The Best One Yet - “These delivery apps are like mafia families” - Grubhub, Spotify, and Tough Mudder

Episode Date: January 9, 2020

We’re testing out a new title format, Snackers. Grubhub shares jumped 13% on news it’s trying to sell itself. Spotify’s launching a dynamic new advertising format that reminds us of Facebook. And the “you might die from this” fitness event startup Tough Mudder is reportedly being pushed to file for bankruptcy.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. This is snacks daily. It is Thursday, January 9th, already. Day 9 of the January, and I'm still alive. This is the best snacks daily we've ever done. If you bite off a piece of Jack right now, a green juice sips out of him. It's actually kind of wild snacks.

Cash your cheese and cauliflower crust. First story, Jack, what are we doing? Spotify is embracing a Facebook-like targeted podcast ad situation. No more pitching new ice cream brands with their promo codes to the lactose intolerant. This is a podcast about a company doing. podcast ads. It's like a Seinfeld thing. But there's no ads.

Second story, James. Grubhub just jumped 13% on word that it's trying to sell itself. Classic case of if you can't beat them, sell yourself to them. They're in a final story. Tough mutter. You've all seen somebody like a tough mutter shirt. Someone just right out. I was like, huh?

Someone said Tough Mudder. I did tough mutters. I did four tough mudders last week. People talk about CrossFit. They really talk about Tough Mud. It is like the keto of workouts. The creator of the humble brag, I just did this extreme event workout concept is pushed to file for bankruptcy.

Now, Snackers. Before we jump into that three wonderful mix of stories, we got to talk about the 10,000 humans who just applied to work at Disney. For free. Without getting paid. Yeah. Why are they doing this? Well, here's the thing. Before we even talk about that 10,000, let's focus

on the 14 who were accepted. Okay, let me quickly do some math here. 10,000 people applied, 14 got accepted. That's a 0.14% acceptance rate. Jack and I jumped into the books, the old Wikipedia, and it turns out that that's lower than everything. That's lower than Middlebury College. There is not a single institution, you name it, college, university, whatever, that has a lower rate. I'm thinking

Bat Boy for the New York Yankees has a lower acceptance rate. We're thinking maybe Apollo Mission with NASA had a lower acceptance rate? Head boy at Hogwarts reportedly had a lower acceptance rate. Sounds like an inappropriate role Hogwarts, but we'll let that one slide. So the job we're talking about that these 14 lucky, highly qualified people got, is a Disney Park's mom panel. It's called the mom panel. Technically, they're now three dads on this panel. But these are 14 people who get paid in joy and happiness. It's the currency of love. Their job is to plan families' vacations to Disney Park. So the next time you're trying to do a cruise line on Disney or you're trying to work your way around the Magic Kingdom, you're going to speak with a Disney

Park's mom and just know they're doing this because they love you. They're doing this because they want you to experience magic. They're doing this. because they think that Mickey would be proud. We actually didn't have thinking out the reasons why they're doing this, but let's in our three stories. You're tuned in the snacks daily.

We spoke to the lawyers and we got to get something legal out the way. The snacks about the hearing food is air candy. They don't reflect the views of the robberhood family. It's all informational just so. We're not recommending any securities. It's not a research report or investment advice.

Not an offer or sale of a security. Right. Snacks is digestible. Business news for you. Rapper Her Financial, LLC, member FINRA slash SIPC. For our first story, Spotify introduces a new service to make podcast ads a lot more like Facebook ads. Now, Nick, I think Apple unofficially invented the podcast in the mid-2000s. Hence the pod.

Hence the pod. Hence the pod. Hence podcast. But Spotify is number two. Spotify is not just number two. It is kind of like it is the lift to Apple's Uber. It is the Katie Perry to Apple's Taylor's swath. It is the snake to Apple's mongoose.

Or is it the mongos to my snake? I can't remember exactly how that one went down, but it was something like that. But Spotify might become the number one podcast monetizer, thanks to its new streaming ad insertion, which it announced yesterday. They're going to come out with that. They need a better name for this thing. It's abbreviated S-A-I. That's a lot, but let's go with S-A-I. So instead of just one advertisement per podcast played to all the listeners of the podcast forever, you're going to get a

couple changes. The first change is targeted ads. That means two people listening to the same podcast. In the same universe. Could likely hear different ads when that moment comes up when the ad comes up. One's probably going to be a direct-to-consumer mattress company. One's going to be a direct-to-consumer toothbrush, let's be honest. True. That's actually a big deal, Nick. The second big deal is refreshed ads. Refreshed ads. So let's say, for example, right now you got Frozen 2 out, you know, and you're probably maybe hearing a podcast ad for Frozen 2. Right. Well, a year from now, that Frozen 2 movie ad is It's going to be a little outdated. It's going to be stale.

