Grubhub just left investors hungry.
In quarterly results released today, the company highlighted a 44% year-over-year increase in revenues, which hit $123.5 million in the third quarter. Grubhub’s total customer base rose to 7.7 million in the quarter, and customers ordered on average 267,000 times a day. On a conference call this morning, executives touted the results, but failed to reassure investors. Third-quarter profit, at just $13.2 million, missed analyst expectations, and shares of Grubhub—parent company of Seamless—are down 8%.
At a basic level, Grubhub’s problem is that it isn’t cool. With its cheesy ad-copy puns (“download for deliciousness”) and unfortunate branding (the “Yummy Rummy sweepstakes”), it’s the food-ordering site Americans love to hate. In Silicon Valley, where all things food are currently competing for dollars, Grubhub looks less like a startup and more like what it is: a two-and-a-half-year-old public company. It lacks the tenacity of UberEats, the polish of DoorDash, and the bravado of Postmates. All the company does have going for it is a real and consistently profitable business. And where’s the fun in that?
If the public market is disappointed in Grubhub’s latest quarter—by most metrics, a strong one—it should take a long look at the company’s competitors, a bevy of Valley-backed meal-kit and food delivery startups, most of which built their businesses on loss-leading strategies like coupons and discounts. As venture capitalist Bill Gurley told Bloomberg, food-delivery startups are by and large consumer businesses: “[If] you discount, you can attract customers….But if you’re losing money on every transaction, you’re not doing awesome. You’re giving something away and it’s going to end.”
Already, private investors seem to be growing weary of these tactics. Postmates has struggled to raise fresh capital despite adding significant sweeteners to its funding terms. Square, which purchased food-delivery startup Caviar in 2014, reportedly tried to sell the business but couldn’t find a buyer. Munchery, a startup that delivers prepared meals, burned $3 million to $5 million a month this year, and is looking to replace its CEO. Others have shut down altogether.
Grubhub may not have hit precisely the marks that investors were hoping for. But $13.2 million in quarterly profits is still a pipe dream for its buzziest and best-funded competitors.