Ahead of its second quarter earnings report on Thursday, Yelp announced plans to sell its Eat24 delivery business to Grubhub for $288 million in cash. Yelp bought Eat24 in 2015 for $134 million, and currently integrates Eat24 into its restaurant listings. Instead, as part of a five-year deal, the ratings and review site will add links to order delivery via Grubhub into its platform. Grubhub recently announced similar arrangements with TripAdvisor and Groupon, effectively making Grubhub the internet’s “order delivery” button — at least on review and discovery sites. By integrating into Yelp’s listings, Grubhub will power more orders than ever. Plus, its restaurant network will expand: currently Grubhub has about 55,000 restaurants on its platform to Eat24’s 40,000. According to a Bloomberg report, many restaurants use both platforms, so the total number of restaurants available will grow to 75,000.
Yelp is best known for its user reviews and rankings, but it also has other interests: Yelp Reservations (formerly SeatMe); Nowait, a tool that allows people to wait in line remotely at restaurants that don’t take reservations; Yelp Cash Back, a rewards program; and Yelp Wifi, offering free wifi to restaurant customers in exchange for providing their email address to the restaurant. Given these product offerings, Eat24 was the outlier as the only product that wasn’t supplementing or enhancing an in-restaurant experience. In an interview with Chefs+Tech last month, Yelp SVP of business development, Chad Richard, said, “Yelp has always been an amazing place to promote your restaurant, but it wasn’t really helping you run your restaurant. We have this ability to bring audiences to restaurants. How can we help consumers connect on that next level?” For Yelp, the next level appears to be what happens in the restaurant, not the delivery or takeout experience.
Yelp acquired SeatMe in 2013 for $12.7 million, with only 200 restaurants on the platform (It now has 5,000). In contrast, when Yelp acquired Eat24, it already had a large business operation with 20,000 restaurants. After that acquisition, Yelp CEO Jeremy Stoppelman said, “With this acquisition, we gain more tools and expertise to help engage our users from discovery through transaction in a key vertical for Yelp.” As it turns out, transactions and logistics might not be Yelp’s strong suit.
In a statement accompanying Thursday’s announcement, Stoppelman said of the deal, “Yelp and Grubhub benefit from greater scale and sharper operating focus.” Whether or not this sale signifies Yelp will focus on other parts of its business, the joint press release and announcement does signify that Yelp believes Grubhub rules delivery and logistics and Grubhub believes Yelp can’t be beat as a recommendation and discovery tool. In that way, the business models are moving away from everyone-do-everything to a few key players ruling each space. We’ll have to see what sharper operating focus means for Yelp’s growing business.
Of course, this is big news for Grubhub, too, who will absolutely take advantage of a Yelp audience. According Richard, over a third of Eat24 orders come through Yelp’s restaurant listings, up from about 20 percent two years ago, he says.