Platform Matters

Top Silicon Valley CEOs will appear before congress (remotely!) today amid antitrust inquiries in tech's "Big Tobacco moment."

Welcome to Expedite, a (mostly) weekly newsletter by Kristen Hawley covering what’s important in restaurant technology. 


Just ahead of today’s congressional testimony from top American tech CEOs including Apple’s Tim Cook, The New York Times published a piece about Apple’s continued efforts to collect nearly a third of product sales within iOS apps. The piece focuses on two companies, Classpass and Airbnb, whose pandemic-era pivots to digital included hosting paid classes and experiences within their iOS apps. Now that the events were virtual, Apple said, they were subject to the company’s policy of taking a 30 percent cut from in-app sales. 

There’s the obvious restaurant industry parallel here: that chefs, restaurants, or food workers who have pivoted to digital platforms as a way to support their virtual businesses as the physical ones take a pause could take another hit for offering classes or experiences through Apple. But then there’s the larger issue, which is about how much of a $ cut a platform is entitled to during… (I’m going to say it) an unprecedented time. 

The article says:

“Apple’s disputes with the smaller companies point to the control the world’s largest tech companies have had over the shift to online life brought on by the pandemic. While much of the rest of the economy is struggling, the pandemic has further entrenched their businesses.”

Here’s part of Apple’s defense: it was simply enforcing a decade-old rule, and that not doing so would be unfair to other companies who have spent years beholden to that rule. Rule enforcement, straight from the rule-breaking environs of Silicon Valley! 

If Apple’s looking, there’s plenty of Covid-era precedent for changing the rules to fit the new game. When the pandemic hit and millions of people had to cancel travel plans, the travel industry took a massive hit. Yet airlines adjusted their policies to accommodate flexible refunds outside of the typically narrow bounds of official policy. (Whether or not the airlines would have done this without a humongous bailout from the federal government is up for debate.) 

Here’s a better example: when the pandemic hit and millions of people had to cancel travel plans, Airbnb’s business took a massive hit. The company was preparing for an IPO when suddenly the rug underneath it was ripped away. Travelers who booked nonrefundable stays demanded refunds. Hosts who had bought up property for the express purpose of renting it out on Airbnb were left underwater with no business model and little protection offered from Airbnb. (The company did set aside $250 million for cancellation fees and also offered $5,000 grants to help, but these cover just a fraction of hosts’ expenses, if they receive anything at all, they say.) An email sent to Airbnb customers encouraging them to donate to hosts didn’t go over well, either.

Back to restaurants: Third party delivery companies have introduced some temporary measures to help amid the crisis, mostly in the form of reduced or waived fees for diners. Restaurants have also enjoyed select breaks in pricing, though all of these measures have felt decidedly temporary. But their problem is similar: traditional revenues have completely dried up and businesses are reliant on what was previously just one slice of its operational pie to help keep it afloat. 

In restaurant delivery, DoorDash — even with a $16 billion valuation — is not Apple, and comparing the two companies is literally oranges to Apples (sorry). But it’s worth looking further to the tech giant’s defense strategy right now as it navigates the potential antitrust case. 

According to the Times:

“Last week, Apple publicized a study by a consulting firm called Analysis Group showing that the 30 percent commission it charges many apps for the right to appear on iPhones is close to what other platforms charge for distribution. The study left out that Apple helped popularize that 30 percent standard across the industry.”

Apple’s defense also includes an insinuation that companies wouldn’t have a business to run were it not for the platform Apple has built and offered them. Essentially: “We build the technology you use to run your business and you should pay for it.” Sound familiar? 

What will actually come of these companies’ unwillingness to rewrite the rules to meet the moment? Meaningful change? Bureaucratic regulation? Seems like the regulators are considering these specific examples a smaller symptom of a larger problem, and experts liken this to Big Tech’s “Big Tobacco” moment — a momentous experience in a momentous time of pivots and technological support and marketing and footprints and survival. 

All this to say: be mindful of the technology upon which you build a business. The platform matters.


Keeping Count

A San Francisco-based startup has raised $51 million to count people. Density, which uses sensors to determine the amount of people in a space, announced a Series C round of $51 million. (Fortune has a good rundown of the company and its history if you’re interested.) 

Density uses sensors and lasers to determine the number of people entering and exiting a space — though could potentially be tricked by someone, say, crawling on their hands and knees through a doorway, its CEO said. (Catherine Zeta-Jones Entrapment vibes, anyone?) The company does not use facial recognition or mobile devices to determine the number of people in a space; this is more of a virtual turnstile. Stores can display the number of occupants in real time, via a tablet outside the door. 

This technology could easily be applied to restaurants, food halls, and other foodservice spaces, particularly those who don’t want to modify their operations to accept reservations or use a digital waitlist. Density says that it was planning to raise capital this year before the pandemic hit, but acknowledges that our current way of life has accelerated interest. 

As we learn more about the coronavirus, we’re also learning what sort of technology can best support this new way of living. We now know, for example, that surface transmission is less likely than airborne transmission, and the so-called “hygiene theater” (brilliant term borrowed from a recent piece inThe Atlantic) is performative, but likely ineffective. A visible and real-time representation of an in-person crowd makes me feel more secure than a hand sanitizing station by the door, tbh. 

Of course, all hygiene theater, effective or not, costs money. But the technology exists to help businesses, and perhaps the people and firms who support the technology might consider its best applications to support the businesses that need it most. 


What else is happening? 

Grubhub signed a deal to fund third quarter marketing for a couple of ghost kitchen concepts. Worth watching closely as Big Delivery cozies up to the concepts that rely on them for customers and distribution. 

New York-based ghost kitchen company Zuul Kitchens closed a round of $9 million to expand to other locations throughout the city’s five boroughs.. Manhattan has been particularly affected by Covid restrictions as workers that used to flood its streets and restaurants are working from home indefinitely.

Chipotle will start charging more for orders placed via third-party delivery services to offset the fees they charge, according to its chief financial officer. Last I heard, this practice is prohibited in delivery service agreements, though I also hear it’s generally not enforced. Will now be the time to start enforcing? Probably not for Chipotle!

A study from Ohio State confirms what we already knew to be true: a few negative restaurant reviews on Yelp make a huge deal. In this case, the number of poor reviews can determine how many reviews it gets overall. That is, popular restaurants become more popular over time. Also! Household income in different neighborhoods affected a restaurant’s likelihood of even being reviewed. Lower income areas had a higher share of unreviewed restaurants.  

Sevenrooms announced some new executive hires today including a new chief revenue officer and executive VP of enterprise sales

And, finally, is social media the new Food Network? Yes, absolutely, 100 percent. I’m happy to be included in this piece on Shondaland that explores how social platforms have changed how we watch chefs cook. 


About: 
Expedite is produced by Kristen Hawley, a San Francisco-based journalist with over seven years of experience covering the restaurant technology industry. Previous iterations of this content were available via Chefs+Tech and Skift Table. Thanks for reading. 

Share Expedite