Philippa Kaur

IT WAS A spectacular bit of timing. On November 16th Baidu, a Chinese online-search giant, said it would buy YY Live, a China-focused video-streaming service with 40m monthly users, for $3.6bn. Two days later Muddy Waters, an American short-seller, published a report claiming YY Live was “an ecosystem of mirages” and “almost entirely fake”. The share price of JOYY, YY Live’s parent company, slid by 26%.
Muddy Waters alleges that JOYY’s platforms, including YY Live, are infested with “bots”—computers that log on to “watch” streams, pretending to be human. Many, it says, appear to sit in JOYY’s internal networks. The upshot, it alleges, is that somewhere between 73% and 84% of JOYY’s revenue is suspect.

JOYY responded by saying the report contained “numerous errors, unsubstantiated statements and misleading conclusions and interpretations”. It said it would be open to “cash verification and diligence” conducted by “competent third-party advisers”. (JOYY and Baidu did not respond to requests for comment.)
The allegations are unusual in accusing the platform of creating its own fake users. Technological complexity and minimal human oversight means the “attention economy” is full of virtual eyeballs. But such mischief tends to be the work of outsiders. Last year America’s Federal Trade Commission fined the boss of a firm called Devumi $2.5m for selling fake YouTube views, the first time such a complaint had been brought. Digital advertisers pay to have their ads shown to users. It is an open secret that many end up served to fake viewers, generated by computers infected with malware written for this purpose.
A new report by the University of Baltimore and CHEQ, an anti-fraud firm, estimates that $35bn is lost annually to such scams, from a total market worth $333bn. South-East Asian fraudsters employ humans to scoot between racks of smartphones, tapping ads and installing apps, says Gary Danks of Machine, a firm that offers ad-fraud detection. Those in places with higher labour costs simulate phones on computers.
Companies are fighting back. Last year Uber sued more than 100 ad agencies, accusing them of buying fake views on its behalf. Facebook launched a lawsuit against firms it says create malware that hijacks users phones, forcing them to generate fake ad clicks. Neither suit is likely to stem the fraudsters’ rise.
This article appeared in the Business section of the print edition under the headline “You’ve been botted” More

OXFORD-DICTIONARY lexicologists recently declared “blursday” a word of the year. Pandemic-induced date confusion extends beyond self-isolating households. Best Buy, a large American electronics retailer, recently declared that “Black Friday isn’t just one day this year—it’s months long.”
The start of the pre-Christmas shopping season, which this year falls on November 27th, has long been a bonanza for American retailers. The term itself is often credited to Philadelphia’s policemen, who used it to describe the pandemonium caused by suburban shoppers and tourists thronging the city ahead of the annual Army-Navy American-football game on the Saturday after Thanksgiving. By the 1980s shops recognised the branding opportunity—and began marking the occasion with deep discounts and “doorbuster” deals to pull people from their turkey-laden tables to shopping aisles.

These days retailers make one-fifth of their holiday revenue, defined as sales in November and December, in the five days from Thanksgiving to Cyber Monday, invented in 2005 by the National Retail Federation (NRF), a trade group, in recognition of an online sales bump on the first working day after the holiday weekend. Black Friday typically attracts more than twice the foot traffic of other annual shopping sprees in America.
This year, though, covid-19 has made many shoppers reluctant to elbow their way to cut-price wedding gowns or TV sets. So large retailers have, like Best Buy, stretched Black Friday from a frenzied 24 hours to several weeks. Walmart, Target and other big-box retailers announced discounts on holiday items as early as October 11th. In lieu of mall Santas and mistletoe, they offered refurbished online interfaces, generous return policies and expanded options for kerbside pickup. Amid the pandemic-induced collapse of travel and other “experiential” spending, some of the unspent dosh is going on stuff instead, notes Jill Standish of Accenture, a consultancy. NRF expects this year’s holiday retail sales to grow by as much as 5% compared with 2019, as friends and families use gifts to show long-distance appreciation.

