Category Archives: Money

GrubHub, Seamless Merge; Mobile Drives Food Ordering Growth


Photo: CNN

Online restaurant ordering and discovery giants GrubHub and Seamless have agreed to merge their operations, creating a single company. Chicago-based GrubHub currently serves more than 20,000 food ordering establishments in 500 cities, while New York-based Seamless serves more than 12,000 food ordering establishments in 400 U.S. cities plus London.

GrubHub CEO Matt Maloney, who co-founded the company in 2004, keeps the CEO job. Seamless CEO Jonathan Zabusky becomes president. Zabusky recently came on to spin off the operation from Aramark, the corporate catering giant.
The two companies had been going head-to-head in a number of their markets. Both share a vision of the food ordering business being rapidly transformed via smart phone.

We had an extensive discussion with Zabusky in March. At that time, he noted that Seamless had two million regular users and grossed $85 Million in topline revenues in 2012. It projects $100 million in top line revenue in 2013, with major growth seen in coming years.

The company has had a strong foothold in the corporate market, providing food ordering and delivery to law firms, tech firms and investment houses. But its major effort has been focused on the consumer side, which has been experiencing year-over-year growth of 60 percent.

The company has 300 people in three major offices, as well as field based sales. While it is best known for its strong business in Manhattan, where it recently opened a 28,000 square foot facility, Zabusky notes that the company has a strong presence in 13 major U.S. markets. He added that Seamless had “a major national expansion strategy,” and was well-situated to execute it with a customer care center in Salt Lake City.

The key to growth, said Zabusky, was to keep selling new products and features to its food establishment partners. “We don’t make money unless they make more money.”

Zabusky noted that Seamless has been processing electronic order forms, and providing electronic terminals, along with table side ordering apps. Generally, its focus is to move restaurants away from fax machines, and away from phone calls and paper, which he says remains the segment’s biggest competition.

With Seamless, restaurants move up to a “multi-platform portal,” where they could “view, confirm and track orders,” he said. Restaurants also leverage Seamless and its vast network for discovery and retention. For instance, it offers different deals on different days to keep customers coming back. “It is very different than the daily deals space,” he said.

The industry’s transformation via mobile, however, is expecially key. Zabusky says it represents 40 percent of the total business, up from 10 percent a year ago. But for online food ordering, mobile doesn’t just represent a phone. The company’s best customers use the PC-based Web, phones and tablets, he says. “Thirty percent of the mobile volume comes from the iPad.”

After the merger is completed, major competitors for the combined company will include Living Social, which has recently bet big on online food ordering; Delivery.com, which claims a roster of almost 10,000 restaurants in 50 cities; and Eat24.com, which covers 20,000 restaurants in 1,000 cities across the country.

Chase Buys Bloomspot; Banks Continue Invasion of Deals Space

Another bank has telegraphed its strategy in the offers and loyalty space. JP Morgan Chase, the nation’s second largest bank after Bank of America, announced today that it had purchased Bloomspot.

The acquisition follows MasterCard’s recent purchase of TruAxis and BarclayCard’s purchase of Analog Analytics. Other banks have partnered with transaction marketing vendors, which include Cardlytics (Bank of America), Cartera and Edo Interactive.

Bloomspot is an interesting choice for Chase, which has previously done low key trials of deals in several markets with different vendors. Co-founded by ex-Yahoo Local execs Jasper Malcolmson, Frazier Miller and Ashish Baidua, the 100 person, San Francisco-based company had raised $46.1 Million, but apparently needed to make a deal – it has been cutting back on expenses in recent months.

What it brings to the table for Chase is a presence in 11 major markets, and a loyalty focus. Rather than directing its attention on building a giant consumer list a la Groupon and Living Social, it has instead worked with merchants to reach their best customers. It reports that 62 percent of its subscribers opt in to its loyalty program, and 92 percent spend above the deal value, compared to 59 percent for other deal sites.

Bloomspot has not, however, built a card -linked solution — which might be considered a strategic necessity for a major credit card vendor like Chase. This means that Chase may still be in the market to work with one of the key vendors (or build its own.)

Notes from Seattle Interactive: Microsoft and the Multi-Device User

Hot trends in Web and marketing were all on display this week at Seattle Interactive, a large regional show with 190 speakers and an audience largely comprised of Northwest agencies, startups and technologists.

The change in media was brilliantly illustrated by a single question posed by a speaker. “How many of you responded to a Nielsen diary entry since this session started? (no hands raised) And how many of you have updated your social media status or posted?”(many hands).