So they could update. If your podcast is on Spotify, you could update the ad to be the Frozen 3 advertiser. Which is critical. That's critical if you have a podcast that, like, last the test of time. Snacks Daily definitely lasts the test of time. Exactly. But people tend to listen to us, like, right now and not last year's episode. Now, these two changes make advertising.

Now, these two changes are a big deal because they make advertising so much more valuable for podcasts. Let me tell you what a marketer hates. Oh my God. This scenario freaks some people out. When somebody sees or hears their advertisement, but that person who saw or heard it hates the product. I mean, Cheesecake Factory? The Cheesecake Factory, they're trying to advertise on a podcast.

Do you know how many lactose intolerant people are hearing that ad? And that is wasted ad spending. Because they're intolerant. No, because they're not interested in cheesecake. Well, with targeted ads, you can show your ad only to the people who may like your product, especially if you're the cheesecake factor. For example, with this targeted advertising on Spotify, you could place an ad only to female listeners

between the age of 18 and 36 who live in a metropolitan area who have posted a picture online of a hot chocolate fudge Sunday all over their face, which indicates they're not lactose and tolerance. Or that may just be me, and you couldn't tell who it was exactly. Now, that's called ad targeting, and Facebook is the best ad targeter in the wall. And that's because Facebook knows that your interests on Facebook include cookie dough. Or maybe on Instagram, you've geotagged your e-a-tagged your evening at Salt and Straw or Ben and Jerry's.

And because of that, Facebook can charge more for ads than a newspaper can than a TV channel can and then a podcast company can. So with this new Spotify ad service, podcasters may be able to charge more for ads too. Now, there's one way this might change the industry. It might mean that hosts read fewer ads like live and refer to things that are happening in this podcast episode. Back in the day when Jack and I did ads, we used to do one for like Buffalo Trace Whiskey, which was, I mean, we were actually having the whiskey.

doing the ad. We'd make reference to like that brutal Xerox story and that we needed some Buffalo Trace. Boom, rolling to the ad. You might not get that anymore because ads are going to be like pre-recorded. So Jack, what's the takeaway for our buddies over at Spotify?

Spotify's secret weapon against Apple isn't just their data. It's their willingness to use the data. Spotify also knows your age, your gender, your location, and what music you're listening to. Right. In fact, for snacks, data listeners, we know that the top three music you listen to is Post Malone, Drake, Kanye, is one of the same. two, three. Number five is Ed Shearin. I forget what number four. Ed Shearant's always in the mix in a top five. By the way, Snackers, this is why we love you guys.

Now, Spotify is willing to use that listener data to segment Snacks data listeners into different groups so that we could serve you different ads if we had ads. But Apple isn't willing to do that so far because it's obsessed with privacy. Yeah. Privacy is a big value proposition that Apple has been pushing. But here's the big question and the big X factory we want to leave you with Snackers. If you log into Spotify via Facebook, like I do, which you can do with a one-click Facebook login, does that mean that Spotify knows as much about me as Facebook knows about me? I'm actually not sure. It's a thinker.

This is Jack. I own stock of Spotify. For our second story, Jack, spit the garlic bread out of your mouth. Grubhub just jumped 13% on word it's trying to sell itself. We call it sauce or we call it gravy? This story began with five dangerous words in the Wall Street Journal. According to people familiar with the mail. Whenever you hear that, it's not a good sense.

Those are juicy gossipy words. It turns out that Grubhub, the food delivery company, has tapped financial advisors basically to help them sell the company. Yeah, they're like, we are for sale, we're going to merge, we're going to get acquired. We don't want to be independent. And if you're wondering why the stock jumped, it's because when Grubhubbh gets acquired, it'll Grubhub. If it gets acquired, it's probably going to be for a higher price than wherever the stock

is trading right now. That's just how acquisitions work. You acquire a company. You're going to pay more than the company. price according to the stock. So investors are jumping in right now. Because they want to get a piece of that. In the meantime, we took a look at Grubhub's rise and then fall. 2004 founded in Chicago, Illinois, and they started by just posting menus of delivery places online. Remember the early 2000s? Growing up in New York City, we had like six Chinese places around the corner, so we had

