Dynamic Yield’s machine learning could well put McDonald’s in the crosshairs of Amazon.
McDonald’s is turning to machine learning to personalize and customize your experience at their outlets.
That’s right–McDonald’s has reached an agreement to acquire Dynamic Yield, an Israeli startup that specializes in “decision logic” technology. This tech uses data acquired from previous purchases to recommend additional purchases. (Think: the “customers like you also bought” suggestions when shopping on Amazon, for example.)McDonald’s Just Spent $300 Million on a Little Known Startup. Here’s Why It Was a Brilliant Move
It’s more than just the “customers like you” trick, however, as Dynamic Yield can draw on a wide variety of data, such as weather, what’s popular in your area right now, and your purchase history.
… in a pilot program at a McDonald’s restaurant in Miami, powered by Dynamic Yield, those displays have taken on new dexterity. Algorithms crunch data as diverse as the weather, time of day, local traffic, nearby events, and of course historical sales data, both at that specific franchise and around the world.MCDONALD’S BITES ON BIG DATA WITH $300 MILLION ACQUISITION
What’s the Strategy?
McDonald’s spent $300 million on the Dynamic Yield acquisition. Getting that money back is going to require upselling a lot of chocolate shakes — unless, that is, they decide to continue making money from their new acquisition:
Founded in 2011, the company has headquarters in New York as well as Tel Aviv, and a healthy roster of blue-chip retail clients, including Ikea, Sephora, and Urban Outfitters. It will remain independently run even after the acquisition, and plans to continue growing its business outside of the Golden Arches’ shadow.MCDONALD’S BITES ON BIG DATA WITH $300 MILLION ACQUISITION
It’s hard to know how Dynamic Yield’s existing customers will react to the acquisition. The answer will, of course, depend upon licensing terms and assurances from the new parent company that customer data will not be integrated with that of McDonald’s without their express consent. This does raise the interesting prospect of a food services company getting into the data management business.
That is a strategy that puts McDonald’s in direct competition with Amazon for the prediction engines of commerce. A more winnable strategy would be to shift the Dynamic Yield client base by focusing it on the automation of service businesses. This is an area where the parent company could contribute much to its new subsidiary. It would also focus McDonald’s on automated self-service technologies, particularly in the physical retail environments it knows best. It also would keep the company squarely focused on the looming — and soon to be booming — business of automating the service economy with machine learning.
Special thanks to Mary Stoval for sharing this story on LinkedIn.