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Seamless, GrubHub merge to create mobile ordering powerhouse

May 21, 2013

Seamless and GrubHub have signed a definitive agreement to merge as the two companies look to build an organization with enhanced financial strength that can better scale in the rapidly growing food-ordering industry.

Both companies focus on making it easy for consumers to place online orders with local restaurants, with mobile growing quickly parts of their businesses. In 2012, the online and mobile platforms of the two organizations sent approximately $875 million in gross food sales to local takeout restaurants, resulting in combined revenue over $100 million.

“Our diners are increasingly moving towards mobile platforms,” said Abby Hunt, public relations manager at GrubHub, Los Angeles.

“Also, we have complementary mobile technologies, from Seamless’s award-winning iPad app to GrubHub’s innovative Track Your Grub technology,” she said.

Scaling up
The companies will combine their complementary restaurant and diner networks to enable diners and companies in more than 500 cities across the United States to order from more than 20,000 local takeout restaurants.

They will also look to drive additional restaurant and diner value by combining their services and products.

One of the benefits of the strategy will be an enhanced financial strength that will enable the new organization to pursue growth opportunities while continuing to invest in its current business.

The biggest challenge is likely to be creating a cohesive technology strategy.

“Scale is everything in this business, so the combination makes sense,” said Drew Sievers, co-founder and CEO of mFoundry, San Francisco. “It’s rare that two private companies combine as a merger of equals, so it will be interesting to see which brand emerges as the dominant player.

The biggest challenge, aside from executive ego management, will be the inevitable decision on whose technology is left behind,” he said. “No matter what anyone says, running two platforms with identical functionality isn’t operationally efficient.

“Ultimately, someone’s technology will need to sunset.”

Mobile ordering grows
Seamless is seeing mobile play a big role in the company’s ongoing efforts, with more consumers turning to their smartphones and tablets to place food orders.

The company recently reported that more than 50 percent of orders are placed via mobile on weekends and that, overall, mobile orders increased from 10 percent to 40 percent between 2011 and 2012.

Seamless offers iPhone, BlackBerry and Android mobile apps, as well as a mobile site to help streamline the mobile ordering process.

The company rolled out a new iPhone redesign in December, which features a revamped user interface where consumers can check out mobile reviews and photos.

Seamless’ iPad app was launched in February last year and is currently responsible for more than 30 percent of total mobile orders.

GrubHub has also been quickly building its mobile business. The company reports that more than 30 percent of its orders come from mobile devices. GrubHub has apps for Android and iOS.

Additionally, GrubHub has an in-restaurant tablet service called OrderHub that is used in restaurants in more than 75 U.S. cities, with approximately half of all orders processed through these tablets.

GrubHub also launched Track Your Grub, which lets users track their food’s progress as it is being delivered to their doors via the mobile app. The service is available in more than 30 cities.

Streamlining product development
The two companies hope to pool their research and technology efforts to help streamline product development and better address the evolving needs of the industry. This is key in the quickly changing mobile space where companies are under significant pressure to keep up with the escalating consumer demands.

According to the companies, another key strategic benefit of the merger will be the ability to create an expansive network and offer diversified products and services to serve restaurants and diners across the U.S. and Britain.

Matt Maloney, co-founder and CEO of GrubHub, will serve as chief executive officer of the new organization, while Seamless’ CEO Jonathan Zabusky will serve as president.

The merger is subject to regulatory approval.

“Online and mobile ordering gives restaurants much better insight into their customer’s behavior,” Mr. Sievers said. “Walk-in orders are great, but there is no easy way to track the frequency, order types, etc. that can be tracked, measured, and acted upon by digitally-powered pre-ordering.”

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

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