The Wall Street Journal - USA (2020-12-03)

B4| Thursday, December 3, 2020 **** THE WALL STREET JOURNAL.

TECHNOLOGY WSJ.com/Tech

Shareofsalesamongtopmeal-deliverycompanies,monthly

Source: Second Measure

Note: All monthly sales are indexed to total U.S. consumer meal delivery sales among

these companies from January 2017 (=100)

60

0

10

20

30

40

50

%

2018 ’19 ’20

DoorDash

Grubhub

Postmates

UberEats

for true-crime podcasts such

as “Doctor Death,” “Dirty

John” and “Over My Dead

Body,” was the sixth most-pop-

ular podcast publisher in the

U.S. in September, according to

audio analytics firm Podtrac,

with more than 60 million

downloads and streams of its

shows.

Publishers ahead of Won-

dery included NPR,iHeartMe-

dia Inc. and the New York

Times.

Like many of its peers,

Wondery has benefited from

the growth of podcasting

among listeners and advertis-

ers. Wondery generates reve-

nue from advertising and li-

censing fees as well as from

optioning the rights to its pod-

casts to media companies such

asAT&T Inc.’s WarnerMedia

Continued from page B1

andWalt Disney Co.

Amazon Music moved into

podcasting in September, look-

ing to draw new listeners with

70,000 titles to start, including

new original, exclusive shows

hosted by DJ Khaled, Becky G,

Will Smith and Dan Patrick.

The tech giant has some

catching up to do withApple

Inc.’s Apple Podcasts, where

most podcast listeners tune

in free, and Spotify, which

has been investing hundreds

of millions of dollars in the

format and sparked an arms

race for programming and

talent.

While Amazon is joining a

competitive field, executives

have said the service can tack

differently from rivals—as it

has with music streaming—

and bring in new podcast lis-

teners, particularly through

its voice-activated home

speakers.

Amazon has the third-larg-

est music service by subscrip-

tions, behind Spotify and Ap-

ple Music, and has drawn an

older listening base across the

U.S., in part through the help

of its Prime subscription ser-

vice and Echo speakers.

holders by ramping up losses

in search of growth.

DoorDash focused heavily

on U.S. suburbs—eschewed by

Uber Eats and Grubhub in fa-

vor of dense cities. With little

competition, DoorDash found

surprisingly high revenue from

families placing big orders. In

addition, DoorDash gave prior-

ity to expanding the number of

restaurants on its app, while

Uber focused on restaurants

with fast delivery. Uber execu-

tives have since acknowledged

that DoorDash’s bet was the

better one.

Uber backers in particular

have been frustrated by Door-

Dash’s rise. Two years ago,

they felt the company’s net-

work of drivers and its own

cash pile made it well-placed

to dominate food delivery.

“It’s been sad to watch Uber

Eats get outcompeted and out-

innovated by DoorDash begin-

ning in 2018,” said Emil Mi-

chael, a former top executive

at Uber who has been critical

of the company recently. “A

distant second place will cost

Uber tens of billions of dollars

in market value over time.”

Uber has said its Uber Eats

business is growing rapidly,

and is the global leader in the

category, excluding China.

Still, DoorDash’s dominance

has held back Uber’s stock

price, analysts and investors

say. It is a double-edged sword

for SoftBank: While it is profit-

ing from DoorDash’s success, it

is also Uber’s largest investor.

It holds more than 12% of the

ride-hailing giant, a stake

worth over $11 billion.

—Maureen Farrell

contributed to this article.

When SoftBank first in-

vested in DoorDash, the

startup had struggled to cob-

ble together an earlier invest-

ment round, and was far be-

hind competitors Grubhub Inc.

and Uber Eats in the U.S.—bat-

tling with Postmates for fourth

place.

SoftBank pumped in $280

million, part of a $580 million

round with other investors in-

cluding Sequoia Capital, a

main funder of DoorDash since

its early days. The $580 mil-

lion was more than twice what

DoorDash had raised in its en-

tire existence, and set the

stage for SoftBank to invest a

further $300 million over

three subsequent funding

rounds.

