The size of the transaction for the Russian market is quite impressive. High cost, in addition to the obvious prizes for control for the market size, due to the uniqueness of the asset. Services quick delivery is a seamless continuation of the user trend of “want it now”. This trend is created by such Internet companies as “Yandex.Taxi,” Uber and many others, which give the opportunity to obtain services or goods in a minimum and as simple as possible.
This market has huge growth potential due to the young audience and the more conservative audience of the middle age. Therefore, in the next two years the market will grow at the same high rate. In addition, the involvement of users in the restaurant business for the nonprofessional leads to huge prices on lid with unpredictable conversion rates. The fixed fee for the “result” of 10-20% of the order value, which places pay, joining the already operating infrastructure for online delivery, allows to effectively control costs and increase revenues.
This means that the number of restaurants collaborating with services like Delivery Club, is bound to grow. The partnership is doubly advantageous, because the payment is only upon receipt of the order, and restaurants do not incur any additional risks by collaborating with the service. You also cannot forget about the high synergistic effect of which will receive the current business owners.
Mail.Ru Group acquired not just potentially highly profitable asset, but also a platform for sending unsold or targeted traffic. Delivry Club, attracting this traffic, gets all chances to become the absolute market leader. If to speak about other market participants, on the one hand, the deal set a precedent that will allow to sell the same assets of more. On the other hand, projects that have previously competed with Delivery Club, faced with the impossibility of direct competition without access to the vast marketing and financial resources.
In the new conditions they will have to seek niche development strategy in order to survive and ensure profitability for its shareholders. Many do not understand why Delivery Club was so dearly bought. As much as $100 million on revenue of around seven million dollars. Some were not, did not hold a candle, but the logic of the transaction is clear to me, Ill try to explain.
— Revenues of 500 million rubles. This is their margin on the delivery. Sales in times above, I saw somewhere that seven times. Of course, I buy for profit, but sales growth and margins show potential.
— “Yandex” and Mail.Ru Group there is a natural slowdown in the core business. It is affected by many factors. The large size and market share, the crisis of the Russian economy, and as a consequence — the deterioration in the advertising market.
Investors are not happy. You need to add something that grows faster than the core business. Companies that are growing rapidly and have large market potential — a little. You have to overpay. And the theoretical market potential of food is huge.
— Internal evaluation. In Mail.Ru Group estimated, how many times faster can grow the business if to give him marketing channels Mail.ru, “Vkontakte” and “Classmates”. Do not be surprised if in a year or two this deal, itll seem extremely cheap. With competent work, the company can easily grow 10 times during this period.
And this is not the limit. I have no doubt that aggregators will continue to exist and occupy a niche in the market, but I dont see how the aggregators, food delivery can become very large and profitable business. The value that they create is too small, so it was able to earn a lot in the long run.
Uber creates a new product, connecting at the right moment in the right place of the client and taxi. This is the key value for the end customer and the driver. Very physical taxi service, of course, important, but it is Uber — Creator of the core values in the chain. The aggregators of food there is no such “magic”.
Aggregators — a traffic-selling providers of new clients and delivery service for restaurants that delivery is not their core business. What are the issues I have is the current model aggregators of delivery?. Unlike Uber, where taxi drivers have more or less the same services, and the main value for the customer is not the driver, and feed the machine at the right time in the right place, in the delivery of food, each restaurant creates a unique product. Its taste, temperature and freshness, packaging and service is most important in the entire chain to the client. Consumers are loyal first and foremost to this product, not an aggregator.
What is the result?. Restaurants will always try to obtain through the mediation of new customers, and then to make sure that customers ordered them to bypass the aggregator directly, especially if the Board aggregators is 15-20% of the order as it is today. Typically, this amount is the whole profitability of the restaurant. Consumers are loyal first and foremost to the restaurant in the long run.
Of course, not all restaurants there are convenient sites for online ordering, but they will appear. Restaurants will be to divert customers from the aggregator. Aggregators are simply suppliers of new customers. All this will force the aggregators to reduce the fee for orders.
In the end, the aggregator can turn into a directory of restaurants with a minimum Commission. A small fee on small checks (this is not a Booking.som) in parallel with the need to constantly invest in traffic will lead to the fact that the business will become very very profitable. The situation when a restaurant pays 15-20% with order, is possible in two cases. First.
Restaurant specializiruetsya on shipping and paying a Commission for a new client, trying to work with the client directly. Second. For restaurant delivery is not the primary business. Of course, aggregators can combine restaurants who do not have their delivery, for which shipping is just an additional service.
But there is a big difficulty, which is not visible to those who are not deeply familiar with the industry. In these restaurants, manufacturing, products, processes are not adapted to the delivery. They simply will not be able to provide stable service delivery and will lose those who are confined to the delivery.
Mail.EN Group missed the taxi market, but they managed to find another, equally promising vertical. With the purchase of Delivery Club they go to a new market that has huge potential. Mail.Ru Group has huge advertising resources, and combined with their expertise in mobile, this purchase is a very correct and logical for the company. We, as participants of the market of delivery, it seems that this transaction will have a positive impact on the overall market and strong competition is always a good thing, as ultimately it benefits consumers.
It is not very usual step for the Internet service. To buy something offline. But the logical step.
“ARPU does not smell”. Opportunities to increase income Mail.Ru Group c one of the Internet user through the Internet service is already close to the ceiling. The price is not much raise, the more ads on the page will not cram, the possibility of conversion in your own online profit centers (games, for example) are already optimized almost “ringing up”. Mail.EN Group has decided to enter the new glade — the increase in the average income of the Internet user at the expense of offline services.
If this experiment proves successful, it opens a wide field for the expansion of these offline suggestions. “Yandex” has been successfully working in the market of aggregators. If Mail.Ru Group decided to go there, the purchase of Delivery Club is a good solution. Food delivery from restaurants is a rare market in which a monopoly prevails in fact among agregation.
Delivery Club have no serious competitors, and with the capacity Mail.Ru Group to move the company from the first place will be almost impossible. At the same time the market is very large. With regard to the assessment, the deal looks good for Foodpanda. But you need to know the dynamics of revenue growth to evaluate its substantive.
Overall, the market is a good news as any big deal. This is both unexpected and anticipated event. Unexpected, because from anyone, and from Mail.Ru Group output foodtech and ecommerce-the market I didnt expect to see. It wasnt a threat.
Because usually new players there is the traditional offline retailers or small startups. But if you look at the Western market, the step Mail.Ru Group is not so unconventional. Take at least Amazon and its Amazon Fresh unit, or access The New York Times the sets for cooking. The market is changing, the traditional players are reviewing their models, looking for new channels of engagement and monetization of their audience, open new vertical.
For our market, where the company delivers the food with recipes, this deal should bring in the pros. It will allow to attract new resources in the ecommerce and foodtech in General, and to popularize it among the target audience. This will inevitably create additional opportunities for other market participants.
For the Corporation, such Mail.Ru Group, buy as the market leader seems like a reasonable way of entrance into non-core industry. In this case, the company will use the audience of its online services for the growth of a new offline-direction. This will allow not only to maintain leadership in the delivery (for example, reduce the cost to attract customers) and to diversify the groups main business, but also to cope with the slower pace of monetization in the main business units of the company (“Vkontakte”, “Classmates”).