"Life is not fair; get used to it," said the founder of Microsoft Bill Gates.
In a new study, 44% of Millennials plan to move out of the Bay Area in the “next few years.”
In the same study, 8% of Millennials will move out of the Californian tech peninsula within the next 365 days.
Tech companies are in serious danger of stagnating because they won’t be able to hire the talent needed to keep their companies afloat while the number of foreign HB-1 visas has dried up.
All of this could come home to roost and early cracks can be found in the local housing migratory trends.
The robust housing demand, lack of housing supply, mixed with the avalanche of inquisitive tech money has made living with a roof over your head a tall order.
The area has also become squalid like some third world countries due to the homeless problem that is growing faster than any software company.
Salesforce Founder and CEO Marc Benioff has lamented that San Francisco, where ironically he is from, is a diabolical “train wreck” and urged fellow tech CEOs to “walk down the street” and see it with their own eyes to observe the numerous homeless encampments dotted around the city limits.
The leader of Salesforce doesn’t mince his words when he talks and beelines to the heart of the issues.
In condemning large swaths of the beneficiaries of the Silicon Valley ethos, he has signaled that it won’t be smooth sailing forever.
He has also urged companies to transform their business model if they are irresponsible with user data.
The tech lash could get messier this year because companies that go rogue with personal data will face a cringeworthy reckoning as government policy stiffens.
I have walked around the streets of San Francisco myself.
Places around Powell Bart station close to the Tenderloin district are eyesores littered with used syringes that lay in the gutter.
South of Market Street (SoMa) isn’t a place I would want to barbecue on a terrace either.
Summing it up, the unlimited tech talent reservoir that Silicon Valley gorged on isn’t flowing anymore because people don’t want to live there anymore.
This is exactly what Apple’s $1 billion investment into a new tech campus in Austin, Texas, and Amazon adding 500 employees in Nashville, Tennessee are all about.
Apple also added numbers in San Diego, Atlanta, Culver City, and Boulder just to name a few.
Apple currently employs 90,000 people in 50 states and is in the works to create 20,000 more jobs in the US by 2023.
Most of these new jobs won’t be in Silicon Valley.
Jobs simply flock to where the talent is.
The tables have turned but that is what happens when the heart of western tech becomes unlivable to the average tech worker earning $150,000 per year.
Sacramento has experienced a dizzying rise of newcomers from the Bay Area escaping the sky-high housing.
Millennials are reaching that age of family formation and they are fleeing to places that are affordable and possible to take the first step onto the property ladder.
These are some of the practical issues that tech has failed to address, and part of the problem with unfettered capitalism which doesn’t consider quality of life.
No wonder why Silicon Valley real estate has dropped in the past year, people and their paychecks are on the way out.
If you need a new investment theme – here’s one.
3D printing.
Yes, the same 3D printing that was once considered a raging but hopeless fad.
A lot has changed since then.
Early adopters were largely cut down at the knees as they tried to traverse the rocky terrain from a niche market to going full out mainstream.
Production complications and the lack of specialists in the industry meant that problems were rampant and nurturing an industry from scratch is harder than you think.
Believe me, I’ve been there and done that.
It is time to stand up and take notice of 3D printing, this time it is here to stay.
Certain tech companies love this technology like e-commerce company Etsy (ETSY) who focuses on personalized handcrafts.
The cost of production doesn’t change whether you’re producing one item or a million because of the economies of scale.
The previous 3D printing bonanza was a frenzy and this corner of tech became known for the use of buzzwords representing the potential to reinvent the world.
With lofty expectations, there was a natural disappointment when outsiders understood growing pains were part of the critical evolution instead of a direct route to profits.
The initial goal was to democratize production which sounds eerily similar to bitcoins mantra of democratizing money.
The way to do this was to make it simple to produce whatever one wishes.
That would assume that the general public could pick up professional production 3D printing skills on arrival.
That was wishful thinking.
The truth was that applying 3D printers was tedious.
