It’s not a good week to be a side dish in the food delivery room.
After baking the delivery platform No. 2 England, Deliveroo in it public debut on the London stock exchange on Wednesday, investors moved to scorch US middlemen. Both can leave lasting burns in the sector.
Back in December, it seemed that investors were coveting food delivery stocks with almost as much vigor as vaccines. Now that the shoot has emerged, investors’ tastes appear to have changed. US market leader DoorDash shares close 86% above their public offering price on their first day of trading late last year, but it has been down nearly 30% in the months since restaurants started welcoming indoor dining again.
DoorDash, at least, still boasts a monster market value of over $ 50 billion on a fully diluted basis, nearly 8.5 times the size of its closest US pure game competitor. Other companies in this sector that have gone public recently have not been that lucky. Olo’s software-as-a-service platform, which counts shipping platforms as both a competitor and a customer, has seen its stock drop 24% since its public offering less than two weeks ago. Meanwhile, the eagerly awaited public offering for London-based food delivery platform Deliveroo closed 26% below its offering price on Wednesday.
It seems that investors’ appetite for food delivery can be spoiled by a story – like food – with a little hair on it. Even though revenues increased 54% last year amid the pandemic, Deliveroo has still managed to lose money, even based on adjusted earnings before interest, taxes, depreciation and amortization. Now, future profitability is even more questionable after Uber Technologies recently lost a UK court case that resulted in a reclassify the landmark from its ride-hailing driver as workers, entitling them to benefits such as vacation pay and a pension. The decision has left skeptics worried that food delivery drivers will be next on the regulatory menu. For Deliveroo, which accounts for roughly half of its sales in the UK, that would be very expensive.
finished this year – said on Wednesday that sales are up 54% in 2020. Like most online food businesses, they are benefiting from large restaurant chains, including McDonalds, signing up to sell via its website and more consumers entering to order food during the pandemic. The company’s shares rose 4% in early trading.
Growth is expensive. JET incurred an annual loss of € 151 million, the equivalent of about $ 180 million at current exchange rates, leaving deeper losses than before the pandemic. Has poured money into the UK to fend off Uber Eats and
Supported Deliveroo, which is preparing an initial public offering in London. The Just Eat brand, which Takeaway.com previously acquired last year, has lost market share and is looking to take it back by 2021. The company also plans to invest heavily in France and Spain. The higher cost might explain why stocks have only risen 16% over the past year.
JET’s business model too put him in a position to be slightly disadvantaged during the crisis. As restaurants spend much of 2020 closed, players like Uber Eats who specialize in getting food to customers’ doors have an edge. Just Eat Takeaway.com has a bigger market business that only connects visitors and restaurants via a digital platform. Orders that also meet deliveries are a relatively low 26% from last year’s tally.
The first word about what Wall Street was talking about.
However, the mix should be an advantage as the company pushes towards the US with the Grubhub acquisition. JET will be able to use cash generated in countries such as Germany and the Netherlands, where lucrative market settings still dominate, to lure American visitors. Management is betting that by keeping shipping costs less than half the rates charged by others in a given market, competitors will be forced to either cut their prices and deepen their losses, or start letting go of customers.
and Uber Eats, trends in Europe can be a preview of what menus are on their domestic market. Like Just Eat in the UK, Grubhub has lost market share in the US. Competition can become more violent when the well-funded industry veteran JET comes along to revamp his latest acquisition.
15 year old Olo is not a name your average eater will know. From a consumer’s point of view, that is largely behind their experience of ordering online from a restaurant, helping the chain with things like third-party order integration and fulfillment. It competes with online delivery platforms in some aspects of its business, but considers it a significant customer on the other. It also boasts another key difference: Its business is designed to be more like a software as a service company.
