Uber, Postmates Agree on $2.65B All-Stock Deal • Hacker News Board

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#311

Post by kelnos » Mon, Jul 06, 2020, 8:29 PM UTC

bhl wrote: post #66

tyre wrote: post #24

Food delivery is a terrible business. M&A won’t make it better. I worked at LivingSocial in 2012/2013. We used to joke that “we lose money on every transaction but make it up in scale.” Takeout and Delivery was one of the last bets the company made. Basically food delivery. The customer service load is huge, the services aren’t really differentiated, and you have to both pay the driver enough for it to be worth it an…

I think a questions that’s going to pop up is, why does delivery work for a company like Dominos’s (vertical integration) but not Postmates (horizontal)?

@ThrustVectoring has an excellent answer, but to add one more bit:

When you have your own delivery staff, you are planning your costs and setting your prices with all that built in. When a third party is handling deliveries (in a very non-integrated manner), it's a lot harder to consider the delivery cost as a part of the business, because the cost is being borne by a third party who is charging you an arbitrary amount that may not actually reflect delivery costs.

Since the third-party delivery companies usually take a cut for their services, restaurant owners can't plan that way. They do have choices: they can raise prices overall or they can charge more per-item for delivery orders (if the delivery platform allows it). If they do this, the restaurant owners will be fine; they'll offset any loss to the delivery company with an increase in prices (as long as this doesn't hurt non-delivery business).

The problem lies with the third-party delivery companies. They have drivers who are sitting idle during their downtime, so they have to pay them more per-delivery, essentially paying them to sit around. They have a ton of cheap VC money behind them, and VC's seem to care more about market share than profits, so they are incentivized to do deliveries at a lower price than what it actually costs. So it's no surprise that we see things like revenue of $50M on expenses of $100M. It's a race to the bottom, fueled by someone else's money. All the delivery companies must charge well below cost in order to be competitive. At some point (hopefully) people will stop investing in these companies. At that point, we'll see the final consolidated state of things, and we'll see delivery fees go up dramatically, or service quality go down quite a bit, or both.

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#312

Post by ThrustVectoring » Mon, Jul 06, 2020, 8:30 PM UTC

jacquesm wrote: post #156

ThrustVectoring wrote: post #114

Earlier quoted context omitted.

I've worked as pizza delivery. The tipping and per-delivery payments to drivers is why it works. Roughly speaking, a delivery driver in my area nearly a decade ago earned roughly $20/hr after gas and car expenses, half in hourly wages @ state minimum and the other half in tips + $1/delivery payment. They also took about 3 deliveries an hour when fully utilized, which wasn't for 100% of their shift. The wait time got…

Corona changed tipping completely. Tips are now done through the platform if at all and no longer in cash to the delivery person reducing the chance that the money actually ends up where it is supposed to go.

I never had any problem getting my credit card tips as a store-employed driver. The apps have done some of that kind of bullshit, but at the end of my shift at the store I'd get paid my credit card tips in cash. Only difference is that credit card tips got added to total pay for payroll tax withholding, while cash tips relied on your own record-keeping for tax reporting purposes.

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#313

Post by ThrustVectoring » Mon, Jul 06, 2020, 8:50 PM UTC

mathieuh wrote: post #168

ThrustVectoring wrote: post #114

Earlier quoted context omitted.

I've worked as pizza delivery. The tipping and per-delivery payments to drivers is why it works. Roughly speaking, a delivery driver in my area nearly a decade ago earned roughly $20/hr after gas and car expenses, half in hourly wages @ state minimum and the other half in tips + $1/delivery payment. They also took about 3 deliveries an hour when fully utilized, which wasn't for 100% of their shift. The wait time got…

What about in countries where tipping is not normal? I live in the UK and lots of small family-run fish and chip shops and takeaways offer delivery, along with the bigger chains like Dominos.

I'm making two points here, and it's worth separating out.

First is pure utilization. App drivers get paid while on the road and while idle, store drivers get paid hourly while on the clock and usually have some useful work to do. The average pay of road & idle time has to be worth the driver's while, and the store driver has more valuable work they can do, so the economics make more sense.

Second is the largely tip-driven pay differential while on the road vs in the store. 3 deliveries an hour at my store, more at places that trade off service times for throughput. Average of $3-4 per run, with a tendency for higher tips for customers further from the store. (Funny example: there was this one house at the exact furthest corner of the store's delivery area. They were extremely nice and tipped like $7. These facts are not coincidental.) But this basically becomes a cross subsidy of in-store work by tips, and there was a decent chunk of tension between drivers and management over this. Usually it took the form of "do your assigned side work and then you can go home", and since doing dishes was the "bad" pay of the shift, this disincentivized malingering too.

As far as I can tell for non-tipping countries, drivers tend to use employer-provided vehicles and fuel, so it turns into a more straightforward hourly job and loses a good chunk of the piece-work and quality incentives.

