Olo, perhaps the leading online ordering partner for restaurants with over 70,000 restaurant locations supported, recently announced a syndication deal with Google where they would power the “Order Online” button across many Google properties (think Maps, Search, and others to come).
If you’ve been following this closely you’d remember that Google caught heat from restaurant operators who didn’t like the fact that Google added an “Order Online” button on their online Google listings. More on that here, but the gist is that these ordering buttons would forward the order to a third party delivery company who would take a 10%, 20%, or higher cut for doing nothing since Google was sourcing the customer.
Olo’s partnership with Google seeks to change that power dynamic by supplanting the third party referral link on the Order Online button with a link to the merchant’s own ordering system. In doing so the merchant avoids the third party commissions and, more importantly, sees the customer data.
According to Noah Glass, Olo’s CEO and founder, restaurants will see the online order entered directly into their POS through Olo’s integration and all customer data – including payment information, where relevant – will be shared with the merchant. The customer data piece has been a huge contention for sophisticated operators (all two of them), and Olo’s move will benefit all such operators using Olo, even if most of them won’t figure out the value for a few more years.
Of course we need to ask some hard questions about this new partnership as well.
First, who gets priority for that Order Online button? Does Olo have the right to keep third party companies from inserting their link behind Google’s button? Won’t Google just give link preference to the highest bidder? Olo didn’t know either. “What we’ve seen is that restaurants are changing their contracts with marketplaces to bar the marketplaces from bidding against them with keywords. I imagine restaurant operators will do the same here to take control of their own buttons, and we’d certainly counsel restaurants to do so,” explains Noah.
Second, what data does Google get? Google, via their ventures arm, led a $40M round in Kitchen United this year. Google ain’t exactly asleep at the switch here, and they are arguably the 800-pound gorillas of offline user data right now. According to Noah, Google sees the same information a marketplace would see – customer information plus item, price, basket, etc. Effectively it’s the same data the merchant sees as well. How might Google be using this data? It’s definitely worth further rumination, and while we have some ideas we don’t want to speculate quite yet.
Olo has also added a bit of a change to its pricing here as well. While Olo has traditionally been a SaaS business charging merchants ~$100/mo per location for their software, they’ve slowly been adding transaction fees for orders submitted with their Ordering, Dispatch, and Rails products (since January 2016, to be precise). At 70,000 merchants Olo is the king of restaurant software (we can’t think of any other software provider that can boast as many locations). But we don’t think they’ve yet hit IPO-levels of revenue either ($100M a year is the floor to become listed). This new transaction fee could help Olo reach the IPO revenue thresholds without needing to grow their merchant base too much, which is a tall order when you recall that merchants take forever to make even logical decisions (note: Olo has not traditionally focused on brands with fewer than 30 locations and has penetrated roughly 25% of the 30+ unit operators to date).
Try not to act surprised, but we’re not at all amazed that Olo beat POS companies to the punch. Yes, POS companies should have open APIs, and yes, POS companies should be able to syndicate this type of value with Google (and others) on behalf of their merchants. But POS companies haven’t been able to do this because they suck at executing anything that’s even remotely outside their core, which really should raise the larger question on the quality of any POS company’s bolt-on solutions (Touchbistro has some interesting things going on with reservation syndication but that discussion belongs in a separate article).
Olo’s partnership with Google is a great win for merchants in the short run. The implications over the longer run are still a bit ambiguous – like what will Google do with the data it sees if it’s also investing in ghost kitchen operators – but you’d be a fool not to jump all over this today.
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