Food delivery, but make it SaaS, basically. In filing its initial public offering last month, Olo gave investors an idea of the advantages most food delivery platforms have yet to achieve on a sustainable basis. Even DoorDash, which increased revenue by 226% in 2020, is still losing money for the year. But Olo says it generates more than $ 3 million in net revenue in 2020 from revenue growing at less than half the rate of leading US food delivery platforms.
However, it is not clear how easily the profits can be recovered. Unlike typical SaaS models, where the business has significant visibility into future revenue thanks to up-front paying contracts, Olo calls itself a “transactional SaaS” model, where revenue comes not only from subscriptions but also from costs per transaction. This last source of income is important because it now forms the majority of its business: Although Olo says less than 7% of its revenue came from transactions in 2018, that percentage is growing to nearly 57% in 2020.
That mix of businesses alone should make SaaS investors bite their fingers. But things become even more uncertain when you consider that food delivery platforms that hope to see a significant moderation in their pace of growth over the next year are some of Olo’s biggest customers. According to its filing, Olo provides DoorDash access to its order fulfillment, aggregator and channel management solutions. Transaction revenue from DoorDash accounted for at least 19% of Olo’s overall top line last year, up from 2.6% in 2018.That likely means the DoorDash pandemic-driven business boom was a key factor in Olo’s ability to turn a profit – Olo lost money in two the year before 2020.
Slows down growth not the only risk associated with DoorDash. Olo also disclosed in his public offering that his party was being sued by the company, which alleges a breach of contract related to fees. While Olo said the allegations were baseless, the more than $ 7 million DoorDash was seeking would be insignificant if given. Furthermore, the lawsuit could threaten to injure what is clearly a significant financial relationship for Olo.
Olo may be the newest food trading technology company to hit the public market, but it’s nothing new. Preceding DoorDash, Uber Eats and even Grubhub, the company says its name actually stands for “online ordering,” which in the dial-up era used to be three words.
Olo started his business long before, sending text message orders to printers before the world owned iPhones. Investors must now wonder if it has taken a front on its own.
Roblox’s debut is coming as the coronavirus pandemic has prompted people to do so spend more money and time on video games than before. Tech valuations have surged over the past year – Roblox was personally worth $ 29.5 billion in January, up more than seven times from early 2020 – although the stocks have recently faltered amid shifting investor sentiment that an improved economy will benefit the sector other.
Instead of relying on Hollywood-like budgets and rock star talent to produce a few blockbuster games each year, Roblox is shifting game development to its own players. These players, especially teenagers and preteens, in turn produce their own hits and earn 70% of the revenue their work generates.
“We are like YouTube, except our content is a game, and our content allows everyone to play together,” Baszucki said in 2018 while speaking at his alma mater, Stanford University. The 58-year-old man himself often appears at Roblox, using the name “Builderman”.
This approach has earned Roblox an estimated 33 million daily users who can choose between tens of millions of multiplayer games, ranging from obstacle challenges and catch the flag iterations to contests based on popular characters like Peppa Pig and Sonic the Hedgehog. The company provides free tools and instructions that players – even those with no coding experience – can use to create games for its platform.
Samuel Jordan of Fort Lauderdale, Florida, took a hiatus from college about a year ago to focus on creating games and other digital content for Roblox with his business partners. The 21-year-old, who participated in the company-run accelerator program in the summer of 2019, says he made about $ 600,000 last year from his Roblox creations, up from $ 30,000 in 2019.
“This is crazy,” Jordan said, adding that the pandemic was likely to contribute to a tremendous increase. More than 300 Roblox developers made $ 100,000 or more last year, the company said.
The health crisis provided significant fuel for Roblox’s business. Revenue grew 82% last year to $ 923.9 million, while orders – sales of virtual items on the platform – more than doubled to about $ 1.9 billion.
London’s Alan and Sinéidin Cooper said their two daughters, ages 5 and 10, and 7-year-old son each spent about five hours a week at Roblox before the pandemic. Now that time is doubled because they are using the platform to connect with friends. The couple treated their kids to Robux worth around $ 40 to $ 45 per month.