Issues cropped up like faulty first-generation hardware or software -problems that overwhelmed newbies.
Then if everything was going smoothly on that front, there was the larger issue of realizing it’s just a lot harder to design specific things than initially thought without a deep working knowledge of computer-aided software (CAD) design.
Most people know how to throw a football, but that doesn’t mean that most people can be Super Bowl quarterback Tom Brady.
The high-quality 3D printing designs were reserved for authentic professionals that could put together complicated designs.
The move to compiling a comprehensive library will help spur on the 3D printing revolution while upping the foundational skill base.
Then there is the fact that 3D printing technology is heaps better now than it once was, and the printing technology has come down in price making it more affordable for the masses.
These trends will propel broad-based adoption and as the printing process standardizes, more products can rely on this technology from scratch.
The holy grail of 3D printing would be 3D printing on demand, but imagine this on-demand 3D printing would function to personalize a physical product on the spot.
Think of a hungry customer walking into a restaurant and not even looking at a menu because one sentence would be enough to trigger specific models in the database that could conjure up the design for the meal.
This would involve integrating artificial intelligence into 3D printing and the production process would quicken to minutes, even seconds.
At some point, crafting the perfect meal or designing a personalized Tuscan villa could take minutes.
The 3D printing industry is reaching an inflection point where the advancement of the technology, expertise, and an updated production process are percolating together at the perfect time.
The company at the forefront of this phenomenon is Stratasys (SSYS).
Stratasys produces in-office prototypes and direct digital manufacturing systems for automotive, aerospace, industrial, recreational, electronic, medical and consumer products.
And when I talk about real pros who have the intellectual property to whip out a complex CAD-based 3D design, I am specifically talking about Stratasys who have been in this business since the industry was in its infancy.
And if you add in the integration of cloud software, 3D printing would dovetail nicely with it.
All the elements are in perfect in place to fuel this industry into the mainstream.
Take for example airplanes made by Boeing (BA) and Airbus - 3D printer-designed parts comprise only 0.1% of the actual plane now.
It is estimated that 3D printed design parts could potentially consist up to 25% of the overall plane.
These massive airline manufacturers like Boeing (BA) have profit margins of around 15% to 20%, and carving out more 3D printer-designed parts to integrate into the main design will boost profit margins close to 60%.
The development of the 3D printing process into aerospace technology is happening fast with Boeing inking a multi-year collaboration agreement with Swiss technology and engineering group Oerlikon to develop standard processes and materials for metal 3D printing.
Any combat pilot knows who Oerlikon is because they are famed for building ultra-highspeed machines to shoot down, you guessed it, airplanes and missiles.
They will collaborate to use the data resulting from their agreement to support the creation of a standard titanium 3D printing processes.
GE’s Aviation’s GEnx-2B aircraft engine for the Boeing 747-8 is applying a 3D printed bracket approved by the Federal Aviation Administration (FAA) for the engine, replacing a traditionally manufactured power door opening system (PDOS) bracket.
With the positive revelations that the (FAA) is supporting the adoption of 3D printing-based designs, GE has already started mass production of the 3D printed brackets at its Auburn, Alabama facility.
Defense companies are also dipping their toe into the water with aerospace company Lockheed Martin (LMT), the world’s largest defense contractor, winning a $5.8 million contract with the Office of Naval Research to help further develop 3D printing for the aerospace industry.
They will partner up to investigate the use of artificial intelligence in training robots to independently oversee the 3D printing of complex aerospace components.
3D printed designs have the potential to crash the cost of making big-ticket items from cars to nuclear plants while substantially shortening the manufacturing process.
As it stands, Stratasys is the industry leader in this field and if you believe in this long term then this stock would be for you.
It’s nonetheless still a speculative punt but a compelling pocket of the tech industry.
“Capitalism has worked very well. Anyone who wants to move to North Korea is welcome.” – Said Founder and Former CEO of Microsoft Bill Gates
Is Waymo the real deal?
