Advertising

Pros and Cons of Instacart’s Growing Advertising Business

  • Instacart has big ambitions to grow its advertising business from $300 million to $1 billion.
  • They said Instacart is benefitting from the boom in e-commerce ad budgets more than Amazon or Walmart.
  • But Instacart needs stronger relationships with brands to turn advertising into a long-term bet.
  • See more stories on Insider’s business page.

Instacart faces tough competition from Amazon and retailers like Walmart, Target, Walgreens as it tries to build an ad business that will hit $1 billion by 2022.

Advertisers laid out the advantages and challenges it faces as it tries to get a bigger piece of their budgets.

When advertisers buy campaigns from retailers they rely on for distribution, like Walmart, Target, and Amazon, those ad budgets are typically baked into large contracts that include distribution deals.

Since Instacart doesn’t have those distribution relationships, it gets dollars that brands are siphoning off from other channels, which is easier to get than dollars tied to distribution deals, said ad buyers.

“The creativity on the advertiser side in order to find budgets is pretty high,” Instacart Chief Revenue Officer Seth Dallaire told Insider.

For instance, Michael Sloan, CEO and cofounder of Chloe’s Fruit, estimated that he spends 50% of his ad budget on Instacart and sees it replacing part of its Facebook ad spend. 

“We’re able to track and identify sales on Instacart — on Facebook we can’t,” Sloan said.

Second, advertisers said Instacart is generous with data that Amazon and other retailers’ have been reluctant to give. Instacart shares data like what products and when people buy, and is working on a way to show advertisers what sales they missed out on by not running ads. 

In one example, Instacart sales reps recently sent advertisers data about ice-cream sales before National Ice Cream Day on July 18.

Instacart advertising data



Instacart


“They’re really trying to differentiate themselves from other retail and grocery ad platforms with how much data they give us,” said Elizabeth Marsten, senior director of strategic marketplace services at Tinuiti. “They can trend out recommended ad spend and what the return might look like.”

Along with data, Instacart is bringing automated buying to its core search ads to keep up with adtech that competitors like Amazon, Walmart, and Target are rolling out.

Advertisers want more automation and targeting ability, though

But while Instacart may be able to snag incremental ad dollars, it needs deep relationships with big and small advertisers to scale its $1 billion ambitions.

“Is Instacart stealing ad dollars that would otherwise be spent with retailers? Not really,” said Kiri Masters, CEO of e-commerce agency Bobsled Marketing, who recommends that clients test 10% of what they spend on Amazon with Instacart. “Most clients are looking at this as either a test-and-learn with additional budget, or there is new budget that’s been negotiated to allocate to Instacart.”

Ad buyers said they’d like Instacart to include more ad formats like display ads and coupons that currently require them to buy through a sales rep.

They’d also like wider ability to run national ad campaigns on Instacart. Ads cannot be targeted to specific regions, so brands that don’t sell products across the country will waste a lot of ad spend, said Jason Goldberg, chief commerce strategy officer at Publicis Groupe. An Instacart spokesperson said that ads are automatically turned off for products that aren’t in-stock.