GrubHub or GrabHub? Thoughts on the Latest Predatory Industry to Target SMBs

Mike: Dog days of summer, finally! And I am riding my bike almost every day. In fact I am setting record times on my ride to work of late. If I were drug tested, they might find Ibuprofen, though.

David: Early August sure is a lot more pleasant in Oregon than it was in Central Illinois where I grew up. Just got back from a long weekend at the coast where our dog certainly had an incredible couple of days on the beach.

Good for you on the bike riding. The bike is now my regular commuting vehicle, but I think my commute might be shorter than yours by an order of magnitude.

Mike: Given the news reporting about the food delivery space of late, I thought we might discuss some of the issues that have cropped up as Local has rapidly become so transactional. 

David: For those who have not seen the original story, Yelp is injecting GrubHub’s phone number whenever a restaurant has enabled GrubHub delivery — without the restaurant’s permission, giving GrubHub (and presumably Yelp) a cut of every transaction fee.

(Grubhub has had a similar arrangement in place with Google for at least a year.)

Mike: There is so much low-life behavior in that industry, it is hard to know where to start looking and whom to criticize. There is plenty of bat-crazy selfish behavior to go around. Here are three examples from the last 3 weeks of our Last Week In Local Newsletter

David: Wow. I hadn’t even seen the domain story. That chaps my hide at least as much as the latest Vice story involving Yelp. 

Mike: Well, we can criticize Yelp all day long, but Google has been doing something similar in hotels forever and in food delivery for at least a year. 

David: There have seemingly always been ethically challenged, predatory actors in the SMB digital space — thinking back to MerchantCircle buying local domains and stealing traffic from unwitting business owners, as you pointed out — but the predatory behavior now appears to be mainstream. 

The GrubHub-Yelp and GrubHub-Google deals are lauded as “growth hacking” in Silicon Valley, but from where I sit they have much more in common with illegal profiteering off of someone’s likeness without their permission than they do with legitimate business practices.

For no one to challenge the merits of either Yelp’s or Google’s decision to do this kind of deal with GrubHub at seemingly any level of product or business development speaks to the utter lack of empathy among the tech elite for the impact of their products on society, as you and I have discussed in this space before.

Mike: Yes, “growth hacking” along these lines is enough to gag a maggot, but there is the more “benign” approach of Google that says, “Let’s add an order button to every restaurant for the ‘benefit of the customer’” that is equally reprehensible. The business is effectively paying a searcher “head tax” to the food delivery companies on brand searches where the consumer just wanted to get the restaurant phone number, and the searcher was offered a big order button that is so much more convenient to click. 

In Google’s case, it would be a simple matter to provide the local restaurant the option to turn off the Order CTA in the dashboard. Instead, if a business complains to Google, they foist them on the delivery service for resolution. (Or not.) 

It’s not just the businesses that have no transparency into who is “taxing” them and why, but consumers don’t either. Particularly in Google’s case. Very few individuals understand that when they hit that Order button that the restaurant is paying a substantial fee. So even if a consumer wanted to do the right thing, they wouldn’t know enough to do so — as the recent Vice article highlighted on Yelp. And it all could have happened on a simple brand recovery search by someone looking for a phone number. 

David: Is it just that these behaviors are now getting better covered by investigative journalists, as society has gotten more skeptical of tech companies in general? Or are these behaviors actually getting more egregious?

Mike: I think that folks are more aware of the negative impacts of monopolies. and we are seeing the rapid evolution of this industry into just such a monopoly state. 

The dynamics of the delivery industry are interesting because they so reflect the winner(s)-take-all world of the internet that has existed for years. We have recently seen mergers, buyouts and closures that have effectively left four food delivery companies standing in the US: DoorDash, GrubHub, UberEats, and Postmates. 

David: For the time being, I’d add Caviar to that mix, though we will see if DoorDash continues to maintain it as a standalone product.

Mike: Well, GrubHub has left Seamless and Eat24 as standalone brands, but they have effectively been rolled up into the mothership. 

And from what I have garnered, PostMates is looking to sell. For those left standing, it has become a land grab to take any and every surface that they can get to increase their business reach and market penetration. 

It is the drive for the brass ring of monopoly (or oligopoly) that is behind these “growth hacking” behaviors. 

Hopefully the coming antitrust conversations will put in place regulations that not only keep the likes of Google and Facebook in check but also modulate market dynamics to keep the next monopoly forming in check. And it appears that the delivery industry is just such a candidate. 

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