Apparently not.
That is my takeaway from an analyst cutting the valuation estimate by 40% for Alphabet’s autonomous car subsidiary Waymo from $175 billion to $105 billion.
At $175 billion, investors were giving Waymo the benefit of the doubt plus a generous serving of hyperbole when this unproven technology has never in the history of mankind been monetized successfully before.
Well, $105 billion is a stretch in current times and that valuation might need to be revisited a few months down the line as well.
In a stock market that has frowned upon the waterfall of cheap money of late to fuel its absurd risk/reward strategies, Waymo’s haircut falls in line echoes the same parallels.
This current market climate is more about bulletproof balance sheets and the Waymos, Ubers and Lyfts of the world are getting a nice bench seat in the penalty box.
Today marked an even lower nadir with Uber Technologies Inc. announcing that it is on the verge of acquiring a majority stake in online grocer Cornershop, a deal designed to both extend its geographic reach and boost profits by commingling food delivery with rides.
Cornershop is a digital grocer in Santiago, Chile.
Yes, Chile, the country in South America.
It’s hard to believe that Uber must reach that far down the olive branch to grow.
Prepare yourself for anything like pig farms in Zimbabwe or plumbing businesses in Baku, Azerbaijan.
Who really knows anymore!
These types of exotic purchases are exactly what Mr. Market despises in a climate of negative tech earnings growth.
But I do believe Uber is at the point where CEO Dara Khosrowshahi must become the unlikely savior as the alarm bells are ringing with current Uber investors presiding over a calamitous decline in shares since the IPO.
It’s a rough one and tough sledding for tech executives in 2019.
And it’s no surprise why the number of fired tech CEOs has mushroomed from the CEO of eBay Devin Wenig to the fake tech CEO of office-sharing company WeWork Adam Neuman who spectacularly lost $3.5 billion of personal wealth in less than 30 days.
He is still left with $600 million but his story epitomizes the tech climate right now and there are no free lunches.
So is Waymo ready to deliver or is it a charade?
Waymo pinged an email to customers of its ride-hailing app that their next trip might not have a human safety driver behind the wheel.
The email, entitled “Completely driverless Waymo cars are on the way,” was sent to riders in Phoenix.
A geofenced area that covers several suburbs, including Chandler and Tempe, have a human safety driver behind the wheel and the grid-like setup makes it easy for self-driving technology to perform well.
Waymo has dabbled in Chandler, Ariz. in 2016 and has slowly built this program toward commercial deployment.
Recently, Waymo opened its second technical service center in the Phoenix area to serve a doubling of the fleet.
The general public has never gotten a taste of this technology and I bet it will be years before Waymo is ready and not the late 2019 and early 2020 projection they promised us a few years ago.
There are too many known unknowns that have yet to be solved such as what limitations Waymo will place on these rides.
Waymo is effective in controlled environments but thrown in the natural elements, nighttime, and unforeseen circumstances and the effectiveness deteriorates by orders of a magnitude.
I believe the hurdles relating to the commercialization and advancement of autonomous driving technology will keep slowing Waymo’s march towards success.
Analysts have underestimated how long safety drivers will accompany cars with the most likely outcome a broad-based delay of the rollout of autonomous ridesharing services.
Profitability has been vastly miscalculated as well.
Each driverless car unit is more expensive than first thought and will stay operationally loss-making for years longer.
The technology isn’t advancing at the rate it was when this technology was incubated, Waymo has clearly plateaued and there is a bottleneck in terms of meaningful solutions.
Alphabet has already invested deeply into driverless cars.
Not only them, but Uber already had spent over $1 billion on autonomous cars at the time they went public.
I won’t say this is a black hole of investment capital, but the losses will keep mounting for the next few years and there is no inflection point in sight.
Waymo will continue to be a drag on Alphabet’s earnings after there were such high hopes for the rapid deployment of self-driving cars.
There is a light at the end of a dark tunnel, but that light seems further away than ever.