Even if NRF’s forecast proves accurate, however, this year’s haul is unlikely to arrest the stagnation of the holiday shopping season. Its share of annual retail sales faded below 19% throughout most of the past decade, from 20.2% in 1992 (see chart). Online shopping offers perpetually low prices, making one-off discounts somewhat less exciting.
In this light, Black Friday’s in-store stampedes no longer look that appealing. The day’s internet sales have been rising (though Cyber Monday has digitally outshone it since at least 2016). Last year a third of the day’s $23bn trade happened online. Now the share could be closer to a half.
In any case, the idea of squeezing all your bargain-hunting into a day is falling out of fashion. Since 2019 Amazon Prime Day, the e-empire’s signature shopping event, has lasted 48 hours. And this year Singles’ Day, a Chinese extravaganza which normally falls on November 11th, lasted a full 11 days. ■

This article appeared in the Business section of the print edition under the headline “Fade from black” More

TIME FOR a confession. Normally, Bartleby’s family waits until December before putting up the Christmas decorations. But this weekend, even though it is only November, the festive lights will go up. Furthermore, he has bought some new (especially gaudy) decorative items to brighten up the front of the house.
Your columnist is far from alone. Some celebrities have already decorated their Christmas trees; Joan Collins, an actress, was pictured next to hers on November 10th. The local coffee shop and minimarket had dressed in fir by mid-November. These early seasonal signals have been triggered by the possibility of a long and depressing winter, in which the pandemic will disrupt traditional celebrations and families may be kept apart. There is the prospect of a vaccine but, for most people, not until the spring.

A recent survey found that 68% of Britons said the pandemic had adversely affected their mental health before the nights started drawing in. In the circumstances, many people will be tempted to put up more Christmas lights just to have a cheerful sight.
The approach of winter is a problem for employers and workers alike. When Western economies endured their first covid-19 lockdown, it was the spring. The days were lengthening and people working from home could take a break from their labours and go for a stroll in the local park. Many could take their laptops and work in the garden (if they were lucky enough to have a backyard, and a job that could be done remotely).
But the second wave of the disease has hit as days get both colder and shorter. Workers are stuck inside for most of the day; in many countries, restaurants and bars are shut. The idea of working from home seems less inviting when there is little scope for taking a break.
To counter the seasonal gloom, humans have long celebrated the winter solstice, the moment when the days start getting longer again. This helps explain why even atheists are enthusiastic participants in Christmas festivities.

The fact that the solstice is followed by the start of a new year only adds to the need to mark the event in some way. In Christian countries these celebrations are a part of people’s working lives. At the minimum, this means lights and decorations in the office, or a Christmas tree in reception. Often, it will involve a lunch, after-work drinks or a party for staff, where they can relax and reflect on the year’s efforts. The effect is to bolster team spirit.
Look back to the suggestions made by management consultants about improving winter morale in previous years and it is striking how many of them involve collective activities: ice-skating, fitness classes, potluck lunches and the like. Social distancing now rules out pretty much all these distractions.
Online collective activities are a substitute, but not a great one. When the pandemic is over, few people will want to maintain the tradition of “Zoom drinks”. Quizzes are a potential substitute, although they do not appeal to everyone. Some will be embarrassed if they do not know the state capital of South Carolina or the losing side in the last FIFA World Cup final.
The other way companies can boost morale at the year end is with an annual bonus. But the economic damage caused by the pandemic has crimped many businesses’ ability to offer this perk; they are struggling hard enough just to keep everyone in their jobs.
That leaves another hardy perennial. Around this time chief executives send out a message to all staff in an attempt to rally the troops by recounting the successes of the previous year. These always remind Bartleby of the scene in the BBC sitcom “Are You Being Served?”, when a department store’s elderly owner tells his shop assistants “You’ve all done very well”, before tottering away on the arm of his nurse. It is hard to feel motivated by such bland, indiscriminate praise.
So this year managers need to do a better job. A personal message (or a phone call) to each staff member in their team is a good start. The conversation should contain some praise that is specific to the individual, as well as a check on how the colleagues are feeling at a difficult time. This will be time-consuming—and all the more appreciated for it. The art of management is not merely about hitting a budget.
If this doesn’t happen at your company, never mind. Praise from a boss is priceless. For everything else, there is always a display of luminous reindeer.
This article appeared in the Business section of the print edition under the headline “Winter is coming” More

