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Mobile ordering heats up with GrubHub IPO, Foodler loyalty play

March 3, 2014


GrubHub has filed for an initial public offering

With mobile ordering for take-out food growing quickly, competition in the space is heating up as GrubHub Seamless files for an initial public offering while Foodler strengthens its loyalty positioning via a new integration with mobile rewards and payments platform LevelUp.

GrubHub hopes to raise up to $100 million via a public offering and plans to use the money for working capital and possibly to acquire complementary businesses. While GrubHub is a leader in the space, Foodler is looking to compete by making it easier for users to checkout and giving them more ways to earn rewards.

“Whenever a company in a new sector goes public, it’s both good and bad for the competition,” said Drew Sievers, CEO of mFoundry at FIS Mobile, San Francisco. “On the one hand, it’s validation of the business, and it also creates a well-funded competitor who can go shopping for acquisitions to round out its service offering.

“The downside is that it also creates a well-funded competitor who can aggressively market and price-compete to drive out the smaller, remaining players,” he said.

“In a market as large as mobile ordering, however, there is more than enough room for another couple large, public competitors.”

Mobile ordering grows
GrubHub, which merged with Seamless last year, said orders placed from mobile devices reached 43 percent of overall orders during the fourth quarter of 2013, up from 20 percent in 2011. Together, GrubHub and Seamless handled approximately $1.3 billion in gross food sales.

The company’s filing with the Securities and Exchange Commission for the public offering also reveals that while sales increased 67 percent last year, the company’s net income declined by almost 15 percent for a total of $6.75 million.

Additionally, the company said co-founder Mike Evans will leave the company by the end of June.

A public offering could make it tougher for alternative platforms such as Foodler to compete in this quickly growing space.

By integrating LevelUp, Foodler hopes to make it easier and faster for users with a LevelUp account  to pay for orders. Additionally, Foodler users will be able to earn rewards for their food orders when they pay with LevelUp and order from restaurants running loyalty campaigns.

Foodler also offers its own point program, with users able to earn points for orders that can be redeemed for food and merchandise.

To support the new partnership, Foodler and LevelUp are both offering new customers $5 to spend on Foodler when they pay with LevelUp.

The loyalty angle
To pay with LevelUp, Foodler users need to select LevelUp as a payment method and enter their email address. They will then receive a push notification to their LevelUp app to confirm permission.

After this, users’ LevelUp accounts are linked to Foodler for all future checkouts.

Foodler can be used to order from more than 13,000 restaurant locations in the United States and Canada. It is available in Boston, Washington, Philadelphia, New York, Chicago and San Francisco.

The partnership with Foodler will enable LevelUp to boost its real-world mobile payments positioning by enabling users to earn rewards for online purchases for the first time.

The LevelUp app lets users link to their credit card, enabling them to show a bar code at the point-of-sale in participating retail locations to make purchases as well as unlock special offers and rewards. By integrating with the Foodler site and app, which lets consumers order food for home delivery from nearby restaurants, LevelUp is extending its reach into virtual payments where PayPal, Google Wallet and others already compete.

LevelUp also processes payments for a flat 2 percent fee, which is lower than what merchants pay with traditional card processors, savings that merchants can pass onto their customers via special offers.

“We’ve built LevelUp’s Developer Platform to give third-party developers access to LevelUp’s API, enabling them to incorporate LevelUp into their own services,” said Matt Kiernan, marketing director at LevelUp, Boston. “Foodler is an example, as are our White-Labeled partners like Equinox, who have their own mobile apps that include payments as a feature.

“And we have a few more partnerships in the works that we’ll announce as they launch,” he said.

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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