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Protocol Index: It’s a great time to hire

Protocol Index

Good morning! This Wednesday, everything you need to know about the Uber/Grubhub deal, why it's a surprisingly good time to launch in the U.S., and the latest development in the Animal Crossing economy. Want Index in your inbox each morning? Subscribe here.

What Matters Today

  • Just now: Tencent reported a 26% year-on-year jump in revenue, driven by surging video game demand. But the company warned that demand for in-game purchases would "largely normalize as people return to work," and it forecasted "headwinds" for its ad business.
  • 6 a.m. PDT: Fed Chair Jerome Powell will give a webinar for the Peterson Institute. Investors are hoping he'll discuss negative rates, outlining if the Fed's opposition has changed given current circumstances. Also look for a broader economic outlook: Dallas Fed President Robert Kaplan said yesterday that unemployment was likely to peak around 20%.
  • 1:30 p.m. PDT: Cisco reports earnings, where it's expected to lay out just how much its remote-work tools have benefited from quarantine measures.


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Today's News

As of 4:45 a.m. PDT: Nasdaq Futures: 0.83% | Euro 600: -1.16% | Nikkei: -0.49% | Hang Seng: -0.27%



  • Sen. Lindsey Graham introduced a bill that would let the president sanction China if it "fails to cooperate and provide a full accounting of the events leading up to the [coronavirus] outbreak." The proposed sanctions include asset freezes and banning Chinese stock listings in the U.S.
  • 13 state attorneys general asked Amazon to provide data on its workers' coronavirus infections and deaths, along with information on its health and safety measures.
  • Facebook agreed to pay $52 million to its content moderators as compensation for work-related PTSD.
  • Democratic senators proposed a bill that would ban telecom companies from shutting off service during the pandemic.
  • Sony reported a 57% year-on-year drop in operating profit for last quarter, warning that it could fall 30% over this fiscal year. It said its consumer electronics unit was most affected.
  • Software company Sage said new customer acquisition was around half its expected level in April.
  • WeWork is reportedly considering subleasing its New York headquarters.
  • Telegram gave up on its TON blockchain after the SEC told the company to return investors' money.
  • Kuaishou Technology, a Tencent-backed video platform, sued ByteDance for "unfair competition."


Everyone's Thinking About

Uber: Your Grubhub order is being processed

Grubhub investors had a pretty good Tuesday: The company's stock closed up almost 30% on reports that Uber has made an offer to acquire it. We've talked a lot about how the hyper-competitive delivery space was bound to lead to consolidation, and that's now coming to pass.

  • Biz Carson and I have a story on Protocol explaining the background behind this deal. In short: Grubhub's marketplace model, where it paired up restaurants' own delivery services with consumers, was once profitable.
  • But when new, VC-backed entrants like Uber Eats, DoorDash and Postmates entered the market with their own logistics services, it triggered a race to the bottom.
  • Grubhub was forced to compete by entering the logistics space itself, despite executives telling investors that it didn't believe "that a company can generate significant profits on just the logistics component of the business."
  • And so its business has turned. In the first quarter of 2019, Grubhub made a profit of almost $7 million. This year, the first quarter led to a $33.4 million loss. Though the pandemic has led to a surge in demand, it's also spurred even more aggressive discounting: Deutsche Bank's Kunal Madhukar said Monday that Grubhub is likely discounting "in the mid-to-high-single-digit range across all delivery orders."

Consolidation was inevitable because it's the only way the economics make sense. This deal would give Uber control of 55% of the U.S. market, according to Wedbush analysts, which would let the price war ease up a little. That, combined with Uber adding value to its overall ecosystem (ride hailing, grocery delivery and the like), means your takeouts could actually make money.

  • But that's also why the deal might not go through. Rep. David Cicilline, the top Democrat on the House Judiciary's antitrust subcommittee, said yesterday that "we cannot allow these corporations to monopolize food delivery," particularly calling out Uber as a "notoriously predatory company."

