Sore Over Losing Grubhub, Uber Scoops Up Postmates for $4 Billion

Photo: Chris Delmas/AFP, Getty Images
Photo: Chris Delmas/AFP, Getty Images

Well, it’s official now — Uber is expanding its presence in the food delivery game. After several rumours last week, Uber announced today that it bought U.S. food-delivery app Postmates for $US2.65 ($4) billion in an all-stock transaction.

Bloomberg initially broke the news that a deal was imminent late last night, but Uber snatching up Postmates is hardly surprising. Back in May, Uber made some noise about buying Grubhub in an all-stock transaction, though that eventually fell through. On top of this, it was reported earlier this year that Uber also failed to buy DoorDash in 2019. After falling on its face with both DoorDash and Grubhub, it’s logical that a stymied Uber turned its focus toward Postmates.

Despite Uber laying off 14% of its workforce because of the pandemic, the deal sort of makes sense as food delivery is the only part of Uber’s business that’s seen any growth in recent months. Uber watched $US3.5 ($5) billion swirl down the drain in Q1, but Uber Eats saw bookings shoot up 52% to $US3.1 ($4) billion. Meanwhile, net revenue from that part of the business shot up 121% compared to Q1 2019. It would appear that trend continued into Q2 as well.

“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery — they can be a hugely important part of local commerce and communities, all the more important during crises like covid-19,” Uber CEO Dara Khosrowshahi said in a statement. “As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100 per cent year on year. We’re thrilled to welcome Postmates to the Uber family as we innovate together to deliver better experiences for consumers, delivery people, and merchants across the country.”

So what does this mean for both services? For consumers, it doesn’t look like much is changing as of right now. In its press release, Uber says it intends to keep the Postmates app alive and running. Bloomberg’s report also noted that Postmates CEO Bastian Lehmann and his team would stay on to do so. Mostly, it seems like Uber will be merging some of the back-end tech while widening its network of delivery options. The release, for instance, says that delivery people will have “more opportunities to earn income,” referencing batched orders.

Food delivery has surged during stay-at-home orders, but that hasn’t necessarily translated to profits. Restaurants aren’t benefitting much due to the huge cuts these apps take, while according to the Wall Street Journal, the services themselves are barely breaking even. Mostly because they can’t be monsters and deny protective gear for their drivers, and other pesky things like the human decency to provide sick days for quarantined gig workers, healthcare funds, and unemployment benefits. Honestly, this deal is basically two companies consolidating to survive and take potshots at bigger rivals in the same space — while doing the bare minimum (or less) for the small businesses and gig workers who make these services possible.