New York City-based online food ordering service Seamless, born SeamlessWeb during the dotcom boom in 1999, has purchased Menupages from New York magazine publisher New York Media for $15 million and the right to sell advertising against MenuPages content for a year, Betabeat has learned.
New York Media Holdings CEO Anup Bagaria, who would not disclose the price but said it was “significantly more than we bought it for,” said the reason for selling MenuPages, which “has actually grown 100 percent since we’ve purchased it” in 2008, had to do with New York Media’s reluctance to invest in growing the business beyond advertising revenues.
Mr. Bagaria says New York Media started thinking about a sale at the end of the first quarter of 2011, when an undisclosed buyer approached with an offer for MenuPages. The unsolicited offer could have come from a long list of related companies, but Betabeat’s sources think was most likely either Zagat, which was exploring the possibility of adding menus to its reviews before it was acquired by Google; or the London-based Just-Eat, which raised $48 million to expand globally around the same time.
The offer inspired New York Media to find out who else might be interested. By the time the publisher was done, a source familiar with the situation says, it had spoken to a number of companies including Google, the publicly-traded reservation service OpenTable and Just-Eat.
For Seamless, the MenuPages acquisition is the latest in a string of aggressive moves spurred by fierce competition in an increasingly-heated market. Seamless has maintained a serviceable but increasingly stale product since it was bought by corporate caterer ARAMARK in 2006. But in June, Seamless spun out from under ARAMARK, raising $50 million in outside investment. Now, after years of complacence, Seamless is going after the consumer market with renewed vigor. Seamless’s fiercest competition comes from GrubHub, a seven-year-old Chicago upstart that completed a parallel purchase last week: the acquisition of Dotmenu, owner of online ordering site CampusFood and menu library AllMenus.
MenuPages actually approached GrubHub about an acquisition earlier this year, but “we couldn’t come to an agreement on price,” GrubHub CEO and co-founder Matt Maloney said. However, one source points to the timing of GrubHub’s Dotmenu acquisition, which was likely already in the works.
The rivalry between Seamless and GrubHub started long before the bidding war over MenuPages, however.
Seamless was founded in 1999 after New Yorker Jason Finger, a lawyer for all of six months, discovered the tyranny of reimbursement paperwork. Lawyers, investment bankers and other white collar workers spent hours of overtime for which they are given a food allowance–in many cases, employees front the money for their food and have to fill out oodles of paperwork to get reimbursed later, a annoyance for overworked employees and a headache for the accounting department. Mr. Finger and a few friends came up with the idea for SeamlessWeb, which made it easy for employees to order online. SeamlessWeb paid the restaurants and billed employers later for the tab.
SeamlessWeb signed up investment banks and law firms one by one, explaining how it would make their lives easier and their employees happier. The best part was that Seamless didn’t need city-wide coverage–it only needed a few dozen restaurants in the immediate vicinity of its corporate clients. The company grew slowly until it blanketed the city.
By 2004, Seamless was flying high. Inc. magazine named it the fourth-fastest growing company in the country, reporting its revenue as $29 million and its year-over-year growth as 2,608 percent. In 2006, Seamless sold to ARAMARK, a Philadelphia-based corporate catering provider for what was rumored to be a fabulous price, reportedly producing a thirty-fold return for Seamless’s investors. ARAMARK’s statement at the time–“the system streamlines billing and reimbursement processes, helps improve expense control, and reduces administrative overhead”–revealed its intentions to use Seamless to bolster services for its corporate clients.
Meanwhile, two entrepreneurs in Chicago were facing their own struggles with online food orders. GrubHub was conceived as a listings site where users could enter an address and find food delivery options around them–from there, online ordering was a natural extension. It was three years before GrubHub secured its first round of funding. But the company raised a total of $70 million this year and has been growing by leaps and bounds in part thanks to a technique that could be considered either resourceful or spammy. Unlike Seamless, GrubHub lists restaurants with which it has no prior relationship. The site shows the restaurant’s hours and menu, and offers a phone number for the restaurant. GrubHub later calls the non-participating restaurant, cites the number of referrals, and offers better placement in the listings, and a promise of two or three times the business, if the eatery sings up.