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Uber Technologies is reportedly in talks to buy Postmates for $ 2.6 billion just a month after a planned acquisition of Grubhub failed.
In combination, Uber Eats (22%) and Postmates (8%), according to Second Measure, have a market share in the delivery of meals of 30%. That would be bigger than Grubhub (23%), but still behind DoorDash (45%).
Food delivery apps like Uber Eats, Postmates and Grubhub are all unprofitable. Why is Uber Technologies – which is unprofitable and quickly burns up its billions of cash reserves – so hungry to add another unprofitable food delivery platform?
When Uber's business went under during the pandemic, it had to fire thousands of employees. However, food delivery actually benefits from home orders and the closure of most dine-in options. So there is nothing left but to double the food delivery.
According to a Fortune and Civis Analytics survey of 2,045 US adults from May 22-27 *, 23% of US adults have been ordering more on these platforms since the pandemic began. This is a 39% increase in people who are already using the platforms. However, the upswing is very different depending on age. Around 1 in 3 adults under 44 in the United States increase online delivery orders, compared to 1 in 10 for Americans over 45.
The Fortune and Civis Analytics survey found 58% of adults in the US say they now use food delivery services, and analysts expect many of them to continue as the pandemic wears down.
If Uber Eats and Postmates are combined, Uber could likely reduce 20% to 25% of the combined company's costs by avoiding overlaps, says Daniel Ives, chief executive officer for equity research at Wedbush Securities.
"I think if Uber makes the Postmates deal, it could accelerate Uber Eats' profitability by six to twelve months," Ives told Fortune on Tuesday. A larger market share would help make Uber Eats more competitive with industry leader DoorDash.
Ideally, Uber Eats would have teamed up with a bigger player like Grubhub, which would have made it more scalable and a quicker path to profitability, says Ives. But after that failed, Postmates became his last chance to make a deal.
“Uber is dancing and looking for a partner. Postmates is the last available partner. Otherwise, they go to the dance floor alone, ”says Ives.
* Methodology: The Fortune-Civis Analytics survey was conducted between May 22nd and May 27th among a national sample of 2,045 adults in the United States. The results were weighted according to age, race, gender, education and geography.
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