Big data, social media, responsive web sites and all things mobile were among the key topics at the event. And so, clearly, was the hoped for revival of Microsoft, which is sharply pivoting with the launch of Windows 8 to a multi-device outlook.

The mixed reviews that have greeted Windows 8 suggest its strategy may have trouble catching on. There are deeper issues, too. Last week, at OMMA M Commerce in LA, fewer than four people in an audience of 80+ raised their hands when agencies and developers were asked if they were planning to support Windows 8. Apple iOS and Android rule the nest, for now.

But the turf at Seattle Interactive is naturally friendly to Microsoft. At least 5 percent of the phones were Windows phones (OK, not many). But you could see that the company’s dramatic gyrations energizing much of the tech community.

One of Microsoft’s big initiatives is to be the first of the major Website leaders to engage the “responsive Web” to personalize solutions and conquer “message overload” and “channel attribution.”

Those are “old world problems, “ noted Microsoft General Manager Abe Thomas, during a conference keynote . The “new world” problems, he says, are “social noise.” A leader will develop strategies for the new multi- device consumer, “who wants a specific device in front of them at different times.”

The challenge is the tremendous fragmentation among the operating systems, and now, the devices as well. Sixty percent of iPad owners have an Android device, not an iPhone, Blackberry or Windows phone, he notes. Almost everyone has a Windows PC. “Sooner or later, you will say: Microsoft, Apple, Google – Get it together.”

Microsoft isn’t necessarily working to work inter-operably, but it is “living and breathing the customer journey,” becoming more transparent, and “knowing and respecting the competition,” he says.

MasterCard Dives into Card-linked Loyalty via Truaxis

MasterCard has dived feet first into the card linked loyalty battles with the acquisition of Truaxis. The company should prove to be an anchor for MasterCard Offers Services, where it has partnered with Local Offer Network and others.

Formerly known as BillShrink, a lowest rate guide which developed a customer base of 1.6 million, Truaxis has most recently been competing with other card-linked loyalty players for bank affilations. The company has raised $9 Million since its founding. BIA/Kelsey estimates that more than $170 million has been specifically invested in the bank-dependent, card-linked loyalty space.

Banks enjoy the affiliations because a loyalty card enhanced their chance to win “top of wallet” share. It also allows them to shift the costs to supporting the rewards of their credit/debit cards to merchants; while also getting a commission for the sale of products.

Key players in the space include Cardlytics, Cartera Commerce, Edo Interactive and FreeMonee Network. Other key players are also developing loyalty products — more than 20 — but are not dependent on bank relationships. These include such diverse players as Square, LevelUp and Groupon.

While Truaxis hasn’t landed any major banks, it works with 2,500 independent banks via a marketing relationships with Jack Henry & Associates, a bank platform provider.
Clearly, the affiliation with MasterCard could provide a major jumpstart for the company.

We’ll be taking an intensive dive into the loyalty space at SMB Digital Marketing in Chicago Sept. 17-19, as we feature top execs from Cartera, Edo, Belly, Groupon and Local Offer Network,among others. Register here.

The Move to Loyalty Platforms: Yodle Founder Launches Punchey

In a reflection of the industry’s ongoing interest in developing SMB promotional and loyalty services, Yodle founder Nate Stevens’ venture fund announced last week that it is putting $1.7 Million into Punchey, a new mobile-oriented payments and promotions platform.

The 12 person, Boston-based firm was founded in late 2011 and is focused on SMB “upstream marketing initiatives,” notes Stevens. Features include promotions, customer communications, digital receipts and analytics. About a dozen SMBs have been testing the service in different markets, with new clients signing up daily.

The company’s ambition is to replace cash registers and stand alone dial terminals. Vertically integrated POS solutions will be dealt with through integration/partnership. Today, businesses working with Punchey can accept cards via a mobile phone, iPod, any PC using an independent mobile card reader or a countertop card reader that is compatible with in-store computers. While the whole loyalty and rewards space is converging in many ways, the emphasis on alternative POS suggests that it will seek to directly compete against players such as Square.

Stevens sees a natural progression between Punchey and his work at Yodle, which has focused on getting businesses online and developing their Web presence. While there is “a perennial need to upgrade and improve SMB websites….what we learned is that there is also an opportunity on the processing and loyalty/retention side of the house,” he says. “Everything can be tied together, pre-sale, point of sale, post-sale through an intelligent and integrated payment processing engine,” adds Stevens.

Retention is another big focus for the company. “A critical learning at Yodle was that client retention is important, both as a marketing services provider and as an SMB,” says Stevens. “It allows you to reduce advertising costs and increase overall lifetime value and profitability.”

