With the pandemic raging worldwide, food delivery platforms have become the only profitable sector amongst the entire restaurant industry. Chowbus, a US company that delivers Chinese food, earned $3.3 million and $3 million in July and October 2020, respectively, making the company appear quite promising. However, following these successful financial figures, some negative news came out: a large number of resignations and there had been a data leak impacting more than 800,000 users and merchants. A few days ago, the company confirmed that they will quit the Australian market after just one year of operation, due to its Australian trademark Cybersquatting.
On 7th October 2020, six days after the B-round financing, Chowbus released big news that this large number of data had been leaked, including users’ names, email addresses, phone numbers, and home addresses, due to disorganised management. The Australian team soon responded to this, stating that they operate separately and therefore removing the possibility of a data leak. However, when it turned out that local restaurants had found their own leaked information, the Australian team had to publish a public apology.
These issues had huge impacts on the operation of the business, with Chowbus needing to spend huge amounts of money on marketing as a consequence. In the first month alone, the company spent more than $1 million in an attempt to recover their brand reputation. Now, Chowbus has spent a total of $10 million over the last several months.
On 15th March 2021, the company announced that they would be cybersquatting their Australian trademark, and they ceased operation the next day. It is questionable that such a promising company had no desire for protecting its trademark. What’s more, Chowbus applied for a trademark in the United States in 2017, and re-applied on 11th January 2021, demonstrating that their legal team clearly understands the importance of the trademark. Further, Chowbus’ Australian IP trademark was registered by other institutions before the end of 2020. According to local laws, the company had the right to oppose the registration of the new IP address within the first ten weeks, and their re-application for the US trademark occurred within this period. It is very difficult to understand why Chowbus only worked to protect their American IP, and neglected the Australian IP until 1st March 2021, therefore missing the appeal period.
At present, the company has blamed cybersquatting on its competitors and started to design a new mobile application with a new IP. We can assume that the financial investment will be used for the new app research and marketing. According to internal employees, their new move is an attempt to get more investments through the new app and also to fix any bugs.
According to the media report by Tongcheng AUS, they were able to get in touch with the legal team of Chowbus and found out that the company has not contacted the new IP owners. Whilst the company is willing to put millions of dollars into operation and marketing, they do not want to spend any money fighting against the cybersquatting, and therefore they chose to use a new IP and to return to Australia in the future. The reasons for this unusual decision are unknown.
The Internet, particularly mobile, relies on large amounts of advertising, and there is no clear standard of advertising costs on the market. Hence, investors generally focus on the user activity and retention rate, rather than the revenue itself. Therefore, it is possible that companies will be fraudulent through huge advertising and activity subsidies. However, such operations will lead to companies taking great risks, which means they will always face some problems. For Chowbus, there are various issues they may encounter. Firstly, the company has internal management issues, which will have an impact on their next round of investment. Secondly, the operation in Australia provides a reasonable approach for bypassing the scrutiny of the investors and pointing problems towards the competition. Finally, the generation of a new app will increase the company cost, which may help the company raise more funds in the next round.