Great post! What strikes me in the execution piece of it, is that Doordash could focus on just food delivery while Uber had multiple business line focuses. I don't know how important that was but from conversations with Uber employees I think the prior assumptions from ride share didn't carry over to food delivery.
I do think that was a piece of it. Also, DoorDash execs typically had more equity and a bigger incentive given it was earlier stage and food delivery was the core business
Really interesting write up, thanks Dan! Even with the evidence you have provided, the suburban play sounds so backwards to me. I have always assumed that the majority of the earnings come from urban centers where it can be more difficult to travel to get the food yourself. With how much these services cost to use, as a consumer I still find it difficult that they turn a profit, but I am obviously proved very wrong here.
If you have small kids taking people to a restaurant is a nightmare. Ordinarily this would mean giving up on restaurant food, but with DoorDash this is no problem.
I used to use UberEats but then I got free dashpass through my frequent flyer credit card.
Just to add some anecdotal insight: I was within walking distance of a Chinese place, a pizza place, an Italian place, and a taqueria (among others) when I lived in the city. So while getting food from a specific restaurant might have been more difficult, getting food in general was much easier in the city versus the suburbs.
Because of this, the value of food delivery was lower. There just weren't as many situations where I "needed" it. It was also competing with the cheaper (and likely faster) option of ordering pickup from the pizza place down the street.
From a business perspective, I do also think that getting delivery capacity in the city is easier. This means that you can be comparatively "late" and still have a shot at competing. Whereas the suburbs, being less densely populated, means you need to spend a lot of time and money getting a reasonable delivery network. This makes the penalty for being late to the market that much more severe.
Really fascinating analysis on how DoorDash pulled off the win here. The suburbs first stratgy was brilliant becuase they essentially created a moat before competitors even realized that market existed. What I find most intresting is how the timing of going public or staying private can literally determine who wins in these winner take all markets. DoorDash got to play by different rules at a critical moment.
> It would have cratered their market cap to take on the burn required to pivot to DoorDash’s model. Instead, they stayed asset-light and posted EBITDA margins of 14% ($186M on 1.3B in revenue).
I wonder whether they’d have made the same decision as a private company. It feels like going public makes companies overly focused on short term outcomes and quarterly results.
Really enjoyed this piece. One key insight that is important to highlight is that DoorDash’s strategic insights emerged primarily through rapid iteration, not from a top-down planning process. For instance, they discovered the suburban opportunity after initially launching in Palo Alto during their time at Stanford. It was only when they tried launching in cities later on that they learned the strategic advantages of operating in the suburbs. While this agile philosophy is common among engineering-led companies, I’ve found it to be the exception in the marketplaces space, which often rely on the traditional 'plan, then ship' model.
The arbitrage you describe has a human cost: I worked 6 hours for DoorDash, earned $5.70/hour after all expenses. The 94% acceptance rate system punishes declining unprofitable orders. The legal fiction of 'independent contractor' lets them extract labor below minimum wage while maintaining behavioral control. Documented here: https://www.unspunthread.com/p/doordash-driver-full-time-broke-acceptance-rate-trap. Prop 22 didn't just change law, it locked in wage theft.
I have been wondering about this for a while now! GrubHub seemingly had a big lead circa 2018 and really lost it. The lesson I take from this is to keep raising massive amounts of money and just throw it into optimizing product and branding/marketing/advertising and if you massively outspend based on smart strategy, you will win. The question is, have they earned back all of the money they spent yet? Are they profitable now? What was their 2024 EBITDA?
I think that GrubHub commercial (https://www.youtube.com/watch?v=G-T3qKl6y-c) sealed their fate. When your advertising is so disconnected with your users that it turns into a meme making fun of you, then you're doomed.
Fantastic. But I must be missing some nuance when you write "They launched the Chase Sapphire partnership before Uber launched the Amex partnership." Amex-Uber partnered in 2014, while Chase-DoorDash came in 2020.
Great post! What strikes me in the execution piece of it, is that Doordash could focus on just food delivery while Uber had multiple business line focuses. I don't know how important that was but from conversations with Uber employees I think the prior assumptions from ride share didn't carry over to food delivery.
I do think that was a piece of it. Also, DoorDash execs typically had more equity and a bigger incentive given it was earlier stage and food delivery was the core business
I was thinking the same thing. Focus on one market and a clear impact, and the brand association was clear to the market.
