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Comment by blancNoir | Hacker News Reader

from the article

"While neither Uber nor Grubhub turns a profit delivering food, they are nonetheless venture-backed and raking in mountains of cash: Grubhub reported revenue of $362.98 million during the first quarter this year, a year-over-year increase of more than 12%. Uber Eats’ revenue surged 53% from the same quarter a year ago, to $819 million.

Restaurants, meanwhile, are facing utter devastation. The restaurant industry lost 5.5 million jobs nationwide in April, according to the Bureau of Labor Statistics. In L.A., the overall unemployment rate now stands at 24%, an increase from 4.7% in February."

edit: additional context from article

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So they are comparing revenue with job loss? Those aren't the same class or the same measure... This is just pointless.

Focusing on jobs in the context of gains and losses is a bad idea in general as the only real measure you'd get regarding jobs is 'how many people can support themselves by working' which is the actual real-world impact. And if you want to take survival in to account or basic living standards you could even go a little more abstract and try to report on 'how many people are stuck in poverty'.

It doesn't matter how many jobs you have if people barely get by. Same goes for having less jobs: if people are still doing OK it's not as strong an indicator of anything to report job counts.

Right, but "raking in mountains of cash" is skipping the "in the face of even larger mountains of costs". That's why this article feels deceitful -- using words like "raking in" and "surging" as if revenue before costs means anything at all.

If you lose money on every order, you're not thriving in any sense. You're hoping to thrive some day in the future. The fact that they're venture-backed is irrelevant. Restaurants are backed by investors and bank loans too.

Most growth-oriented tech companies are “unprofitable” in the sense they invest their revenues into growth rather than dividends. This does not mean their core products necessarily make less money than it costs to operate them, without those massive growth investments. The real question people are asking here is: what necessary costs do the food delivery apps actually incur in operating their business that causes them to have such high commissions and fees and still lose money per transaction?

> This does not mean their core products necessarily make less money than it costs to operate them

Generally, yes it does. The up-front costs for building and marketing a platform so that it ultimately becomes profitable are enormous. In today's climate, the idea that a company could just "choose" to be profitable now and in the long-term rather than grow is disingenuous: over the following few years, other companies will eat their lunch and they'll fold.

But with delivery apps, answering your question is not hard. First, paying delivery people is expensive. Crazy expensive. That's obviously the main variable cost. Then there are huge fixed costs with creating and maintaining a multi-platform app, customer service to deal with late/missing/wrong orders, sales and support for restaurants, marketing, and all the normal business stuff.

That's your answer. Food delivery apps aren't spending half their revenue on frivolous side projects like space rockets or cities of the future, or questionably/fraudulently siphoning revenue to a founder. They're just trying to operate as normal businesses, and there's zero evidence to the contrary.

I think you're slightly misrepresenting what the parent comment is saying. You both are right.

Food delivery can be profitable, and they could switch to being profitable if they wanted to. That's what the parent company is saying - they chose not to as they want to operate on the hypothesis that investing in growth as early as possible will put them on an expontential trend in a network effect -based business. Which is true.

However, what you say is right as well. If they switched to a completely profit skimming model, their competitor would keep them in check very fast.

However. what data that I've seen in ridehailing shows, is that if you invest in growth and achieve the 1 or 2 position in volume, you can grow and reap profits simultaneously - at least for some time. It's a massive juggling effort.

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