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#314

Post by ThrustVectoring » Mon, Jul 06, 2020, 8:52 PM UTC

mathieuh wrote: post #175

washicalendar wrote: post #172

Earlier quoted context omitted.

Like the person you responded to said, employees working for those stores can do useful work when they aren’t delivering. Here the Domino’s are delivered by bicyclists and those people are doing work for the store when they’re waiting for deliveries. That work justifies them being paid a wage. For Postmates et al., those drivers aren’t doing anything useful during their downtime. They have nothing to sweep or dishes…

Yes but they said 50% of their income comes from tips and a $1 delivery fee. I assume tips are generally more than $1 (I may be wrong). Maybe it’s just not productive to compare different countries’ eating habits in the end, but it seems to me GP is saying that tips make up a meaningful proportion of delivery drivers’ income.

Tips averaged between $3 and $4 per run, and I got 3 runs an hour at peak. That's more than half if you add all that up, but not all time is peak time, so it averaged closer to 50/50. Plus I subtracted out fuel and car costs from the delivery side of things to net stuff out.

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#315

Post by Larrikin » Mon, Jul 06, 2020, 10:09 PM UTC

xvector wrote: post #216

Larrikin wrote: post #96

Earlier quoted context omitted.

The automatic refund gives that scam price, but if you insist on the full refund plus tax you'll still get it

Not been the case for me unfortunately, even after escalating. Ordered some stuff and everything but the condiments were destroyed on delivery. Couldn't get a full refund.

Did you try escalating and saying you will do a chargeback?

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#316

Post by bonestormii_ » Mon, Jul 06, 2020, 10:51 PM UTC

martinald wrote: post #290

bonestormii_ wrote: post #145

Earlier quoted context omitted.

You raise an interesting point. Maybe with uber the goal is to integrate delivery work force with ride work force to improve utilization of drivers/deliverers. Horizontal, but complimentary.

In many markets they are different vehicles, scooters/(e)bikes for food delivery, cars for passenger transport. Even in markets where cars are used a lot for food delivery; I can't see it really working very well. It's hard enough trying to schedule food delivery drivers being in the right place at the right time (often waiting a while for food to be ready if the order got delayed in the kitchen). Trying to then piec…

Perhaps--I really know nothing about it.

However, if you allow yourself to simplify the problem, it seems there is really no physical difference from a food delivery and a ride. Pick up at one location, drop off at another--maybe with extra time required to get out of the car. In both cases, there is a limited allowable waiting threshold.

So if you can merge those work forces, you could attain higher utilization. The main problem I see though is that both sectors surge at roughly the same times, so it isn't quite as complimentary as you might initially hope.

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#317

Post by TheSpiceIsLife » Tue, Jul 07, 2020, 12:07 AM UTC

erispoe wrote: post #205

marvin wrote: post #191

Earlier quoted context omitted.

Huh. That's a novel use of stupid index fund money. Just get your shitty investments listed on the stock exchange and cash out. Index fund buyers don't care, they'll swallow it right up and it's free to crash and burn at their expense. You could even do it deliberately, as long as it follows securities regulations. Being a pure momentum strategy, index investing has no intelligence. At one point this would make index…

Uber is not in the S&P500. And no fund manager is consistently doing better than the market. "Stupid index fund money" looks pretty smart in that regard.

Uber, and others, are in some ETFs thought.

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#318

Post by geitir » Tue, Jul 07, 2020, 1:58 AM UTC

Thorrez wrote: post #134

geitir wrote: post #94

Earlier quoted context omitted.

I imagine the end goal is the same as with Uber's main business. Automation

The end goal of what? Uber Eats or Domino's?

Both probably. I read an interesting article about restaurants renting in industrial areas with no dining room only doing take out. People will always want to eat somewhere nice / fun but certain franchises I could see making the switch

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#319

Post by rreichman » Tue, Jul 07, 2020, 5:19 AM UTC

Weird that people keep saying that food delivery can't be profitable when Grubhub has already been profitable and only became unprofitable due to the Doordash/Uber Eats price user acquisition wars. It's the same thing that happened in ride-hailing, which already proved to be profitable.

Re: Uber, Postmates Agree on $2.65B All-Stock Deal

#320

Post by bshanks » Tue, Jul 07, 2020, 5:30 AM UTC

cglong wrote: post #28

mardifoufs wrote: post #8

What's Postmates moat? Having never used it, I don't necessarily see the 2.6b$ value in a smaller delivery app that is only really used in some areas of the US. Though I'm sure there is something I'm missing and 2.6b$ is probably less expensive than the cost of pricing Postmates out of the market especially considering it's an all stocks deal. It's just that delivery seems to be easily scalable and easy to just dump…

Of all the services I've tried in this space, only Postmates lets you request items from businesses they aren't partnered with. This was a huge win once when I needed groceries delivered quickly.

You can also order non-food items on Postmates (e.g. stuff from Home Depot).

Also anecdotally, the probability of an order actually arriving and being correct seems to be higher on Postmates. Perhaps the drivers there are more motivated to do a good job.