IN THE DAYS before Thanksgiving two top contenders emerged for Simon & Schuster, the fifth-biggest English-language book publisher by revenues, from ViacomCBS, an American media group. On November 25th Bertelsmann gained the upper hand. With an offer of $2.2bn the German parent of Penguin Random House (PRH), the largest publisher by a Tolstoyan margin, outbid News Corp, Rupert Murdoch’s media group, whose catalogue contains HarperCollins, ranked third (see chart).
A merger with Simon & Schuster would give PRH almost one-third of English-language book sales. That is more than double the market share of its closest rival, Hachette Livre, owned by Lagardère, an ailing French conglomerate. (Vivendi, a French group that is Lagardère’s biggest shareholder, also briefly vied for Simon & Schuster.) In America the merged biblio-behemoth would control 70% of the market for literary fiction.

Authors and agents worry that the enlarged PRH may become ever more dominant in distribution—and that market concentration could lead to an excessive focus on bestsellers such Michelle Obama’s memoir of her time as America’s first lady (which was published by a PRH subsidiary) at the expense of niche titles that are no less worthy. Robert Thomson, News Corp’s boss, is certain, for his part, that the Bertelsmann deal will alert trustbusters. Earlier this year America’s Department of Justice thwarted a merger of Cengage and McGraw-Hill, two publishers of educational books. Any delay would be bad news for ViacomCBS, which needs the money badly for investments in video-streaming, where it lags behind rivals such as Netflix, Disney or AT&T, a telecoms giant that owns HBO.

Thomas Rabe, Bertelsmann’s boss, says he is confident that regulators in America and other countries will bless the deal. They rarely block mergers that only reduce the number of big players from five to four. The last big union, Bertelsmann’s takeover in 2013 of Penguin, did not fall foul of antitrust guardians. Moreover, the leading five have lost market share in recent years to smaller rivals, not to mention Amazon, which these days not only sells books (as well as just about everything else) but also publishes them.
That still leaves the question of whether the deal is a good one for Bertelsmann. The price was heftier than even ViacomCBS expected. Covid-19 initially hurt book sales, as it did other discretionary spending. “The first five weeks [of the pandemic] were very tough,” admits Brian Murray, chief executive of HarperCollins.
But with their pantries full, self-isolators turned to fiction for escapism and edification. “People are always predicting the decline of book publishing, but it has actually been very resilient,” says David Steinberger, chief executive of Arcadia Publishing, a publisher of history books.
And Simon & Schuster is a prestigious prize. It was originally set up in 1924 to publish crosswords, but went on to represent Ernest Hemingway, F. Scott Fitzgerald and Tom Wolfe. This year it made waves with the publication of “Rage”, a ferocious account of Donald Trump’s White House by Bob Woodward, a far-famed journalist, as well as a tell-all memoir by the president’s niece, a psychologist.

Nabbing Simon & Schuster is Bertelsmann’s second coup in the space of a week. On November 17th American and Canadian readers set a record for first-day sales, snapping up 890,000 copies of a new memoir by Mrs Obama’s husband, also published by a PRH subsidiary. ■
This article appeared in the Business section of the print edition under the headline “Book-binding” More

IN THE DAYS before Thanksgiving two top contenders emerged to take over Simon & Schuster, the fifth-biggest English-language book publisher by revenues, from ViacomCBS, an American media group. On November 25th Bertelsmann gained the upper hand. With an offer of $2.2bn the German parent of Penguin Random House (PRH), the number one by a Tolstoyan margin, outbid News Corp, Rupert Murdoch’s media group that counts HarperCollins, ranked third, in its catalogue of assets.

A merger with Simon & Schuster would give PRH almost one-third of English-language book sales (see chart). That is more than double the market share of its closest rival, Hachette Livre, owned by Lagardère, an ailing French conglomerate. (Vivendi, a French group that is Lagardère’s biggest shareholder, also briefly vied for Simon & Schuster.) In America the merged biblio-behemoth would control 70% of the market for literary fiction.