Really interesting write up, thanks Dan! Even with the evidence you have provided, the suburban play sounds so backwards to me. I have always assumed that the majority of the earnings come from urban centers where it can be more difficult to travel to get the food yourself. With how much these services cost to use, as a consumer I still find it difficult that they turn a profit, but I am obviously proved very wrong here.
Agree - I think the counter-intuitive nature of the insight is why it was so powerful.
If you have small kids taking people to a restaurant is a nightmare. Ordinarily this would mean giving up on restaurant food, but with DoorDash this is no problem.
I used to use UberEats but then I got free dashpass through my frequent flyer credit card.
Just to add some anecdotal insight: I was within walking distance of a Chinese place, a pizza place, an Italian place, and a taqueria (among others) when I lived in the city. So while getting food from a specific restaurant might have been more difficult, getting food in general was much easier in the city versus the suburbs.
Because of this, the value of food delivery was lower. There just weren't as many situations where I "needed" it. It was also competing with the cheaper (and likely faster) option of ordering pickup from the pizza place down the street.
From a business perspective, I do also think that getting delivery capacity in the city is easier. This means that you can be comparatively "late" and still have a shot at competing. Whereas the suburbs, being less densely populated, means you need to spend a lot of time and money getting a reasonable delivery network. This makes the penalty for being late to the market that much more severe.
This is the good stuff. Top quality post Dan 👏
Thanks Daniel!
Really fascinating analysis on how DoorDash pulled off the win here. The suburbs first stratgy was brilliant becuase they essentially created a moat before competitors even realized that market existed. What I find most intresting is how the timing of going public or staying private can literally determine who wins in these winner take all markets. DoorDash got to play by different rules at a critical moment.
Luck doesn’t get talked about enough as a key factor in success. Great article.
Agree - it’s often not in people’s interests to talk about luck, unless you’re an outside observer, or perhaps a competitor.
Super interesting! I like that oyu factored luck into it, I feel like we often tend to forget about it !
Great post Dan !
Thank you!
> It would have cratered their market cap to take on the burn required to pivot to DoorDash’s model. Instead, they stayed asset-light and posted EBITDA margins of 14% ($186M on 1.3B in revenue).
I wonder whether they’d have made the same decision as a private company. It feels like going public makes companies overly focused on short term outcomes and quarterly results.
I absolutely think being public (and especially having many cycles of setting investor expectations) made it harder for them to pivot their model.
Great analysis. Thanks for the perspective, insights, and sources.
I appreciate it Joel!
Really enjoyed this piece. One key insight that is important to highlight is that DoorDash’s strategic insights emerged primarily through rapid iteration, not from a top-down planning process. For instance, they discovered the suburban opportunity after initially launching in Palo Alto during their time at Stanford. It was only when they tried launching in cities later on that they learned the strategic advantages of operating in the suburbs. While this agile philosophy is common among engineering-led companies, I’ve found it to be the exception in the marketplaces space, which often rely on the traditional 'plan, then ship' model.
The arbitrage you describe has a human cost: I worked 6 hours for DoorDash, earned $5.70/hour after all expenses. The 94% acceptance rate system punishes declining unprofitable orders. The legal fiction of 'independent contractor' lets them extract labor below minimum wage while maintaining behavioral control. Documented here: https://www.unspunthread.com/p/doordash-driver-full-time-broke-acceptance-rate-trap. Prop 22 didn't just change law, it locked in wage theft.
Would be curious to hear what you make of doordash's recent acquisitions?
I have been wondering about this for a while now! GrubHub seemingly had a big lead circa 2018 and really lost it. The lesson I take from this is to keep raising massive amounts of money and just throw it into optimizing product and branding/marketing/advertising and if you massively outspend based on smart strategy, you will win. The question is, have they earned back all of the money they spent yet? Are they profitable now? What was their 2024 EBITDA?
I think that GrubHub commercial (https://www.youtube.com/watch?v=G-T3qKl6y-c) sealed their fate. When your advertising is so disconnected with your users that it turns into a meme making fun of you, then you're doomed.
Fantastic. But I must be missing some nuance when you write "They launched the Chase Sapphire partnership before Uber launched the Amex partnership." Amex-Uber partnered in 2014, while Chase-DoorDash came in 2020.
Great stuff! Super interesting!
Thanks Alex!
The suburban strategy struck a chord.