The technology infrastructure company Cisco sold off over 2% after Goldman Sachs analyst Rod Hall downgraded the stock to neutral from buy.
His downgrade was based on a guess that enterprise spending will weaken further, and that telecom spending will continue to remain unimpressive.
This shows you how far the bank of the elite has fallen and the quality of their research considering Cisco’s earnings report was in August and this call should have gone out far earlier.
Goldman Sachs (GS) has trimmed headcount fiercely as their traditional businesses from IPOs to trading have been squeezed to suffocating levels forcing the bank to go into the subprime segment with the Apple (AAPL) credit card.
In Silicon Valley, Cisco’s shares will be subdued for the foreseeable future because the telecom segment is softening up as we motor into 2020 nicely, noted by Goldman.
The headwinds stem from the slow adoption of 5G and requisite carrier network automation implementation.
If you thought 5G would happen with a mere snap of the fingers, you are wrong. It will be implemented in agonizingly slow stages with lots of trial and error along the way.
Enterprise spending has also tapered off boding ill for the company that supplies the foundational technology to the software startups.
Adding fuel to the fire, waning business confidence at large enterprise driven by trade volatility as opposed to a broader macro slowdown is somewhat disconcerting and Cisco will most likely trade sideways in a stupor until external catalysts either pick up the stock or the bizarre world of geopolitics slams it down.
The floor of the stock is solid and deeply rooted in the profitability of the stock.
This is a great company and is one of the premier brands that slide in nicely in most offices in Silicon Valley.
The company isn’t a growth company, yet not written off into the legacy dustbin, and the sudden paradigm shift to value has made this stock even more attractive.
The 7% revenue YOY growth last quarter is not a problem as risk appetites are reigned back as the economic cycle ends.
EPS grew to $3.10 highlighting the ultra-profitable nature of the company.
Many of the recent tech selloffs in individual names have been induced by sour forward-looking outlooks and Cisco followed suit calling for 0-2% revenue growth, and GAAP EPS growth of -14% year-over-year.
The company has turned to the exciting revenue stream of subscriptions accounting for around 70% of the company's software sales.
This has created inflated net margins with Cisco improving from 16.7% five years ago to 25.8% today.
Cisco is a cash cow generating $15.8 billion of cash flows from operations, up 16% year-over-year.
The bump up in cash flow has made it easier to justify M&A which Cisco has routinely turned to in an effort to shore up different areas of the business.
A dividend was initiated in 2011 providing shareholders with strong annual double-digit percentage increases.
Financial engineering doesn’t stop there with Cisco's buyback approach resulting in reducing its outstanding share count by roughly 16.3% over the past 5 years adding to the profitability narrative.
Macro-risks have gone up the wazoo in the external market and Cisco is a legitimate candidate for a short-term trade to safety at these levels and a long-term investment.
Considering that their Chinese business is only in the single digits and revenue growth is in the high single digits, value-added management should make this company even more compelling.
And as the next wave of 5G adoption hits, this stock will experience a tidal wave of asset appreciation.
I can guarantee that the best is yet to come, and the status quo isn’t all that bad too.
The administration banning 8 Chinese tech companies screams one thing – American cybersecurity will become more important than ever before.
Interestingly enough, most of the entry list included Chinese own version of cybersecurity companies which usually participate in heavy-handed censorship including facial recognition startups Sensetime, Megvii and Yitu, video surveillance specialists Hikvision and Dahua Technology, iFlyTek, Xiamen Meiya Pico Information Co and Yixin Science and Technology Co.
All of these companies have “borrowed” American source code while applying American designed semiconductors to create a business aiding the interests and model of the Chinese Communist Party.
As the stakes become higher, American companies too will have to grow cybersecurity budgets, and instead of budgeting for mass authoritarian censorship, American companies will need to spend to protect the technology and networks they develop from getting pillaged from totalitarian regimes.
