The Wall Street Journal reports that delivery service Instacart, "which helped shift shoppers from supermarket aisles to smartphones, now is making a push into selling online advertising. It is hiring veterans from Facebook Inc.and developing platforms for video and other services, aiming to tap a multibillion-dollar digital advertising business that also is being pursued by Walmart Inc. and Kroger Co. ––some of its biggest customers."
According to the story, "For Instacart, advertising is a way to boost sales and deepen its connection with users, executives said. Food and consumer brands’ spending on digital advertising is projected to rise about 32% this year, according to research firm eMarketer. Brands are leaning more on websites and apps to reach consumers, and less on traditional in-store deals and television spots.
"Instacart’s ad business generated about $300 million in revenue last year; the company is seeking to increase it to $1 billion by next year, according to a person familiar with the matter."
- KC's View:
I completely understand why a company like Instacart is moving in this direction. It isn't alone; DoorDash is another of the companies making a similar move. The fact is that these companies struggle to be profitable, and they're looking to open up additional revenue streams that will improve their fortunes, not to mention making them look better when it comes to potential mergers, acquisitions and public offerings.
What amazes me is that these companies' retail clients are countenancing these activities, doing business with entities that are eating away at dollars that might normally be spent with them. This is an area that retailers used to guard jealously - heaven help any business that even appeared to get in between a retailer and promotional /advertising money.
To be clear, the Journal story does say that Instacart maintains that "it doesn’t compete with retailers but rather helps them achieve higher sales and provides them with data on which items sell and how well. It said it gives retailers information on orders placed through the platform, working with them to analyze the data and ways to apply it. This helps retailers build better relationships with shoppers, and consumers benefit from cheaper deals."
But in the old days, retailers would say that they'd rather have tangible cash than intangible benefits.
Maybe retailers actually are getting enlightened. Maybe, in fact, this is a "service for grocers that aren’t equipped to build their own tech platforms," which is also what Instacart says.
But maybe many retailers actually are yet again handing over to a very ambitious and aggressive company information and dollars that will allow that company to become an ambitious and aggressive competitor.