SoftBank executives “de-

serve credit for understanding

why DoorDash was thriving

and would ultimately prevail

when virtually all other inves-

tors misunderstood,” said

Keith Rabois, one of Door-

Dash’s earliest investors.

At around the same time

SoftBank backed DoorDash, it

also invested $7.7 billion in

Uber Technologies—and by ex-

tension Uber Eats. Uber execu-

tives were frustrated that their

largest investor would fund a

rival, people familiar with the

matter have said.

The cash injection proved

pivotal for DoorDash. It went

on an expansion blitz through

the rest of 2018, increasing the

number of towns and cities it

served to around 3,000, from

600 early in the year. Its mar-

ket share, less than 20% at the

start of 2018, jumped to nearly

30% by early 2019 from, ac-

cording to research firm Sec-

ond Measure. By early 2020,

DoorDash cracked 40%, and

this fall it passed 50%.

DoorDash reported a profit-

able April-June quarter, thanks

in part to the pandemic-re-

lated boom in food delivery.

DoorDash was better posi-

tioned than some companies in

SoftBank’s portfolio to make

good use of so much cash. Its

largest initial competitor,

Grubhub, was publicly traded,

and reluctant to upset share-

nia labor law, and its shares

are now up more than 45%

since 2017. Others have per-

formed well during the pan-

demic, including Guardant

Health Inc. and 10x Genomics

Inc., climbing more than 30%

and over 80%, respectively,

since June 1.

than 75% over the same pe-

riod.

Still, many of the Vision

Fund’s investments are doing

better than they were a year

ago. Uber Technologies Inc.,

for one, has taken off since a

regulatory victory last month

that exempts it from a Califor-

rather than turning SoftBank’s

capital into a weapon that van-

quished rivals, ratcheted up

spending, resulting in larger

losses. For some, the deluge of

cash accentuated flaws in their

business models. Other Soft-

Bank-funded companies faced

further problems when Soft-

Bank funded their direct com-

petitors, too.

Late last fall, SoftBank Chief

Executive Masayoshi Son ac-

knowledged some flaws in his

judgment and began to pub-

licly emphasize the importance

of profitability—a contrast to

his prior emphasis on revenue

growth. Several companies in

SoftBank’s portfolio trimmed

staff and costs.

“There are a lot of lessons

learned,” Mr. Son told report-

ers in August.

In September, SoftBank re-

ported the Vision Fund’s in-

vestments increased 11.5%

since it was launched in 2017—

trailing the broader stock mar-

ket as well as the overall ven-

ture-capital sector, according

to Cambridge Associates. The

Nasdaq Composite is up more

SoftBank GroupCorp. faced
criticism a year ago when its
strategy of pouring billions of
dollars into highly unprofitable
startups became bogged down
by some high-profile flops.
Soon, the Japanese con-
glomerate may have a notable
winner to flaunt:DoorDash
Inc. The San Francisco food-
delivery company is gearing up
to go public in coming weeks
at a valuation as high as $32
billion, it said in securities fil-
ings Monday.
If the initial public offering is
as successful as DoorDash
hopes, it would be a huge win
for SoftBank and its tech-fo-
cusedVision Fund. The fund
blanketed the delivery company
with cash two years ago—a
strategy that proved unwise
with many of its other invest-
ments but helped fuel a suc-
cessful growth strategy for
DoorDash. At the midpoint of
DoorDash’s expected share price
range, SoftBank’s $680 million
investment would be worth $5
billion. SoftBank, which first in-
vested in DoorDash in early
2018, is its largest shareholder,
with a 24.9% stake.
The $100 billion Vision
Fund, by far the largest ven-
ture-capital fund ever raised,
spent much of its nearly four-
year existence flooding money-
losing startups with cash to
fund rapid growth. The idea
was to create dominant market
leaders in nascent industries,
with massive profits to follow.
But over the past 18
months, the company reported
billions in losses on many such
investments, as its approach
failed to produce results for
startups including office-space
provider WeWork Cos., on-de-
mand dog-walking app Wag
Labs Inc. and car-rental com-
pany Fair Financial Corp.
Many of these companies,

Amazon in

Talks for

Podcaster

BYELIOTBROWN

DoorDash to Deliver SoftBank a Big Win

San Francisco company

is gearing up to go

public at a valuation

as high as $32 billion

A DoorDash driver picked up an order at Cafe Encore in San Francisco last month.