If American tech companies renege on the Faustian bargain of doing business in China for their technology, then it will force the Chinese to acquire this sensitive technology by any means possible and that doesn’t involve sitting on the emperor’s chair in Beijing.
What does this mean for the broader trade war?
Even if we get a mini deal, it won’t address that the main guts of the trade conflict entails killing off Chinese tech in the way we know it now.
Being able to agree on some sort of enforceable mechanism is a pipe dream, even if an enforceable mechanism is agreed on, who will enforce the enforceable mechanism?
That’s how tricky it is for corporates doing business in China and now the NBA (National Basketball Association) has received a small sampling of the trade war with one innocuous quote by Houston Rockets General Manager Daryl Morey who tweeted then deleted his democratic support for the Hong Kong freedom movement.
The ban of these 8 Chinese companies means they will no longer be able to purchase U.S.-made technology parts to use as inputs of a censorship business model that goes against democratic values.
The trigger for the blacklist was the way these technologies were used to imprison ethnic Muslim minorities in Chinese Xinjiang province paving the way for China to lash out again against the U.S for the ban.
Not only has China applied the technology to Chinese nationals, they have exported this technology to African states and are allowed access to the data which could theoretically be exploited for additional economic and political gain about which they essentially have no qualms.
Chinese foreign ministry spokesman Geng Shuang has characterized this move as “interfering in China’s internal affairs” and as you probably believe, he expressed great unsatisfaction with this move as Chinese and American delegations plan to meet shortly to hash out their differences.
The 8 banned companies will need to source alternative tech in the same way that Huawei Technologies has done.
Huawei was banned this past April under national security premises blocking access to US-made software for its handsets and devices, such as Google’s Android operating system and Microsoft’s Windows.
This will hurt certain semiconductor manufacturers like Nvidia who sell artificial intelligence chips for video surveillance to Hikvision and semiconductor stocks have sold off hard on this news.
Washington’s move has laid bare the fierce struggle for technology supremacy and America’s refusal to allow Chinese technology companies to reign supreme off of ill-gotten intellectual property and American semiconductor chips.
It could be the final straw in corporate America funding China to take down itself or at least another step to disengaging with the Sino cash cow.
And this new episode is almost guaranteed to usher in a flight of capital to American cybersecurity companies as Chinese hackers open up a new frontier to hack the best of America’s intellectual property.
I envision the likes of Palo Alto Networks, Inc. (PANW), Fortinet, Inc. (FTNT), CrowdStrike Holdings, Inc. (CRWD), and CyberArk Software Ltd. (CYBR) as good long term buy and holds that offer quality exposure to the cybersecurity story and the future growth of it.
Customers like to call me and tell me how cheap Spotify is.
Well, it’s cheap for more than one reason.
Even though Spotify (SPOT) dominates the music streaming space just like Netflix (NFLX) dominates the video streaming space, that does not mean investors should go out and buy the stock by the handful.
The numbers are quite impressive when you consider that Spotify boasts 100 million paying music subscribers.
In the iOS world, Apple (APPL) has 60 million music subscribers while Google (GOOGL) has only 15 million music subscribers.
Why do I mention Google?
They aren’t in the online streaming business, or are they?
Google has signaled its intent that they won’t just allow Spotify and Apple to turn the online streaming industry into a duopoly.
They are the third horse in the race.
Recently, Google announced that its YouTube Music app would now come preinstalled on all new Android devices.
Naturally, absorption rates will increase dramatically, and this app could become quite sticky.
Apple has a moat around its castle because of the iOS system but Spotify has no defenses against such attack.
Spotify is a slave to the Android platform to reach customers which is dominated by Google by not only their software but also their hardware now.
Spotify won a recent deal to preinstall its music app on Samsung (SSNLF) devices, but this won’t be the case for most devices.
Google has a two-way money-making strategy for YouTube Music service through both advertising and subscription sales.
Accessibility comes with ads and to remove ads, YouTube Music charges $9.99 per month.
