The Wall Street Journal has a story about Instacart, suggesting that as it plans/envisions an upcoming IPO, one of its real long-term advantages will be "advertising - the kind Instacart sells, rather than pays for … Ads, which DoorDash and Uber Technologies’ Uber Eats are also pushing into, will boost Instacart’s bottom line as a comparatively higher margin segment."
The story notes that "Instacart’s ad ambitions aren’t modest: The company generated roughly $300 million from ads in 2020 and had been looking to expand the business to $1 billion this year, according to a person familiar with the matter. Annualizing Instacart’s second-quarter revenue means ads could comprise something like 40% of Instacart’s total top line by the end of this year."
But the company does face a balancing act, the Journal suggests, because "it is possible a heavy ads business could eventually cause Instacart to compete with the very grocers it has set out to empower."
- KC's View:
Under its new leadership, Instacart has been focused on repositioning itself so that it is seen as an enable for retailers, not a potential competitor. I would imagine that CEO Fidji Simo, who has some experience with this from her time at Facebook, will be doing her best to be reassuring about the ad business; she's already made the point, as the Journal story points out, that "omnichannel shoppers are 'more valuable, more retentive' than those shopping solely online or in store," and so she knows that the entire continuum has to be nurtured and protected.