Hello
@ESYudkowsky. Long time listener, first time caller. I was Chief Revenue and Strategy Officer at Grubhub for many years (now working on a new project) but still know a lot about the space. I never comment on your posts, because I’m generally not qualified to really engage, but on this specific topic, I know a thing or two. In general, I think you’re underestimating the costs involved on two axes; upfront acquisition costs and incremental operational costs. The first is the huge cost of “acquisition” of restaurants, diners, and to a lesser extent drivers who must also be recruited. Three-sided marketplaces are vastly expensive to build up and the scale of each side creates value to the others. Drivers want to be on the platform with diner demand (more tips!), diners on the platform with restaurants (more choices!) and restaurants on the platform with diners (more orders!). And there are attention costs to just being on “every” platform. One more app for diners to check to find their favorite restaurant, one more order kiosk for restaurants to monitor during rush hour, and if an app is only giving drivers one or two deliveries per day, they’ll stop checking it soon enough. Without providing any information that couldn’t be found in publicly available information (and I’m a few years out of my role anyways), you should benchmark at least $25-$50 to acquire a diner, $250-500 to acquire a restaurant, and $50-$100 to acquire a driver. Yes, you could argue none of these costs should be required to be passed on to the diner, just start a service being cheaper and don’t spend on marketing! The users, restaurants and drivers will come! To that, I would politely say “try it”. Go ahead and launch YudBites, at a 15% delivery fee, with no restaurants and no drivers. You might get some diners (you have decent reach amongst people who eat) but less reach amongst restaurants and probably low reach amongst driver recuits. And realistically, without a well-thought out marketing/education program, I doubt that you will acquire many of any group. This is not doubting your ability to generate interest, just pointing out its hard to acquire, retain and service those customers. Second, let's talk about the economics of delivery. An average order is $25 of food. 15%, your proposed fee, of that is $3.75. An optimized food delivery ecosystem (say NYC or Boston or Chicago) can maybe do 3-4 orders per driver per hour. De facto minimum wage is $15-20 for a driver, not including tips which are variable. Even a fully optimized driver is generating $15 / hr in bookable revenue at full optimization. It almost works, but not quite. And only even close in the most optimized environments, and with a good logistics engine which you might find is a moat in itself. But there are costs to cover beyond the driver, so it really doesn’t work at 15%. Forget the costs of acquisition (YudBites.com is available!) but also software engineers, offices, etc… etc… At 25-30% and millions of orders a day it starts to work. So in summary, yes, there’s a huge acquisition moat that you are not giving due credit to and significant per-order operational costs that your proposed math won’t cover. Markets are reasonably efficient and there are reasons there are only three players left in the US (there used to be hundreds!) all with remarkably similar fees, business models and services. Grubhub is of course the best of all of them (fight me) but the economic model and pricing outcomes for all three are undeniably similar, and I would argue, about as competitive as can be realistically supported.