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GrubHub shares dip after report that Facebook is doubling down on food delivery

GrubHub shares dip after report that Facebook is doubling down on food delivery

Shares of GrubHub (NYSE: GRUB)'s stock were briefly lower on Friday afternoon, after a report highlighted Facebook (NASDAQ: FB)'s recent efforts to promote food delivery services.

Facebook announced last year it would soon allow users to order food from any restaurant's Facebook page that uses Delivery.com or Slice — two services that compete with GrubHub's brands like Seamless, AllMenus, MenuPages, LAbite, Restaurants on the Run, DiningIn and Delivered Dish.

On Friday, TechCrunch noted that Facebook had made that option much more prominent, by adding it to the main navigation page for some users. GrubHub shares dipped sharply, falling as much as 3.4 percent before recovering to close down 1.6 percent.

GrubHub spokeswoman Sandra Glading told CNBC that the company still believes it has "the broadest, best restaurant network in the space."

"And while we've always been open to exploring partnerships that leverage our scale, and drive a positive experience for our diners and our restaurants, we're constantly innovating to evolve the ordering experience; recent examples include integrations such as Amazon Alexa, Apple TV, Apple Watch and TripAdvisor," Glading said.

GrubHub was questioned about the Facebook-Delivery.com partnership during a recent earnings conference call. While CEO Matthew Maloney declined to comment on specific competitors, he noted that as one of the largest and most well-known players in the food-delivery space, GrubHub has "significant structural advantages."

"And as you look at our distinct competitive advantages, just to break it down one level deeper, I mean, scale – we have the largest scale in the industry and that gives us meaningful efficiency and competitive advantages others just can't reproduce," Maloney said on the call. "The product focus I talked about, that's all we do. That's all we think about. All of our people do this. That's what we do every day. We're not going to be held up by delivering iPods or toothpaste or groceries."

Still, food delivery is extremely tough to monetize, and the economics of the business have pressured even very well-known players. Sprig, for example, is burning through $850,000 a month and is seeking a buyer, Bloomberg reported this week, citing anonymous sources.

But as more consumers get comfortable ordering food online, GrubHub still has room to run, Pacific Crest analyst Brad Erickson wrote earlier this spring.

"We see little impact from competitors; rather, we believe the secular shift in online ordering is likely a rising tide for most bigger players in the space," Erickson said.

Watch: Cramer on how GrubHub changes game for food chains

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