Delivery firms spot advertising business opportunity

Making money from deliveries is extremely tough, even in a pandemic year that swelled demand, and delivery firms, from Instacart to Uber, are  now exploring how there might be money in advertising products as well as delivering them.

Why it matters

This wouldn’t be the first time retail-adjacent companies looked into advertising, or, more precisely, media sales. The rise of e-commerce media has fuelled Amazon’s ad business, which grew 87% in the last year alone to claim around 10% of the digital ad market.

With Walmart and Kroger also in the mix, the entry of major new players will test the sector’s ability to talk to and persuade users rather than just bring them goods.

The smart idea here is that digital media’s low marginal costs relative to delivery’s extremely high costs will provide a profit base to offset the cost increases in the core business. If it works, that is.

What’s happening

• News that Instacart was exploring an entry in to the ad business was reported by the Wall Street Journal, which points out that even amid a record sales year profits for the popular grocery pickup/delivery service were hard to come by, and have only become harder as demand on deliveries normalises.
• The company already does some advertising with sales of $300m last year; the firm’s eyes are on a $1bn revenue ad prize next year.
• Meanwhile, Uber is also hiring in advertising heavyweights as the company now expects to make $300m in ad revenue by the end of 2022, Insider reported. The company is advertising not only in the OOH space but also across its Uber Eats and Uber apps.
• Advertisers in food and CPG are spending heavily on digital services, especially those that purport to reach consumers directly.

The opportunity

Both these businesses are pivoting, but from a strong basis in robust, usable data that informs their own operations. The bet, here, is not just to drive sales but also to help partner brands better understand what is selling well and, hopefully, why.

Like the biggest in the business – Google and Facebook – both will be looking to the long tail of businesses too small to build their own delivery or advertising platforms.

Sourced from the Wall Street Journal, Insider