like a family album of menus from every delivery restaurant near us. It was like a gospel of menus. That's the wrong. A sacred text. Would they, would they set between 86, and 96 streets, would they deliver? That was the big question. We had an entire polemic on this thing. Your buddy had an alphabetized album of memories. You'd go over there, you're like, let me see, French, Bulgarian. So in Brattleboro, Vermont, which is actually the big city for Vermont, there's like 13,000 people. People look up there. We had all the menus printed in our local phone book. It was wonderful. Strategic real estate. There were like 35 pages of pizza places, just in Brattleboro, Vermont. In the meantime, Grubhubbub evolved from menus to start doing food

delivery, and they IPOed in 2014 at $4.5 billion after they merged with seamless. Yeah, they hit a peak valuation just a couple years ago of $13 billion, so they almost tripled from their IPF. And now they're back down to like around $5 billion by their value. Right. They've plummeted the past two years. Basically, as the delivery wars have started heating up, it's just become a battle of promo codes. Like, deliver McDonald's, you'll have $15 off your first order. Now they're worth less than half of a lift. Right. Actually, in October, the stock of Grubhubhub fell by 43% in one day. Because the CEO said that diners were promiscuous.

Yes. He was venting that diners wouldn't become loyal to Grubhub. They were just like Uber Eads, Doordash, whoever's offered me the best promo card. Snackers, when it comes to the delivery wars right now, Jack and I think it looks a lot like a whole mafia situation, very regional, very split. It's true. There's four big families. The biggest family is Doordash, which controls 37% of America's delivery app, delivery

food market, mostly in the West. Yes, very true. Francisco, Dallas, Phoenix, Arizona. Hey, you want to order some chicken palm? Chicken palm, not from over there. That's the Louisiana family territory. We're not ordering from over there. You mean Dordash territory, not Luigiani territory?

No, no, that's true. And the second is Grubhub. They have 30% of the market, mostly East Coast, New York City, Philadelphia, Boston. I assume their home city of Chicago. They basically got like the whole Amtrak corridor right there. Yeah, actually, Grubhub acquired Seamless, which was a New York City classic. And then you've got Uber Eats with 20% of the food delivery market. They're dominating LeBron James' former territory of Miami and Atlanta, Georgia.

Yeah, they got the South East Coast. And then finally, Postmates has cornered the Los Angeles market only. Of course. They have 10% of the market. And, like, of course, people in L.A. do things a little differently. Here's the funny thing. If these four companies would just stay in their territory and behave like good mafia families, then they could raise prices, stop giving out promo codes, and actually maybe turn a profit.

But East chap is threading into the other turf, which leads to a promo code price war, if you know what I mean. I think you're going to have to have to have. So, Jack, what's the takeaway for our buddies stuck in this mafia situation, especially Grubhub. All right. With no loyalty and just price competition, mergers are inevitable. Another industry where we've seen no loyalty in price competition, Ridehound. Yeah, there's only two companies in Ridehound, Lyft and Uber, and they're still unprofitable, even as just two. So to take out DoorDash in San Francisco, Grubhubb would have to, like, splurge on coupon codes for all of your Thai takeout.

And then they'd have to splurge on advertisements to defend in their home city from Uber Eats. which is probably trying to tread. It would be way easier and cheaper for Grubhub to just merge with Postmates so they could take on DoorDash and Uber Eats together. Grubhub sees that its path to profitability is through a merger or an acquisition, so it's not looking to compete anymore. So Snackers, who do you think could acquire Grubhub? Tweet us at Robin Hood Snacks. For our third and final story, tough mutter is being pushed into bankruptcy. I declare bankruptcy.

If you want to see this, go to their website right now like you. Jack and I did jumping in snack style, and you're going to see one big thing blazoned across the top. Ticket sales are offline. Check back in later. Yeah, it's not a good greeting on the toughmutter.com website. Now, this is a company that boasted they had probably the toughest race on earth. I love the word probably in there. Some lawyers got there.

The lawyers got there. The lawyers, snackers, the lawyers wanted us to say this is probably the best one yet. We probably shouldn't even be saying this right now. Now, the CEO recently left Toughmutter. one of the co-founders is suing the other, claiming they want $3 million. And the big issue that just came up is that a construction firm claims it's owed nearly $1 million by Tush Mutter. Because they built a bunch of crazy obstacle course equipment, and they're telling a judge, I want to get paid, hence, bankruptcy. Now, here's why we were so fascinated with Tuff Mutter.

