Why Yelp Is Partnering with GrubHub
Yelp decides to monetize Eat24
Reports about Yelp’s sale of food-ordering service Eat24 haven’t talked much about one key aspect of the deal between Yelp (YELP) and GrubHub (GRUB). Yelp announced in August that it was selling Eat24 in cash to GrubHub, a leading provider of online and mobile food-ordering services, for $287.5 million. Yelp acquired the business for $134 million about two years ago.
The announced sale of Eat24 gained a lot of attention because it appeared to be an admission on Yelp’s part that online food delivery is a difficult market. Many startups around the world have exited the online food-delivery arena.
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More than just trading an asset
For Yelp and GrubHub, the deal goes beyond trading Eat24. The companies announced a long-term partnership that would see them capitalize on each other’s unique assets to drive more revenue growth and improve customer experience.
For example, the sale of Eat24 will not eliminate access to food-delivery services for Yelp users. As part of the long-term partnership, Yelp will integrate GrubHub’s online food-ordering service into its platforms. Therefore, Yelp users are set to see increased availability of food ordering and delivery services.
Potential boost to advertising business
For Yelp, this integration should increase traffic to its site, which could lead to advertisers spending more on the platform. As shown in the chart above, advertising is Yelp’s primary source of revenue. Yelp competes with Facebook (FB), Twitter (TWTR), and Snap (SNAP) for advertiser spending.
For GrubHub, the partnership with Yelp is set to expand its market potential given Yelp’s massive user base.