Consumers spent $7.0 billion on music streaming subscriptions in 2018 and diversifying away from Google Search is something that CEO Sundar Pichai is hellbent on.
Google has lept into selling cloud computing services and hardware products, including speakers, in search of non-advertising revenue.
In reaction, Spotify cannot just lay vulnerable like a sitting duck, and have announced tests for a price increase for family plan subscribers in Scandinavia.
The family plan in Sweden currently costs about 149 Swedish krona ($15.45) per month, similar to the pricing in the United States and the rest of Europe and it will be interesting to see if they can stomach a 13% increase.
I bet there will be a revolt as Scandinavians know they can just hook up to YouTube with an ad-less browser to listen to whatever they want for free.
Looking to lucrative markets to squeeze more juice out of a lemon would have a higher chance of succeeding if a level up in service is also offered.
The desperation is palpable as Spotify’s Average Revenue Per User (ARPU) falls off a cliff and is the reinforcement I need to feel that this business is impossible to make money in.
Just the unforgivable headwind that licensing music eats up is enough pain with allocating 75 cents on every $1 of revenue.
The company has been in a precarious position right out of the gates.
Even publishers have gripes against Spotify's declining ARPU, since a large part of their contracts include revenue-sharing agreements with the music streamer.
Ultimately, Spotify is a service that cannot differentiate itself through exclusive original series and films which is inherent to survival.
Their attempts to allow individual singers to upload backfired because only their users are interested in hearing the 0.1% of popular music deemed popular from mainstream culture.
Spotify, Apple Music, and Google will possess more or less the same library of music that most people want to listen to.
Then it comes down to what platform is more convenient than the other.
Apple and Google have strong financial backing giving them higher pain thresholds if they lose money.
Until Spotify can find a magical way to make their product unique, they are on the path to a death by thousand cuts even if they do have a great product.
The hammer has been brought down on the financial industry.
Robots are here and here to stay - automation is taking place at a breakneck speed displacing worker from all industries.
In a recent report by Wells Fargo, the U.S. financial industry will supposedly fire 200,000 workers in the next decade because of the advancements of automating processes.
Yes, humans are going obsolete and banking will effectively become algorithms working for a handful of executives and engineers controlling the algorithms.
The catalyst in this equation is the direct capital of $150 billion annually that banks spend on technological development in-house which is higher than any other industry.
Private businesses aren’t charities and banks are doing this all in the name of lower cost, shedding employee wage packets, and boosting efficiency rates.
We forget to realize that employee compensation absorbs up to 50% of bank’s expenses.
The 200,000 job trimmings would result in 10% of the U.S. bank jobs axed for the hyped-up “golden age of banking” that should deliver extraordinary savings and extra services to the customer.
I would argue that cost savings due to technological enhancements have already had an outsized surge in available services to the client as mobile and online banking has increased functionality allowing U.S. customers to maintain tight internet control over their bank account from anywhere that has an internet connection.
The most gutted part of banking jobs will be in the call centers because they will be substituted by chatbots.
A few years ago, chatbots were awful, even spewing out arbitrary profanity, but they have slowly crawled up in performance metrics to the point where some customers do not even know they are communicating with an artificial engineered algorithm.
The wholesale adoption of automating the back-office staff isn’t the end of it, the front office will experience a 30% drop in numbers sullying the predated ideology that front office staff is irreplaceable heavy hitters.
As it is, front-office staff is in the midst of getting purged with 2018 representing a fifth year of decline.
Front-office traders are being replaced by software engineers as banks follow the wider trend of every company migrating into a tech company.
Efficiencies do not stop there; the adoption of artificial intelligence will lower mortgage processing costs by 20% and the accumulation of hordes of data will advance the marketing effort into a smart, hybrid cloud-based and hyper-targeted strategy.
You would think that less workers mean higher pay for the employees - you thought wrong.
Historically, a strong labor market and low unemployment boosts wage growth, but national income going to workers has dipped from about 63% in 2000 to 56% in 2018.
