Recently, an article in a blog called The Margins tells of the owner of a pizzeria which discovered that a food delivery service with which he had no relationship was advertising his restaurants as a source. What was worse was that the delivery company – which is propped up by venture capital and is, at least on the face of it, using predatory pricing to build its business – was advertising his pizzas at USD16. The proper price is USD24.
Of course, he could have got mad. But he didn’t – he got even. He and his pals placed orders via the service and made a profit, per order of USD8. It was free money.
Now, of course, there is an argument that this is a fraud but how, and why? The delivery company is advertising a service to purchasers at a price of USD16. So long as it gets its USD16, where is its loss? It was at all times expecting to pay the shop USD24. And the shop isn’t paying the delivery service because it has no contract with it.
Anyway – that’s what reminded me of several things.
1. internet advertising companies found themselves losing shed loads to companies that bought cheap ads and the companies, such as Google, paid per click. In the old days, before companies got wise to it and in some countries at least the practice was made illegal, there were enterprises, often in India, which had many people sitting doing nothing but clicking on ads. Occasionally they would stuff up and target someone who had not ordered their service – one of our ads was targeted by them. Google wasn’t pleased when we refused to pay the per click price due to obvious fraudulent activity. Oddly, none of our ads ever suffered such an attack again – although later we got into another spat with Google and cancelled our contract because they are stupid and we’ve got better things to do than argue with a dick with a God complex. I digress (because Google have irritated me again with a succession of examples of their supposed artificial intelligence which repeatedly puts out exactly the opposite of notices issued by a government and, if we were to rely on the Google translation, we’d get arrested and fined or jailed). The fact is that the idea of someone clicking on a link and making a secret profit is hardly news.
2. In the VAT fraud known as carousel or “missing trader fraud,” the scheme involved the movement within the EU’s Value Added Tax area of various items – it started with gold, then computer chips and then mobile phones. Then – after a decade – someone finally tumbled to the fact that the fraud wasn’t about the product, it was about documentation. They didn’t need to obtain, move and manage inventory. That’s the point here: the pizza shop needn’t actually make any pizzas for its scheme to work. It can ship empty boxes via the biker. So the profit isn’t USD8, it’s USD24 less the cost of a box. Or it can just make one pizza at the beginning of the shift and send it back and forth – no one is going to eat it unless the delivery rider takes a slice on the way ( which is not unknown, all across the world).
Oh, and do yourself a favour: read, carefully, the piece from The Margins. Aside from being very, very funny it’s also very, very serious. It demonstrates underhand tactics by food delivery companies and an astonishing set of figures showing how venture capital backed trendy businesses aren’t disruptive, they are destructive. And that’s before some twat on a delivery bike goes through a red light and totals your car or runs the wrong way up a one way street and causes serious injury to a pedestrian.
You might also like this about our fight with Google.