Authors and agents worry that the enlarged PRH may become ever more dominant in distribution—and that market concentration could lead to an excessive focus on bestsellers such Michelle Obama’s memoir of her time as America’s first lady (which was published by a PRH subsidiary) at the expense of niche titles that are no less worthy. Robert Thomson, News Corp’s boss, is certain, for his part, that the Bertelsmann deal will alert trustbusters. Earlier this year America’s Department of Justice thwarted a merger of Cengage and McGraw-Hill, two publishers of educational books. Any delay would be bad news for ViacomCBS, which needs the money badly for investments in video-streaming, where it lags behind rivals such as Netflix, Disney or AT&T, a telecoms giant that owns HBO.
Thomas Rabe, Bertelsmann’s boss, says he is confident that regulators in America and other countries will bless the deal. They rarely block mergers that only reduce the number of big players from five to four. The last big union, Bertelsmann’s takeover in 2013 of Penguin, did not fall foul of antitrust guardians. Moreover, the leading five have lost market share in recent years to smaller rivals, not to mention Amazon, which these days not only sells books (as well as just about everything else) but also publishes them.
That still leaves the question of whether the deal is a good one for Bertelsmann. The price was heftier than even ViacomCBS expected. Covid-19 initially hurt book sales, as it did other discretionary spending. “The first five weeks [of the pandemic] were very tough,” admits Brian Murray, chief executive of HarperCollins.
But with their pantries full, self-isolators turned to fiction for escapism and edification. “People are always predicting the decline of book publishing, but it has actually been very resilient,” says David Steinberger, chief executive of Arcadia Publishing, a publisher of history books.

And Simon & Schuster is a prestigious prize. It was originally set up in 1924 to publish crosswords, but went on to represent Ernest Hemingway, Scott Fitzgerald and Tom Wolfe. This year it made waves with the publication of “Rage”, a ferocious account of Donald Trump’s White House by Bob Woodward, a far-famed journalist, as well as a tell-all memoir by the president’s psychologist niece.
Nabbing Simon & Schuster is Bertelsmann’s second coup in the space of a week. On November 17th American and Canadian readers snapped up a record 890,000 copies of a new memoir by Mrs Obama’s husband, also published by a RPH subsidiary, in 24 hours. More

THIS MONTH Britain’s National Exhibition Centre (NEC), the country’s largest events venue, was due to host shows including Motorcycle Live, Simply Christmas and Cake International. Yet instead of being filled with bikes, toys and confectionery, the space has been fitted with 380 hospital beds. Covid-19 has wiped out the planned exhibitions, tipped the NEC’s management company into restructuring and caused the government to turn one of its halls into an emergency field hospital.
Social-distancing rules have forced all businesses to think hard about how to keep their customers safely apart. But for events companies the rules pose a particular problem, for these firms’ purpose is to bring people together. Trade shows and conferences lose their value if attendees cannot mingle. Concerts are no fun alone. And the excitement of a goal, slam dunk or home run is not the same without thousands of fans roaring their support. While stockmarkets have mostly recouped their losses since January, the market capitalisation of listed “crowds businesses” identified by The Economist has collapsed from $254bn to $142bn.

Some live-events industries are dealing with the crowds problem more easily than others. But as the pandemic grinds on, it looks as if those that have had the hardest time in 2020 will emerge least scathed when things get back to normal—whereas those that have found ways to adapt may find that the temporary fixes cause long-lasting disruption.
Hardest hit has been the exhibitions industry, which makes up just over half of the crowds sector’s market value. According to AMR International, a consultancy, its global revenues will contract by two-thirds this year, to $9bn. The outlook is so uncertain that AMR’s analysts have not hazarded an estimate for next year’s revenues.
Take the colossal trade-fair centre in Hanover, the size of 60 football pitches. It closed in March and has been empty most of the time since. Deutsche Messe, which runs it, expected revenues of €330m ($392m) this year; Andreas Gruchow, a member of its managing board, says it will end up with about €100m, partly from events it has run in China, which has controlled covid-19 better than America or Europe. A few events have been held in Hanover, following new rules mandating masks, a reduced headcount and so on. But exhibitors “expect the whole world to come to Hanover and visit them at their booth”, observes Mr Gruchow; with international travel on hold, the big fairs are not happening.
Event organisers have dabbled online with limited success. Some exhibitions, like Cake International, are best enjoyed in person. And even the liveliest Zoom panels lack the opportunities for networking that justify conferences’ admission price. Exhibitors pay a four- or five-figure fee for a spot in one of Deutsche Messe’s online trade fairs, says Mr Gruchow; for a physical booth at Hanover they would pay up to €300 per square metre, leading to seven-figure bills for the largest exhibitors.

