Q&A   //   June 17, 2024

Instacart is betting on YouTube to turbocharge its $871M ad business

Instacart is letting brands tap into its trove of shopper data to target ads on YouTube as the delivery platform seeks to capture a bigger slice of the fast-growing retail media market. 

The new deal will let advertisers, particularly CPG brands, target Instacart’s customer base based on their past purchase history. Instacart has already partnered with Clorox and ad agency giant Publicis Media to pilot its shoppable ads. With the new offering, Instacart will give brands insight into how much incremental spending each ad campaign was able to deliver. 

How it works is that viewers can directly click on a YouTube ad for Clorox’s disinfecting spray, for example, and then be taken to an Instacart product page, where they can theoretically buy something. Instacart hopes its same-day delivery capabilities will sweeten the deal for customers. 

The YouTube deal builds on Instacart’s strategy to let brands target ads on off-platform retail media, advertising powered by retailers’ customer data that takes place outside their physical store, website or app. In January, the grocery delivery company announced a similar deal with Google Shopping Ads. Last year, Instacart announced that its shopper data can also be used to target ads on Roku and The Trade Desk.

“We’re following the lead of our brand partners, who work closely with platforms like YouTube and are really wanting to make their media dollars work harder,” Ali Miller, Instacart’s vp of ads product, said in an interview. “What we’re offering our brands partners is the ability to better target their messages, to make sure they’re reaching high-intent consumers and to measure the true impact of their marketing spend.”

The partnership also further cements its rivalry against e-commerce giant Amazon, which also runs a highly lucrative and fast-growing advertising business. In 2023, Amazon raked in nearly $47 billion in ad revenue, a 24% jump from the year before. By comparison, Instacart’s ad unit earned $871 million in 2023, nearly 30% of its overall revenue. Amazon also unveiled three new shoppable ad formats, sans QR codes, during its first advertising upfront last month. At the same, Amazon has been looking to encroach on Instacart’s turf in the grocery industry. Recently, the Seattle-based company rolled out a grocery-delivery service for its 200 million Amazon Prime members.

EMarketer expects retail ad spend in the U.S. will reach nearly $60 billion this year. A growing share of that will likely come from off-platform ads, which eMarketer forecasts will grow nearly 62% to more than $10 billion in 2024. 

All told, the YouTube partnership reflects not only the momentum Instacart’s ad business has gained over the past year but also the growing prevalence of offsite advertising, according to Andrew Lipsman, an independent media analyst at Media, Ads + Commerce.

“If I’m a large consumer brand, I want to be able to maximize my reach, and YouTube is one of the most powerful environments for that,” Lipsman said. “Anything that facilitates that scale combined with closing the loop to sale is going to be pretty powerful.”

Modern Retail spoke with Instacart’s Miller about the future of advertising, changing consumer behavior and standing out in the crowded retail media space. 

This conversation has been edited and condensed for length and clarity.

Can you describe how Instacart’s past collaborations, like with Google Shopping, informed this new partnership with YouTube? For example, what are some of the success metrics you’ve seen with Google Shopping that you’re hoping to replicate with YouTube?
We have a 15% average sales lift on our platform that we’re really proud of. With the Google Shopping ads pilot, one of our pilot partners, Nestle, saw triple-digit growth in weekly clicks. Plus, over half of the customers who purchased from Google Shopping ads were new to their brand.

We’re helping to reach consumers, not just when they have that high intent on the Instacart platform, which is great and very powerful and can drive great results. But there are so many moments before you start shopping when you’re considering what to buy and where. Having these thoughtful entry points across the web, across connected TV, across Google search and now across YouTube can help to influence that purchase and drive new customers through these integrations.

The brands that buy Instacart ads are those that are already using the platform to drive sales. How does this partnership benefit brands that aren’t already Instacart advertisers?
For the most part, when we start these partnerships, we’re often working with our shared partners. There are a number of CPG brands that you and I know and love that work with both platforms, Instacart and YouTube. We love to take a test-and-learn approach. We want to build these pilots, learn with our partners, both on the media side and also the brands, as well as agency partners, and then make sure that we’re able to drive and understand those results together, while also hopefully opening up new opportunities for folks who are getting more familiar with what Instacart can do. 

Everyone from JPMorgan Chase to United Airlines is an ad network now. Is there any concern that the industry could be headed towards a saturation point?
What we’ve really focused on is trust and strong results. Media Ratings Council completed a very in-depth audit of our metrics and our impressions, and we’re really proud of achieving that accreditation to communicate that we’re a trusted source of measurements and results where brands can invest to power platform and off-platform outcomes.  

The idea of easily scaling the ability to buy in your favorite retailer in your location where the product is available, and taking away that complexity of activating many different retail media networks across the web — that’s an area where I think Instacart can really shine. 

Some of the challenges with shoppable is getting media buyers to believe that this is where the future of advertising is headed, as well as getting passive video watchers to view a YouTube video as an avenue to shop. How is Instacart going about changing consumer shopping habits?
YouTube is, of course, an amazing platform for entertainment, but it’s also the number one platform that’s used to research products to make decisions about purchases. This power of video — the ability to use the full sight, sound and motion to really help to explain a new product and how it actually works in day-to-day life — that’s such a powerful way to introduce a product. 

We really think that we’re enhancing a behavior that’s already happening, and enhancing the value and the dollars that brands are spending in order to help close that loop in an easier way for the consumer. So, the idea of researching a product on YouTube is very natural, and it’s this behavior that we see in the market already. But the idea of shoppers being able to take action on that research or on that learning about what to buy, and then actually be able to buy it from your favorite retailer — that can be a really powerful experience to help make that kind of intent and discovery much more actionable. Plus, Instacart’s takes away a lot of the complexity, like where is it available in my area? Where can I get it into my hands in 30 minutes?