And even if a deal is allowed, it might not be this one. Wedbush analysts said they "wouldn't rule out a bidding war with DoorDash … as it, too, will look to whether it makes sense to purchase market dominance." Biz, meanwhile, thinks Amazon might be a dark horse to enter the race — Grubhub's marketplace model is essentially Amazon For Restaurants.

  • Further consolidation will likely follow, too. DoorDash, the current market leader, would be usurped by an Uber-Grubhub tieup. It might then make a retaliatory move, said PitchBook analyst Asad Hussain: "DoorDash and Postmates could be likely merger candidates going forward."

Oh, and the deal terms? Grubhub had a market cap of $4.27 billion on Monday night, jumping to $5.51 billion as of today. As for how it'll be paid for, the Financial Times speculates that although Uber has $9 billion in cash, its significant burn rate means a stock deal might make more sense. Still, we're a long way from a deal being done: Watch this space.


  • "With the crisis still spreading, the outlook is worse than our already pessimistic projection." — IMF managing director Kristalina Georgieva said that the economy was even worse than it forecast last month.
  • "We spent the entire month of April spending tens of millions of dollars getting our spaces ready for when people can get back to work." — WeWork CEO Sandeep Mathrani also said the company paid rent in over 80% of its locations in April and May, while collecting rent from 70% of its tenants last month.

Diving Deeper

How to launch a US expansion in a pandemic

Back in February, U.K. fintech Curve announced it was opening a Brooklyn office from which it would launch its "100 cards in one" product to the U.S. market. Flash forward three months and yeah, that's not happened yet.

  • "We will have people in a physical office again," Amanda Orson, Curve's head of North America, told me yesterday, saying the company was still set on a Brooklyn location.
  • If anything, the pandemic timing is kind of good. Curve hasn't signed a lease yet, and Orson said the prices she's being quoted have already fallen dramatically. "If it was $58 per square foot in February," she said, "I'm seeing $53 to $55 a square foot." Prices should come down even further as companies bail on expensive offices, she thinks.

It's also a good time to hire. "It is a buyer's market, which is to say there's a lot of talent that doesn't deserve to be on the marketplace, on the marketplace," Orson told me. "You can probably get better talent at lower cost right now than any other time since I've ever been recruiting."

  • Curve's seen a 3x increase in the number of applicants from a couple of months ago — although Orson did say that the numbers started off small.
  • But remote interviews are weird. "What you lose by having completely remote interviews — it's just that opportunity for the casual side conversation, that gives you more insight to what that person is actually like as a human being."
  • "You have to be a lot more intentional, and maybe set more time up for each interview," Orson said.

And in the long run, marketing could go well, too. "To the extent that there's still some fallout ... in the early part of next year, I expect that all the media buys that are demographically targeted will probably be less expensive" year-over-year, she said.

  • Still, there are challenges ahead. Marketing is "a lot more expensive" in the U.S. than Europe, and Curve's business has been hit by the pandemic. "We are, like everybody else in the payments industry, certainly affected by people making fewer payments overall," Orson said.
  • And though Curve's product has a "much more intuitive" value proposition in the U.S., where people have more credit cards, its frosty relationship with American Express could cause problems: Amex abruptly shut down Curve's integration last year, leading Curve to explore legal recourse. But things appear to have mellowed: "We absolutely want to work with them here, and are still in talks with them about that," Orson told me.

Closing Bell

Amazon, but for turnips

Animal Crossing is so popular that an entire economy is being built around it. The Washington Post reported the other day on Nookazon, a "fan-made online retailer" that lets players trade in-game goods and now claims to have 7 million daily page views. It doesn't let players sell for real money, so rare items have become a currency instead. Unusually for an online retailer, Nookazon doesn't take a cut, instead running on donations. Just wait until Bezos hears about it.

Thoughts/feedback/tips? Email me — — or anonymously contact Protocol. And subscribe to get Index in your inbox each morning. Thanks for reading, see you tomorrow.

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