Food delivery service Grubhub found itself under fire after it was reported that the company and Seamless, a subsidiary business, had purchased more than 23,000 domain names to launch microsites for restaurants that it has relationships with.
The problem: initial reports indicated that Grubhub did this without permission, a serious charge given that these sites could be used to capture web traffic that otherwise would have gone to restaurants’ own websites, giving Grubhub the ability to earn commissions it ostensibly didn’t deserve. Put simply, Grubhub, a publicly-traded company with significant resources appeared to be engaged in a large-scale effort to compete with its own restaurant clients on the web.
Not so fast, Grubhub responded. In an email to employees, Grubhub CEO Matt Maloney suggested that the outrage was misplaced. “We do not set up websites without the permission of a restaurant,” he stated. “We had a very clear provision in every one of our restaurant contracts saying we would provide this service to bring them more orders.”
A Los Angeles Times review of language in Grubhub contracts, which stated that the company “may create, maintain and operate a microsite (‘MS’) and obtain the URL for such MS on restaurant’s behalf”, seems to validate Maloney’s statements but not surprisingly, this hasn’t stemmed the tide of criticism.
The reason: even if its contracts gave it the right to launch microsites for its restaurant clients, it would appear that many if not most of these clients either didn’t know or didn’t understand that Grubhub’s own web efforts could compete with their own.
The Verge’s Nick Statt put it bluntly: “How is ‘they didn’t read the fine print of our terms of service’ an even remotely reasonable excuse in 2019?”
Businesses that don’t “get it” will lose out to those that do
If there’s a lesson in the Grubhub fiasco, it’s this: today, every business, no matter how large or small, is risking its future it if doesn’t acquire adequate digital know-how.
When the commercial web was in its infancy, it promised a revolutionary disruption: businesses would have the ability to cut out middlemen and transact directly with their customers. But two decades later, many businesses are dealing with a cruel irony: their industries have been disrupted by digital upstarts that are themselves middlemen and, in some cases, more powerful than any middlemen that existed before.
While there is no doubt that companies like Grubhub offer both businesses and consumers value — they wouldn’t have succeeded otherwise — Grubhub’s microsite efforts highlight the level to which techenabled middlemen can exploit their superior technological and digital marketing know-how to capture value at the expense of the companies they are supposed to be helping.
In some cases such as this one, digital middlemen are arguably relying on the ignorance of their clients and partners, many of which are small businesses, lending credence to an argument that they are engaging in predatory practices.
While some might hope regulatory action could reign in these kinds of practices, realistically the only way businesses can defend themselves is to become more digitally savvy.
For example, even if a restaurant didn’t catch the potentially problematic legalese in its contract with Grubhub, a digitally-savvy restaurant almost certainly would have discovered what Grubhub was doing, especially if Grubhub’s microsite began outranking its own in the SERPs, its website traffic dropped, and/or the percentage of sales attributable to Grubhub increased significantly over a relatively short period of time.
Put simply, knowledge of digital topics including SEO and analytics, and the willingness to invest in performing associated activities, no longer provides a competitive advantage in most consumer markets. Instead, it is a basic requirement for running a business and is the only way businesses can protect themselves from increasingly powerful digital middlemen they often have to work with.
Further reading for Econsultancy subscribers: