I noticed in the report circulating around the web this morning that Dominos UK iPhone pizza orders top £1 million in just three months and the UK online sales – including orders taken through Domino’s iPhone app – jumped 63pc to £128m (US$0.2 Billion) in 2010 and I couldn’t help but wonder just how big the online pizza economy was today.
After a quick Google I was surprised to discover that Domino’s is now claiming the No.4 online retailer spot in the USA. Apparently this year 0ne-quarter of all Domino’s orders in the USA were placed online (See Dispatch.com). The growth is even stronger in the UK where one-third of all orders are now being placed online. So what does that mean in dollar terms? Well if we take a look at Domino’s third quarter financials we discover they are on track to achieve global revenues of about$1.55 Billion in 2010. This would put their global online pizza revenues at around $0.4 – $0.5 Billion.
Not bad but what about the competition? After all Pizza Hut was one of the pioneers in eCommerce. They built their first online pizza store back in 1994 – a full year ahead of Amazon’s revolutionary online bookstore.
I soon discovered that Pizza Hut was expecting to make $2 Billion In Online Sales in 2010. That makes Pizza Hut’s global online pizza delivery business about the same size as Facebook’s revenue engine (See How efficient is the Facebook advertising revenue engine?)
Pizza Hut is one of the key franchises within Yum! Brands (Market Cap. $23 Billion) so it is a little difficult to map how much of their business is conducted online however they have recently claimed that they expect in the future 50% of orders will be made via the mobile phone.
Pizza Hut continues to pioneer the future of advertising. Both online and now on mobile. Yes they are doing the Social Media thing – as is Domino’s. The Guardian reports that Domino’s has done the SoMe thing with 21,000 followers on Twitter and 1.5 Million Fans on Facebook. Plus it has built it’s own online pizza game. While Fans Page List reports that Pizza Hut has 41,000 followers on Twitter and 2.25 Million Facebook Fans. But the simple reality is being online for Pizza Hut has always been about engaging customers to See it Click It and Buy It.
If Pizza Hut’s 2.25 Million Facebook fans purchase just one pizza per year online then they are worth twice as much to Pizza Hut as they are to Facebook. Buy one pizza a month and now you’re really talking about a significant boost in ARPU. More importantly the Facebook advertising revenue is generated over the full calender year. Pizza Hut can generate the 2x the revenue in the time it takes to order, cook and deliver the pizza.
Today we see a growing awareness that the era of the SOE expert is fast evolving the into the era of the SMO expert. What we don’t often see is an awareness that both of these skills amount to a little more than just an additional cost of doing business unless you hire the specialist skills of the ETO expert who can turn all that online and mobile traffic into “real world” paying customers.
This then is the difference between the two business models. Facebook’s model is based on the old mass media “Browse with us, Buy from them” model while Pizza Hut is all about having customers “Browse with us, buy from us”.
As Yahoo! found out over a decade ago the problem with the old mass media “Browse with us, Buy from them” model is
- The success of Pizza Hut’s online pizza business is not tied directly to the brand’s success on Facebook.
- The Fans of the Pizza Hut Brand are a lag rather than a lead indicator of brand awareness
- If the Facebook Fan Club disappeared tomorrow Pizza Hut would continue to sell $2 Billion worth of pizzas online.
- Facebook isn’t reducing Pizza Hut’s cost of doing business (it’s actually increasing them) so the only reason Pizza Hut is there is because – like most brands – it’s the “coolest” place on the web to be seen at the moment.
- Once the heat of the moment is gone Pizza Hut (like most Brands) will be asking themselves what are they really doing there that they can’t do more effectively elsewhere.
At the end of the day the game is all about translating online traffic into real world customers and Pizza Hut and Domino are already doing this very effectively. The key to their success has been to build their brands offline – through a mix of targeted meal time TV and Direct Mail coupons – and facilitating the transaction online.
Here then is a simple message as old as the web. The web may not be a great brand building platform but it’s an excellent transaction and exchange platform.
Some how I suspect the same golden rule applies to mobile media.