Yet trade fairs’ clunkiness online will protect the industry from disruption. “You can’t ‘Amazon’ the events business,” points out Marcus Diebel of JPMorgan Chase, a bank. He cites this as a reason for long-term optimism about the industry. RELX, owner of Reed Exhibitions, the world’s second-largest exhibitions company by sales, saw its revenues fall by 70% year on year in the first half of 2020, but its share price is down only 6% since January. That of Informa, the largest, has shot up by around 40% this month, as successful late-stage trial of a covid-19 vaccines have been reported. Organisers agree that future events will have more digital elements. But a dire couple of years are likely to give way to something much like the old normal. amr expects revenues to rebound to 78% of last year’s level by 2022.
The opposite is true in sport, another crowd-dependent business. After a pause in the spring, most professional leagues have managed to play on, getting around the lack of spectators in novel ways. FC Seoul populated its stadium with mannequins from a sex-toy supplier (and in the process earned a fine from the South Korean football league for indecency). Others have piped in sound, added cardboard cut-out or CGI spectators or even live-streamed fans’ faces onto screens in the stands, as in WWE wrestling’s new “ThunderDome” in Florida.
Yet the smooth transition disguises disruption that may last. The cost of forgone ticket revenue has been borne unevenly. In the main American leagues teams keep the income from tickets—and the drinks, hot dogs and so on that go with them—whereas leagues get the proceeds of national broadcasting rights. So teams are on the rack. Major League Baseball, with its long season and relatively modest TV deals, is in bigger trouble than the National Football League, which has fewer games and pricier TV rights. The New York Mets, a struggling baseball team that was sold last month, is expected to lose out on nearly $250m in ticket sales this year.
The pandemic has also accelerated changes in how people watch sports at home. The lack of crowds has contributed to a fall in viewership of full games, as fans switch to highlights and new formats. America’s National Basketball Association (NBA) highlights show on Snapchat, a social app, has had 37% more viewers this year, even as TV ratings for the NBA finals fell by 49%. People are spending more time on betting sites and forums like Barstool Sports, says Brandon Ross of LightShed Partners, a media-research firm. “There are millennials and Gen Z-ers who would rather just sit and watch the Barstool personalities pontificate…than watch the games themselves,” he says.
The decline in whole-game viewing bodes ill for the big sports broadcasters. ESPN, owned by Disney, announced this month that it was cutting 500 jobs amid “tremendous disruption in how fans consume sports”. Its chairman, Jimmy Pitaro, said the company would focus on “serving sports fans in a myriad of new ways”; some written and audio content has gone behind its paywall. Lower whole-game audiences will mean lower ad revenues for broadcasters and, ultimately, lower budgets for rights deals, “the overwhelming financial engine for sports”, warns Mr Ross. These trends will persist long after covid-19 is defeated.
A different tune
If the exhibitions industry looks stable and sport is heading for disruption, live music combines both trends. Coronavirus has pulled the plug on concerts. Live Nation, the world’s biggest live-entertainment company, reported this month that its revenues plummeted by 95% in the third quarter, compared with a year ago. CTS Eventim, a European rival, saw its sales slide by 79% in the first nine months of 2020, year on year. Yet, rather like the exhibition organisers, the big music promoters are protected by investors’ faith that mosh pits and muddy festivals are not easily replicable online. Live Nation and CTS’s share prices are down by, respectively, only 10% and 15% since February—not bad for firms that have lost nearly all their revenue.
This suggests that live-music companies can outlive the pandemic. The giants should have no problem. Live Nation has nearly $1bn of cash and the same again in undrawn debt facilities, comfortably enough to see it through to next summer. But many smaller operators will not make it. America’s National Independent Venue Association says that 90% of its 2,900 members expect to close permanently without a bail-out. Live Nation will get a chance to hoover them up, entrenching its dominant position.
That does not mean the live-music industry will escape disruption. Early in the pandemic artists, who these days make more money from touring than recording, performed amateurish streaming concerts from makeshift home studios. Online gigs have since become more professional with the help of companies such as Driift and Dice, which organise elaborate streamed productions. Tickets are much cheaper than those for in-person gigs—entry to an online show later this month by Dua Lipa, a British singer, costs €12.99, about a quarter of the minimum that fans pay to see her in real life. But there is no limit to capacity. And stars can attract fans in locations where they would never tour. bts, a South Korean boy band, did an online concert last month which brought in almost 1m viewers from 191 countries.
There are also glimpses of completely new forms of entertainment. In April Travis Scott, an American rapper, appeared in virtual form in Fortnite, an online video game. Some 28m players attended the free concert in avatar form. Experiences such as these are not replacements for in-person live music. But they are the makings of a sub-industry that will supplement the incomes of stars with global followings. Covid-19 has dealt live music a severe blow in 2020, but the resulting innovation could help the industry come back stronger—if, perhaps, a bit less crowded. More

