Food.com changes its recipe

Food.com, formerly called Cybermeals, will now focus on specific locales rather than pursue a national strategy.

The company will season its marketing menu with an advertising campaign aimed at both the online and offline markets, backed by $25 million in new investment capital. The company's first local TV, radio, print, and billboard ads will run in Los Angeles, New York, the San Francisco Bay Area, Washington, Chicago, Seattle, Dallas, Atlanta, and Philadelphia.

"It's a local, even a neighborhood, business," said Food.com spokesman David Gilcreast.

The company says 51 percent of all restaurant meals last year were takeout or delivery, and that segment is growing far faster than other restaurant categories. Food.com and similar services are one shortcut for an eatery to gain Internet exposure, but it's not clear how many bistros are willing to pay for it.

In putting its old national strategy in cold storage, Food.com also has walked away from portal deals with Yahoo, Lycos, and Excite. But it's sticking with America Online and its local Digital Cities properties, extending its four-year, $20 million deal to six years.

"The portal deals gave us a lot of the exposure we were looking for, but they turned out not to be the best strategic business move," Gilcreast said, because the company was paying to reach many users in areas where local delivery wasn't available. "We started to realize it was much more a local and targeted play," he added, noting that Amazon.com and CDNow can play nationally because of what they sell.

The market is young, so it's not clear whether a local approach is best, said Ken Cassar, analyst with Jupiter Communications. "The big question in this space is whether the ultimate winner is going to be a big national player with a national infrastructure and local sales force, or a number of local companies spearheaded by content players like newspapers," Cassar said.

Other potential rivals include telephone companies whose sales forces already sell Yellow Page ads.

Food.com will also target on college students and office workers, in part because of the large percentage of businesses and campuses that have Internet connections.

"For businesses, the average order is larger than a home order," Gilcreast said, while college students have a higher propensity to use online ordering services, as evidenced by the clusters of restaurants around many college campuses.

The name change, which followed research that found Cybermeals wasn't an appetizing name to consumers, also positions the company to move into other areas.

"Food.com is a name we can grow into," Gilcreast said, signaling the company's interest in moving beyond takeout and delivery to become "an affinity portal for food." Potential add-ons to Food.com's menu: Wine, coffee, specialty foods, and the ability to order food for someone in another town.

"In the short term, they would be wise to stay focused on meal delivery before getting into groceries or anything else like that," said Cassar.

Food.com already faces some local competition, Dine One One in San Francisco and NY Delivery in New York City.

Success depends on how many restaurants participate, Cassar said. Although Food.com has 11,000 restaurants online, users are mostly looking for pizza or pasta delivery to their address.

Food.com charges restaurants a $400 set-up fee to put a menu online, with a $50 a month maintenance fee for updating and local marketing. The service also collects 5 percent of each order, but Gilcreast said the average order size through the site is 30 percent larger than phone orders. Next quarter Food.com will begin selling ads and sponsorships on its site.

Participating in Food.com's latest round of funding were Tribune Ventures, the investment arm of the Chicago Tribune, and Accel Partners. The company has content deals with Washington Post, Chicago Tribune, Los Angeles Times and Orlando Sentinel.