“It’s a great way for them to socialize,” Mr said. Cooper.
Roblox hasn’t been able to turn user loyalty into profit, as its net loss in 2020 swelled to $ 253.3 million from $ 71 million a year earlier. The company has said it plans to continue investing in the platform, which can be used for distance learning, conferences and other group experiences, such as concerts.
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Like other online hangouts featuring user-generated content, Roblox has to contend with predators and troublemakers who target children with inappropriate material – a particular concern given that more than half of the platform’s users are under 13. The company says it has made significant steps to keep users safe, such as by adding a communication filter to eliminate offensive speech.
Supporters include the large venture capital firm Andreessen Horowitz, Altos Ventures and Greylock Partners. David Sze, a Greylock partner, said the company invested in Roblox partly because of Mr. Baszucki. While other CEOs may have switched from business models after modest initial growth, Mr. Baszucki remains confident in Roblox’s user-created mission, says Sze.
“It’s like 10 years walking through the desert without anyone trusting you,” he said. “Dave against all odds.”
Mr. Baszucki, who declined to be interviewed for this article, started and then sold a software company that specialized in physics simulation before founding Roblox with fellow programmer Erik Cassel, who died of cancer in 2013. They started making games for the platform, but soon invite other players to create their own. Roblox was released to the public in 2006.
“We immediately realized what they were building was much more interesting and exciting than anything we had ever made,” Baszucki wrote in a Roblox securities filing. Mr Baszucki is the largest shareholder of the company and holds 70% of the voting rights. He will forego cash and equity compensation for seven years after Roblox goes public, and in return qualify for a performance-based stock award, which he intends to donate for philanthropic causes.
Mr. Baszucki was an investor in Friendster, an early competitor for
and he sees Roblox as a combination of Second Life’s social networking platform and online virtual world, said Matt Dusek, a Roblox start-up employee who left the company in 2019. “He sees things as further away than anyone else around him often does,” Said Mr. Dusek.
In the following years, Roblox gradually expanded its user base. Mr. Baszucki, as “Builderman,” will greet new players digitally, appearing as one of the platform’s signature box avatars and offering tips on how to get started. Popular games inspire players to become developers, who then make more games, attracting more users – the so-called network effect.
Roblox’s user-generated gaming strategy has won praise from industry leaders. Tim Sweeney, CEO of “Fortnite” creator of Epic Games Inc., credits the company for helping gamers become game makers. “Roblox has done a tremendous job building the ecosystem,” he said in an email.
Although the company has warned that people may spend less time with its games as the pandemic fades, it wants to continue to add to its base of more than 8 million developers. Similar to other videogame publishers, Roblox is also looking to join more brands like
Uber Technologies Inc. posted narrower annual losses due to aggressive food delivery and cost-cutting businesses, even as the coronavirus pandemic destroyed its core ride-hailing operations.
The San Francisco-based company on Wednesday reported a net loss of $ 6.76 billion for 2020, compared with a loss of $ 8.5 billion a year earlier. While widespread orders for shelter in places dealt a blow to Uber’s freight business, its share of food deliveries is soaring as the same mandate keeps people from going to restaurants. Revenues decreased 14% year over year to $ 11.13 billion.
Uber overhauled its business during the health crisis, cut about a quarter of its staff and dumping non-core businesses, among other moves, which saved him $ 1 billion in fixed costs last year.
The company separately doubles shipments, buying snack delivery rival Postmates Inc. last year and delivered new items such as groceries and medicine. Earlier this month, Uber jumped into alcohol shipping with $ 1.1 billion Drizly’s acquisition.
“It has become clear that the pandemic has increased consumer appetite for on-demand delivery of not only food, but all goods, and we have taken major steps to address this enormous opportunity,” Uber Chief Executive Dara Khosrowshahi said in a telephone conference. with the analyst.