TALK ABOUT terrible timing. When the pandemic hit in March, Brian Chesky had just put the finishing touches on the paperwork for Airbnb’s much-awaited public listing. Instead of travelling to New York to ring the opening bell at the Nasdaq stock exchange, he found himself spending days (and nights) on Zoom in his home office in San Francisco, fighting to keep his online holiday-rental marketplace alive. “It was like you are going 100 miles an hour and suddenly have to hit the brakes,” Airbnb’s boss recalls.
This time around Mr Chesky might be luckier. On November 16th Airbnb unveiled its prospectus, putting it on track for an initial public offering (IPO) next month, just as the first doses of the covid-19 vaccine may become available. The IPO could value Airbnb at more than $30bn. The firm’s longer-term prospects are harder to divine.

The vaccine is not the only thing that makes this an opportune time for Airbnb to go public. The window for tech IPOs has not been open this wide since the dotcom bubble 20 years ago. More than 50 tech startups have floated this year, raising a total of $26bn, according to Dealogic, a data provider. Many of Airbnb’s employees want to cash in on the shares they have been awarded before their right to do so expires. And the firm needs money, on top of the $2bn it raised earlier this year to tide it over—hence its decision to scrap earlier plans to list shares directly without drumming up fresh capital.
Mr Chesky has a good recovery story to tell, too. In the painful second quarter the number of nights booked on Airbnb fell to 28m, from 84m a year before. Gross bookings collapsed by two-thirds, to $3.2bn. In the next three months, though, the numbers rebounded, to 62m and $8bn, mainly thanks to what Mr Chesky calls “travel redistribution”. Guests eschewed virus-hit foreign cities, formerly Airbnb’s stronghold, for domestic and rural destinations. Stays less than 500 miles (800km) from home rose by more than 50% this summer.
Mr Chesky has also made Airbnb leaner. Before the pandemic the firm had sunk money into new businesses, including flights and a television studio, to pad revenues ahead of the listing. Since then his motto has been “back to the roots”. He has fired around 1,800 employees, a quarter of the workforce, shut down most of the new activities and radically cut online advertising (more than 90% of guests now book directly on Airbnb’s site). As a result, though the firm lost $916m in the first six months of the year, it turned a net profit of $219m in the third quarter.
Can Airbnb keep this up? Even before the pandemic growth had begun to slow. Once things are back to normal, room for further expansion may be limited, at least in the company’s core market. Bernstein, a research firm, expects annual growth in private rentals to slow to 7-8%, from around 20% in the past few years. And Airbnb’s operating margins lag behind those of its closest rivals, Booking.com and Expedia (which operates VRBO, a site that lists mostly holiday homes).