Defining the customer base is also key. “If (SMBs) can’t define their customer base, how can they even begin to communicate and market to them after they walk out the door?” says Stevens. Data from the processing side combined with loyalty programs gives Punchey that capability, he adds

Trulia’s S1: Strong Focus on Monthly Fees, Mobile Monetization

Trulia, which provides real estate Web and mobile leads, display advertising and real estate-oriented social media services, has followed in the footsteps of its rival, Zillow, and issued an S1 in preparation for going public and raising $75 Million.

Zillow’s IPO has been highly successful – it went out last July at $20 and is now around $35 a share, having fallen a little. Trulia is betting it can be an even stronger longterm player. The issuing of the S1 suggests the end of a great deal of industry speculation that Google or other players would buy Trulia.

The S1 provides a gold mine of new information for connoisseurs of vertical and local service data. Trulia reports that a spending surge in preparation for going public has pushed it to 22 million monthly unique visitors and 21,544 buyers, or “subscribers,” to its real estate marketing bundles – a number that has risen 46 percent since June 2011, and has plenty of potential upside with a pool of 360,000 real estate pros claiming Trulia profiles.

While the company earned $29 million in the six month period ending June 30, 2012, the spending surge has led to consistent losses and an accumulated deficit of $43.8 million. But the company feels its fundamentals are strong, even in the depressed real estate spending environment, as more and more marketing efforts move to digital. It sees a fragmented digital marketplace where its principal rivals are Zillow and Realtor.com, the longtime online real estate leader.

Average subscriber monthly spend has jumped up to $140 from $90 last year, as Trulia has kept adding more services to its bundle. Display advertising, meanwhile, has become a relatively smaller part of the mix – 32 percent — although it’s overall spending has stayed even and it appears to have good prospects to attract business from real estate and consumer brand marketers seeking to get consumers in a house buying mode (or rental.)

Trulia’s monetization of mobile services gets a special focus in the S1 – something that investors will notice after Facebook’s well publicized issues with mobile monetization, which was a major industry wakeup call.

The company reports that since launching mobile in May 2012, it “is monetizing its mobile products at a higher rate than web products.” Moreover, “users are more likely to contact real estate professionals through our mobile applications than our website.” Mobile now accounts for 20 percent of overall user traffic.

FiveStars Lands $13.9 Million; Card-Linked Loyalty Space Heats Up

The card-linked loyalty and rewards space is seen by a lot of the smart money as the next Groupon. Today, we saw new money being poured into FiveStars ($13.9 Million), LevelUp ($9 Million) and LocalBonus ($900,000). The companies have now raised $16 million, $21 Million and $1.4 Million respectively — about half the $78 Million that we estimate has been invested in the independent loyalty space.

FiveStars, a 55 person Mountain View, CA entity, won its new funding from Lightspeed Venture Partners and DCM. Other investors include YCombinator; Mayfield Fund; Hadi and Ali Partovi; and former Facebook and AOL Mobile exec Chamath Palihapitiya.

CEO Victor Ho reported to BIA/Kelsey today that the company has signed up over 400,000 users in 14 DMAs, and that more than 775 merchants are paying it monthly fees, which widely vary but are typically around $50-65 a month.

Roughly half of its merchant accounts are with larger chains, while the other half is to mom and pops. The chains include Subway, Round Table Pizza, Metro PCS, Baja Fresh and TuttiFrutti frozen yogurt.

Ho says the major differentiator for FiveStars from rivals like Belly and LevelUp is that it has been fully integrated with the vast majority of POS systems – something loosely claimed by a number of companies. The patented technology is the company’s “secret sauce,” says Ho.

The live POS integration enables offers to be spit out to consumers based on what they are currently purchasing. It also makes it easier to sign up customers on the spot and allow merchants to see information about the customer at their display. “They can see that ‘Peter is a loyal customer’” and what he purchased, Ho notes.

The POS integration also cuts down on rebate and rewards fraud and/or mistakes. This is a major issue when cash back rewards are being applied, he says.

Ho adds that FiveStars’ Live POS integration (and other features such as social media and mobile marketing) results in the company getting “3-4 times the penetration of any competitors,” and more than 500 members at the average store, compared to 100-120 for other companies in the space. Verde Tea Cafe, a Silicon Valley chain, for instance, is cited as having gained 20,500 members in one year.

BIA/Kelsey’s SMB Digital Marketing conference Sept. 17-19 in Chicago is going deep into the loyalty space with top leaders from Belly, Cartera and Edo participating. Register here.