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Third-Party Food Delivery Marketplaces Offset Losses With Ad Sales

·3 min read
Grocery Delivery
Grocery Delivery

The food delivery business is still not profitable for most major players, even as their marketplaces surge in popularity. Noting the opportunity for a revenue source that does not involve steep labor costs or complicated logistical networks, these delivery services are supplementing their delivery revenue with income from advertising, offering restaurants and grocery retailers the opportunity to boost their products in these highly trafficked marketplaces.

Last week, Target-owned grocery and essentials delivery service Shipt expanded its ad business by partnering with sponsored product ad solution CitrusAd, the latter announced. The partnership allows brands on Shipt to place advertisements and boost sponsored products in the shopping grid with non-sponsored items, integrating the marketing into consumers’ eCommerce experience.

“As we continue to grow our retail partnerships and expand the categories we serve, our team works hand-in-hand with brands to meet their unique needs and effectively reach customers,” David Young, VP of consumer-packaged goods at Shipt, said in a statement. “We know many of our partner brands already leverage CitrusAd’s technology, and we’re thrilled this integration will make it easy for them to optimize campaigns.”

For now, even the more successful of these ad businesses remain a significant but relatively small fraction of delivery services’ income. In 2020, for instance, Instacart’s revenue totaled $1.5 billion, Forbes reported. The company’s ad business, meanwhile, brought in $300 million in 2020, The Wall Street Journal reported. However, the delivery service plans to grow this ad business to $1 billion this year, a more than threefold increase.

“A lot of Instacart’s new executive hires are coming from Facebook, and Facebook is an ads business,” Dmitry Shevelenko, co-founder and president of last-mile logistics robotics company Tortoise, noted to PYMNTS in an interview last month. “Connecting the dots, is Instacart’s future really more as an advertising company, because of its prime spot in the funnel of people buying stuff?”

Related news: Tortoise Shifts Focus of Automated Delivery to the Present

In 2019, Amazon extended its ad business to its Amazon Fresh grocery arm, offering sponsored product opportunities to food and CPG brands. In June, the company extended its demand-side platform Amazon DSP to offer in-store attribution at Amazon Fresh locations. It was reported on Sunday (Sept. 19) that Amazon is adding more sponsored products to search results, boosting its ad business.

See also: Amazon Ups Sponsored Ads in Searches

Restaurant delivery services are also turning to ad sales to boost their income. In the spring, Ad Age reported that DoorDash was looking for a new head of ad sales, and according to job postings currently live on the delivery service’s site, the company is still establishing its new Ads & Promotions team. Postings note that the company presents advertising both for restaurants and for consumer packaged goods (CPG) brands. DoorDash, Uber Eats and Grubhub all offer sponsored listing opportunities, allowing restaurants to boost their presence in the marketplace, becoming more visible to more consumers on the platform.

These businesses are only going to continue to grow as online food ordering becomes increasingly popular.

“We’re at one of these inflection points where people are asking ‘what’s going to happen in the future?’” Andrew Robbins, co-founder and CEO at restaurant Software-as-a-Service (SaaS) company Paytronix, told Karen Webster in a recent conversation. “Because one could imagine that, with a return to [on-premises dining], online ordering should go down. What we’re seeing in our numbers is that it’s part of some people’s lifestyle that they would like to keep.”

Read more: Paytronix CEO: Restaurants Are Reopening, But Digital Ordering Is Here to Stay