Yahoo Finance Live anchors discuss Amazon and Grubhub partnering to offer a free, year-long Grubhub+ membership trial to Prime members.
Correction: A previous headline incorrectly stated that Amazon bought a stake in Grubhub, and a previous description described the partnership as an "investment." We regret the errors.
BRAD SMITH: Let's talk about Amazon, though, as well this morning. Amazon Prime members, they're going to soon get another perk, free food delivery. Amazon announced a 2% investment in Grubhub owned by Just Eat Take-- Just Eat Takeaway, excuse me. Now, the investment means that Amazon Prime members they're going to get a free year of Grubhub+.
Now, the news comes just as Just Eats struggles to stay above water here. The Amsterdam-based company lost half of its market value this year due to slowing growth. Now, if you're like me, Sozz, you're old enough to remember that Amazon tried this before.
They tried Amazon restaurants. They shuttered it after three years, 2016 to 2019. Stuck the tombstone on it. And then after that it was, how do we ensure that we're still playing in this delivery landscape? This is their next big play in that landscape.
But it doesn't come without them reprioritizing some of those resources internally, at least over that interim period of time from 2019 to 2022 now, on a lot of their food delivery in the form of groceries. So we'll see exactly how this nets out for some of those Prime subscribers as well.
BRIAN SOZZI: Yeah, you know, I'll start on the other side of the equation. Let's start with the Grubhub. First of all, Amazon Prime is over 200 million members. Where in-- where in the world is Grubhub getting this type of money to support a yearlong free membership to Grubhub? That is a lot of money, a lot of money. And it likely will pressure Grubhub results for the foreseeable future.
Second thing here, Just Eat is about I believe a little more than a year into having bought Grubhub for $7.5 billion. They were under pressure to get rid of this division. What a terrible acquisition. You had the founder of Grubhub, Matt Mahoney, leave the company last year. That was the ultimate signal. When he left in December, that was the ultimate signal that Grubhub was really struggling.
So what does this say about the valuation of Grubhub when you have to have Amazon coming up here and getting promised warrants and offering this type of relationship? The valuation is probably falling right off the map.
BRAD SMITH: Look, Grubhub has struggled with acquisitions historically here, even as the company was able to take on acquisitions even prior to Just Eat Takeaway. Seamless particularly was one that had a lot of runway. They ran into some headwinds.
And I think for a lot of the different consolidation efforts that we've seen within this food delivery, restaurant delivery landscape, sure, there was an acceleration period of the pandemic because people needed that. And for restaurants that continue to recognize that there's an opportunity to continue to engage with consumers in that capacity, they're gonna continue to lean into these services.
But some of them-- many of them, I would argue-- want people back in their dining establishments. That's what really allows them to embrace the holistic experience of servicing the consumer. That's what allows them to continue to have that word of mark-- word-of-mouth marketing that might take place because of that experience.
And so within that, you can upsell far more, perhaps, than you would be able to on a delivery platform when someone's simply just clicking the buttons and not necessarily diving into the environment and the atmosphere of a dining experience.
And so there's kind of both sides of how these restaurants would like to engage with the consumer. But I think for Grubhub, for Caviar, for DoorDash, and all of the consolidation that has taken place, it's gonna come back to what the take rate that they're seeing on top of this is. And that's something that customers and restaurants are pissed off about.