Covid-19 and the Rise of Super Apps: How Uber Could Cannibalize Yelp and OpenTable

The current pandemic is unprecedented, but it opens some interesting economic doors as the dust settles. People are eating out less (obviously) and will continue to do so in the future when places reopen. This has hurt companies with a product dependent on the dining out experience.

Yelp

Yelp has been hit hard, with traffic down up to 80% in some areas, laying off 1,000 employees and furloughing another 1,100. They also received some pretty bad press for a terrible product decision to automatically create GoFundMe pages for small businesses.

“In all of our nearly 16 years, I’ve never seen a crisis of this magnitude and impact on our business.” — Yelp CEO Jeremy Stoppelman

It’s hard to see recovery anytime soon here. The stock price is also down 40% compared with the broad market being down 15% (as of May 6th).

OpenTable

With cities heading into lockdown in mid-March, table bookings were down more than 80%, and this trend almost certainly would have moved closer to 100% in April. It is also hard to imagine this trend reversing too rapidly once lockdown is lifted, with people being hesitant to go out again too quickly, and certainly less often than before.

OpenTable did rapidly pivot towards partnering with Postmates, Uber Eats and caviar, displaying delivery options that click through to the partners, but this likely isn’t enough to save the company long term.

Delivery Apps

Unlike Yelp and OpenTable, delivery apps are in a period of hyper-growth with record downloads and usage. They are in a prime position to cannibalize the two companies, either with an acquisition (expensive) or copycat strategy (cheaper, circa Instagram v Snapchat). This would place them in a position to cover the entire dining experience once restaurants reopen.

But which delivery app is in the best position to do this? They’ll need to be in a good position for new expansion, and for it to fit into the company vision.

Let’s look at DoorDash, Grubhub and Uber Eats. They’re the biggest players with 42%, 28% and 20% of the market share, respectively.

DoorDash raised another $1.1 billion in cash in 2019 leading up to their IPO. However, they’re also losing $450 million a year, and it might be too risky to undertake this in the middle of an IPO.

Grubhub still has a substantial market share, but as of last year they only have around $425 million cash on hand. They’re also not known for product innovation or branching out, and that likely won’t change.

So it looks like expansion of this size also doesn’t appear to be in the roadmap for either Grubhub or DoorDash.

Uber, on the other hand, despite recent layoffs and a decrease in riders, still has plenty of cash and resources and enough verticals to support this mission. They also have $10 billion in cash, with $1.5 billion aside for acquisitions. This is a perfect opportunity to consolidate vertically in their path to becoming a Super App.

Rise of the Super App

A recent trend in Asia is the “Super App” — many different features and services under one umbrella, namely WeChat, AliPay, Grab and Gojek. Uber are quite public about wanting to become the western world’s first Super App, calling themselves “An Operating System for Everyday Life” (although they’re in a race against Facebook and Amazon to be the western world’s first).

When restaurants reopen, both Yelp and OpenTable would be a nice addition for Uber to become the vehicle to your local area, an operating system for your night out. Research restaurants, book a table, get a ride to dinner, and review your restaurant experience, all in one place.

They are already on the path to becoming a Super App and have the drive and the cash. As ridership is down (and they sort out legal and regulatory blocks on the rider side), and other businesses are vulnerable, now is a perfect time for them to gobble up Yelp and OpenTable.

Meanwhile, Tellus is on track to be the first Super App for real estate! We’re making high-yield cash accounts, lucrative real estate investments, and state-of-the-art property management tools accessible anywhere, anytime.

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