They've basically created a new industry. Replicable Extreme Team Fitness Events. If you want to do a Tuff Mutter event, no joke, you sign something called Buff Mutter. death waiver. I'm not sure that's officially what it's called, but it's essentially a death waiver. If you signed one... If you signed one... You probably love telling people you signed a death waiver. Tough Mudder was founded in 2010 in Brooklyn, New York. They have 150 events a year, and five million people have participated in a tough mutter. This is going to sound like a great deal to some people. For 125 to 200 bucks, you can climb a fake wall, jump in an ice trench, walk a tightrope,

slop through some mud, and jump through an electric fence with a shock field of 10,000 volts. Jack, can you translate the vault for me? That is twice as much as a cattle fence. Now, Tough Mudder claims this is, quote, unquote, extreme endurance. It's a beautiful combination of the wellness trend, the experience trend, and the nightmare trend. Is that a trend? Is that a fat? Is that even a thing? Now, Tough Mudder claims 20,000 people have Tough Mudder tattoos slapped on their body. Maybe that's why they tried to branch off into new products like an urban version of Tough Mud.

Right. The Tough Mudder I'm aware of, there was one at Mount Snow. in Vermont, my home ski resort. So most of them are outdoors where like it's easy to find mud. They're like two steps away from having someone shoot bows and arrows at you while you're doing this thing. But the urban one is like you're crawling through a chamber with tear gas-like gas. We're actually not kidding on that. They had a tear gas-like substance they would throw it. They also tried to spin off a boutique fitness studios called boot camps.

Attention barriers. Clearly none of these have worked. And now it's rival Spartan race, which does pretty much the same thing. They might acquire tough modern operations outside the USA, which could clear up this bankruptcy. So, Jack, what's the takeaway for our buddies who are struggling over a tough mutter? Jets to get over the hill. Its business model is a lot like a music tour, except for one big thing.

Let's look at its revenue model. Basically, they sell tickets. That's one way they make money. And they get big advertisers who want to reach all those people who just bought those tickets. Chapulte. Jeep. Kindbar. Budweiser.

All of them love the targeted advertising opportunity here. These are health nuts who like to torture themselves. I think it's like health nuts with a same. They don't massacistic kind of bent to themselves. Right. So they could have hauled obstacle courses from city to city, from ski resort to ski resort, from field to field, just like U2 does with their giant speakers and made a bunch of money on a tour. But here's the one difference when it comes to their customers. Musicians have fans dying to see them all over the country.

Tough mutter didn't. That's why when it comes to its cost, Tough Mudders advertising was probably a huge cost for the company. They started from scratch in each city trying to attract people and convince them to pay $100 to pretty much torture. We will shock you for only $125. It sounds like a good deal. Snackers, also the business model of event production is pretty hard. You probably watch two fire festival documentaries to prove it. Jack, can you whip up the takeaways for us over there? Spotify is trying to make podcasting more lucrative by making ads targeted. Snackers, this is why Facebook is worth $600 billion. Targeted ads. Second takeaway?

Grubhub is reportedly planning to merge instead of keep on fighting in the food delivery wars. You can make you a calorie offer. You're going to make you a calorie offer. can't refuse. Third and final story, Tough Mudder is reportedly headed for bankruptcy. Extreme fitness events are basically like music concerts, but without the fans. Now, Snackers, time for our snack fact of the day. This one sent in by a

legendary snacker and a first we have never received anything like this. This is Scott Pereira from Scottsdale, Arizona. Scott decided to video in via Twitter his snack fact, which was the most entertaining thing we've watched. It is the best one. It was a borderline video audition snack fact. I loved this thing. We were fan crush. It was entertaining as hell.

The whole office side. He had multiple snack facts in one snack vac video. Now, the snack fact is about Hershey's. The chocolate company based in Hershey's Pennsylvania named after a man named Hershey. Who only had a fourth grade education. Whose legendary Mr. Goodbar candy bar was named Mr. Goodbar by accident. Whose Hershey's kisses have a name that not even Hershey's really knows where the name came from. whose kisses were being eaten by Scott as he submitted this video submission. For a company called Hershey's, whose chocolate was handed out during World War II, two soldiers. So when they came back home, they loved Hershey's chocolate. The baby boomer generation was basically the Hershey Boomer generation.

Scott from Scottsdale, basically our Snacker in the month. Scott, that was great. Thanks again. Snackers, loved having you with us. We'll catch tomorrow. Jack. Should we do this? See you. See you. Same sweater.

We're going to wear. We'll wear the same thing. Same over. reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc, or any of its subsidiaries or affiliates. The podcast is for informational purposes only and is not intended to serve as a recommendation to buy or sell any security and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision.

Robin Hood Financial LLC, member FINRA, SIPC.