Which is more important to a restaurant, Yelp or GrubHub?
Yelp shares jumped 19% this past week after they released their quarterly earnings. Even though the company had a wider than expected loss, user engagement shows strong improvement as to local ad sales. Is the company worth $5.9 billion? Investors apparently think so based on the quarterly revenue growth of 72%.
But when I speak with restaurant owners about the difference, they say that GrubHub delivers customers that they wouldn’t otherwise get and Yelp is a necessary evil.
The companies have very different business models where GrubHub takes a piece of the restaurant’s revenue that is processed through GrubHub’s ordering engine.
Yelp charges businesses to advertise and control their presence.
In my opinion, taking a piece of delivered revenue is a vastly better business model. As GrubHub CEO, Matt Maloney says, “We don’t make a dime until you make a dollar.”
That’s a powerful message that resonates with restaurant owners so well that they are willing to share upwards of 15% of revenue with GrubHub. They may cringe doing it, but I repeatedly hear that they can measure the money coming in.
Yelp’s CEO, Jeremy Stoppleman is a brilliant, driven businessman who is generating a massive content machine that will cross many more industries than GrubHub. His business model is much more similar to that of traditional publishers asking for money in exchange for an enhanced opportunity to make money from the visibility.
Both companies have aggressively pursued mobile apps and mobile friendly services that will strengthen their penetration.