Airbnb’s future also depends on its ability to police its service and meet a growing list of legal requirements across many jurisdictions where it operates. As with other big online firms, renters have found ways to abuse the platform, for instance by using rental properties for parties; in July police in New Jersey broke up a rowdy event with 700 people. As for regulations, the firm says in its prospectus that by October 2019, 70% of its top 200 cities by revenue had imposed restrictions, such as limits on how many days a year residential properties can be rented out.
Mr Chesky’s biggest task, however, will be to work out what Airbnb, now entering its teens, should be when it grows up. He has said he would like to see it evolve like Apple or Disney—firms that have adapted over time and outlived their founders. The pandemic has been a setback for its new lines of business. “Either we keep doing new things as the world changes,” he says, “or we stop doing new things—and we won’t exist in the future.” Even if, occasionally, doing new things means sticking to the old ones. ■
Editor’s note: Some of our covid-19 coverage is free for readers of The Economist Today, our daily newsletter. For more stories and our pandemic tracker, see our hub
This article appeared in the Business section of the print edition under the headline “Public holidays” More

THE NEW “TikTok Treats” menu on Postmates in Los Angeles wins no plaudits for gastronomy. It appeals to carb-loving teens: cloud bread and pancake cereal. But the tie-up with the popular short-video app is another sign that food-delivery firms are coming of age. Among teens and millennials, ordering food online is as ingrained a habit as booking an Airbnb, bingeing on Netflix or hailing an Uber.
Just how hooked consumers are thanks to the pandemic is clear from financial documents filed on November 13th by DoorDash, America’s biggest food-delivery company, ahead of its listing on the New York Stock Exchange next month. From January to September it booked orders worth $16bn, up by 198% year on year, earning revenues of $1.9bn. It ferries grub from 390,000 American restaurants.

The majority of America’s 700,000 or so eateries now distribute via a delivery app, notes Lauren Silberman of Credit Suisse, a bank. The pandemic turbocharged a pre-existing trend for convenience food, as more women work and everybody is short of time. In doing so, it has also rehabilitated one of Silicon Valley’s most derided business models.
Restaurants entered the digital realm two decades ago when Takeaway.com in Europe and Grubhub in America put menus online. Restaurants delivered the food themselves and the middlemen were reliably profitable. By contrast, the new “third-party logistics” firms like DoorDash and Uber Eats (whose ride-hailing parent has also bought Postmates) have to divvy up the bills, which average around $30, three ways. Once drivers and restaurants take their cut not much is left.
Until recently none of these newfangled firms made money, even in emerging markets where labour costs are far lower. Lack of obvious economies of scale or barriers to entry meant several rivals were fighting over market share by offering diners generous discounts—and bleeding red ink in the process. They also faced the prospect of a sharp rise in labour costs. Last year California passed a law that required DoorDash, Uber and other “gig-economy” companies to treat app-based workers as full employees.
On November 3rd Californians voted in favour of a ballot initiative which in effect overturns the law—and may discourage other state legislatures from passing similar ones. The law’s defeat on the tails of the pandemic bonanza has once again whetted investors’ appetite for food delivery. DoorDash is hoping for a valuation of $25bn, up from $16bn in its most recent private-market funding round in June. The offering is already oversubscribed. It is hard to argue with growth rates of 100-200% a year, notes Mark Shmulik of Bernstein, a research firm. DoorDash bulls point to Meituan-Dianping, the biggest such app in China, which turned profitable last year and is now worth a cool $230bn.

The American firm’s numbers contained plenty to chew on. DoorDash is generating cash and is profitable on an adjusted basis. Its in-app ads business offers juicy margins. The company sees itself as the digital hub for the convenience economy, connecting merchants, customers and riders; the word “platform” cropped up 646 times in the filing. It has started delivering groceries and convenience-store items. Its logistics arm sells last-mile delivery to other companies, notably Walmart. Looking ahead, high unemployment amid a continuing pandemic downturn should mean lots of cheap labour.
Other facts are harder to swallow—not least that it has taken covid-19 to make food delivery profitable, and then only marginally so. DoorDash warns that growth will slow as the virus ebbs. The share prices of many listed digital firms that benefited from lockdowns and self-isolating consumers, from Amazon to Zoom, dipped on the news of an effective vaccine. And despite their critics’ defeat in California, gig firms will continue to face accusations of thriving on the back of exploited workers. In this respect, DoorDash has already joined the club of listed tech platforms. ■
Editor’s note: Some of our covid-19 coverage is free for readers of The Economist Today, our daily newsletter. For more stories and our pandemic tracker, see our hub
This article appeared in the Business section of the print edition under the headline “Mouth-watering” More