Causes stem from the deceleration in union membership and outsourcing has snatched away bargaining power amongst workers on top of the mass automation being implemented.
I was recently in Budapest, Hungary and on a main thoroughfare, a J.P. Morgan and Blackrock office stood a stone’s throw away from each other employing an army of local English proficient Hungarians for 30% of the cost of American bankers.
Banks simply possess wider optionality to outsource to an emerging nation or to automate hard-to-fill positions now.
In this game of cat and mouse, companies can easily rebuff workers' attempts to ask for salary raises and if they threaten to walk off the job, a robot can just pick up the slack.
The last two human bank hiring waves are a distant memory.
The most recent spike came in the 7 years after the dot com crash until the sub-prime crisis of 2008 adding around half a million jobs on top of the 1.5 million that existed then.
The longest and most dramatic rise in human bankers was from 1935 to 1985, a 50-year boom that delivered over 1.2 million bankers to the U.S. workforce.
Recomposing banks through automation is crucial to surviving as fintech companies are chomping at the bit and even tech companies like Amazon and Apple have started tinkering with new financial products.
The jury is out, and heads could roll.
That is what the tech market has been telling us and that is why I am slapping a conviction sell rating on the struggling online food delivery company GrubHub (GRUB).
The gig economy has been found out and the industry is about to have their free lunch taken away.
Many tech companies handling cheap labor by employing key workers as independent contractors are about to lose their shirt.
Considering that GrubHub cannot make the unit economics work in their favor when times are good, what do you think will happen if they have to start paying overtime, healthcare, and bonuses to full-time drivers?
Unfortunately for GrubHub, you cannot just strip out the driver in the business model, someone needs to get the hot tacos from point A to point B and back.
Along with higher labor costs, delivery fees are on the verge of cratering because of elevated competition.
GrubHub doesn’t have a monopoly in this industry and restaurants continue to complain that the likes of Postmates, DoorDash, GrubHub and Uber (UBER) Eats rip them off leaving the restaurants with their necks just above water.
GrubHub is so pitiful that they have had to resort to nefarious tactics condemning a failing business model.
Investors should aggressively short the stock or avoid it at all costs.
What type of tricks has GrubHub been up to?
If you hadn’t heard already, Senator Chuck Schumer was in contact with the CEO of GrubHub Matt Maloney over fraudulent fees the food-delivery giant has been charging restaurants nationwide and demands full refunds for cheated customers.
GrubHub was charging restaurants fees for phone calls that didn’t result in food orders and the company admitted wrongdoing.
The company responded by offering only 60 days’ worth of refunds even though this dark practice had taken place for years.
The exploitation took place because of in-house algorithms that calculate fees, which restaurants say can range between $5 and $9 for a single phone call.
GrubHub recently refunded one New York City restaurant vendor over $10,000 for the fraud, covering fees going back to 2014.
GrubHub agreed to extend the refund to 120 days of ill-gotten fees, but many regulators have said this is still not enough.
Then if you didn’t think that was bad, GrubHub had its hand in anti-competitive tactics that sum up the plight of the company.
GrubHub has been creating fake websites, impersonating third party restaurants by undercutting them to take control over their own web sites then taking a larger cut of commissions.
The company says that the fake websites are “a service” for clients, but when the cybersquatting has been to the detriment to the restaurant, using this point of leverage to swindle restaurants out of more fees and sometimes charging them more than 400% of the actual cost.
This insane move has strained relations and murdered trust between GrubHub and outside vendors while making it extraordinarily difficult to take back control over their website.
As you would expect, GrubHub is monetarily incentivized to control the thoroughfare.
A GrubHub spokesman commented saying there would be “no changing of our algorithm” but from how I see it, the writing is on the wall, the equity in the company is in a vicious spiral downward.
It’s hard to make money in restaurants but GrubHub is overreaching big time.
Invest in this company at your peril and avoid all online food delivery platforms, they are simply ghastly investments.
