An Excellent Sign for GrubHub

 | Jul 16, 2014 | 7:34 AM EDT
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Over the weekend, news out of TechCrunch suggested that payments company Square was going to buy food-delivery company Caviar for about $100 million. (In the interest of full disclosure, an angel-focused tech fund affiliated with me was an earlier investor in Caviar. I'm not going to say anything about them -- other than what's been reported publicly.)

I think this deal is interesting given what it says about the market in which GrubHub (GRUB) and lots of other commerce vendors operate.

Square, up until this point, has only shown interest in being a payments company. It has competed against eBay's (EBAY) PayPal and newer companies such as Venmo and BrainTree (now owned by PayPal). There are some other payments start-ups in the mix as well.

But, with this deal, Square is saying that it wants to do more than payments. It wants to move into the adjacent space of delivering goods such as food. This is also a signal that it wants to play more in the local commerce space. On the one hand, this shows that Square wants to compete against GrubHub in the food-delivery space. On the other hand, it also reveals that that space is exciting enough to attract competitors.

GrubHub's shares didn't drop on this news of potentially more competition. They actually climbed. The lines are starting to blur between commerce and payments vendors -- and this trend should only strengthen over time.

Groupon (GRPN), for instance, started as a daily deals company. Now, rather than pushing a deal each day, it has moved into trying to be a local-commerce-shopping-recommendation engine that pulls you to check for deals around you. Most recently, it's started providing electronic point-of-sales services to local stores it works with -- through Apple (AAPL) iPads that the company gives away. Essentially, Groupon is positioning itself as a new type of customer-relationship-management provider in the cloud.

Square, for its part, wants to become the top-of-mind way you transact with local merchants around you, from the coffee shop to take-out food.

OpenTable (OPEN) got taken out by Priceline (PCLN) because it was a new way of interactions between restaurants and patrons. Priceline wanted to control those local relationships.

GrubHub is sitting pretty as the No. 1 player in delivering food via a mobile device. It's a leader in local, mobile and commerce, and these are bound to remain hot for the next few years.

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