PAUL CHINN/THE SAN FRANCISCO CHRONICLE/GETTY IMAG

company said.

The deal is expected to

close in the second half of

2021, subject to various condi-

tions, including the refinanc-

ing of XPO’s debt on terms to

be approved by its board. Brad

Jacobs would remain chairman

and chief executive of XPO and

serve as chairman of the new

company, which would have a

separate board and manage-

ment team.

The planned split follows a

strategic review XPO launched

earlier this year to evaluate

the possible sale or spinoff of

one or more business units.

“Our transportation and lo-

gistics businesses are both in-

dustry leaders in their own

right and already outperform

the competition on key met-

rics,” Mr. Jacobs said in an in-

terview. Separating the com-

pany into two pure-play

businesses would remove what

he called “the conglomerate

discount in our stock,” unlock-

ing “substantial equity value,”

and make it easier for inves-

tors to compare both entities’

performances against their

peers, he said.

XPO shares closed at

$110.01 Wednesday, up from

this year’s low of $40.69 in

late March, when the corona-

virus pandemic hit the U.S.

XPO said in January it was

exploring strategic alterna-

tives and had hired Goldman

Sachs Group Inc. and JPMor-

gan Chase & Co. “to run four

simultaneous auction pro-

cesses” for all business units

except for its less-than-truck-

load division, which consoli-

dates shipments for multiple

customers onto single trucks.

Mr. Jacobs said at the time

that XPO was trading “well be-

low the sum of our parts and

at a significant discount” to its

peers, but that the company

could also end up not selling

any segments.

The notice followed a chal-

lenging period for the com-

pany, including a 2018 short

seller report that sent XPO’s

stock price tumbling and side-

lined a planned acquisition

bid.

The planned spinoff nar-

rows XPO’s focus to transpor-

tation, where the company

ranks among the largest U.S.

trucking players. XPO is the

third-largest U.S. less-than-

truckload company by 2019

revenue, according to SJ Con-

sulting Group Inc

XPO also has a sizable last-

mile delivery business for big

and bulky items, where de-

mand has surged as people

have ordered more furniture

and exercise and office equip-

ment online during the coro-

navirus pandemic. The com-

pany’s transportation segment

generated $2.68 billion in

third-quarter revenue, roughly

the same as in the prior-year

period.

The rush to e-commerce

also has boosted XPO’s con-

tract logistics business, which

provides warehousing and e-

commerce fulfillment to cus-

tomers such as IKEA, Boeing

Co. and Inditex SA’s Zara.

XPO LogisticsInc., one of
the largest providers of ware-
housing, trucking and last-
mile services in the U.S., plans
to split itself into two sepa-
rate, publicly traded compa-
nies and drop efforts to sell
off pieces of the business.
The company intends to
spin off its global contract lo-
gistics business while keeping
its trucking and freight bro-
kerage operations as a stand-
alone business, XPO said
Wednesday.
The split would shift course
from the growth strategy the
Greenwich, Conn.-based com-
pany undertook between 2011
and 2015, when it used a rapid
series of acquisitions to build
an operation that vaulted it
into the top ranks of logistics
providers and provided $16.65
billion in revenue last year.
The planned transaction
would be tax-free to XPO
shareholders, who would own
stock in both companies, the

BYJENNIFERSMITH

Logistics Giant to Split Its Businesses

DoorDash focused

on U.S. suburbs—

eschewed by Uber

Eats and Grubhub.

 Heard on the Street: Loyal

diners reward DoorDash B11

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