Marketplace Briefing: DoorDash’s new advertising capabilities are trying to court bigger brands and retailers
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
DoorDash is leveraging its trove of shopper data to draw more brands and restaurant partners to its marketplace with a slew of new advertising tools.
The delivery platform’s new capabilities cater to two types of customers: CPG brands and enterprise restaurants. Regardless of the type of business a client runs, the general idea is to improve their ability to reach high-intent customers on DoorDash’s platform of 37 million active monthly users. Historically, DoorDash has relied on smaller restaurants for advertising. Now, with its new suite of ad tools, DoorDash is looking to recruit more major brands with deeper pockets to its platform.
For one, DoorDash is launching a new ads manager for big-name merchants like Chipotle, Sweetgreen and BJ’s Restaurant and Brewhouse. With the new platform, such restaurants will have access to a suite of self-serve tools, including the ability to more precisely target ads to customers based on their shopping behavior and even the time of day, like the dinner rush or afternoon lull. Restaurants will also be able to run targeted marketing campaigns based on data like order frequency, spend and basket size. Restaurants can now offer a range of promotions, whether that’s product giveaways or discounted prices. And big chain restaurants with franchises like McDonald’s and Taco Bell can run independent local marketing strategies.
In addition to these features, DoorDash is releasing omnichannel advertising solutions for CPG partners on the platform. One of these tools will let brands target ads off-platform using DoorDash’s customer data. These ads will be deployed outside its app across the open web and streaming platforms. The company did not disclose which specific publishers it is working with for off-site ads. Within DoorDash’s app, the company is now offering sponsored brand ads for CPGs to advertise specific goods.
To Toby Espinosa, vice president of ads at DoorDash, the company’s sales pitch to brands and restaurants boils down to driving growth for companies that are already juggling multiple responsibilities, from marketing and finance to customer service and creativity.
“If our job is anything, what we want to do is just basically help them to be their growth expert,” Espinosa said in an interview. “What you’ll see with every single incremental product that we launch is that we’re trying to take the weight of having to come up with new different access points for growth off their shoulders and put it on our shoulders.”
These latest announcements are part of DoorDash’s broader plans to grow its advertising business and drive profitability. The company hasn’t reported a profit since it went public in 2021. In the most recent quarter, the company’s net loss was $158 million, more than analysts expected. DoorDash does not break out its advertising revenue, but during its most recent earnings call with investors, the company’s CEO Tony Xu said, “You kind of need the marketplace business to grow in order for your advertising business to have a long runway for healthy growth.” He added that the ad business is growing “really, really fast.”
Marketplaces are increasingly leveraging first-party data to capture a bigger slice of the retail media market. Instacart, for example, has said it wants advertising to account for 4% to 5% of its gross transaction volume. Uber announced its ad business had achieved a $1 billion annual run rate when it reported second-quarter earnings in August. Its ad spent on grocery and retail, in particular, tripled year over year.
The ability to target audiences offsite has become a focus for marketplaces. In June, Instacart revealed that it was introducing shoppable advertisements for advertisers on YouTube. The company had already inked similar partnerships with Google Shopping Ads and Roku.
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.
For its part, DoorDash has conducted studies across a number of its grocery and convenience enterprise partners that show the platform being 70% to 90% incremental to their existing customer base, a company spokesperson said in an email. Espinosa also said that CPG partners that have tapped DoorDash’s off-site capabilities have seen an “incremental lift.”
The success of DoorDash’s retail media offerings, in part, hinges on the platform’s size and scope. “The ability to get dollars when you have consumers that love your product is not hard, and I don’t want to downplay the work that we’ve done, but that is a tale as old as time,” Espinosa said. “If you have eyeballs on your platform, you can sell the ad inventory.”
Espinosa pointed to alcohol delivery, which the company launched in 2021, as an example. “We have over 60% market share of all digital alcohol sales sold in the U.S.,” Espinosa said.
While DoorDash started as a delivery service primarily for restaurants, it has been adding a great variety of retailers to its platform in product categories like beauty, grocery and home improvement. For example, in the second quarter, DoorDash inked new partnerships with Ulta Beauty, Lowe’s and Michaels, as well as regional supermarket chains. The company has even partnered with florists and Spirit Halloween to take advantage of seasonal holidays like Halloween and Mother’s Day. (Uber, which announced a similar partnership with Spirit Halloween this week, is seemingly taking a page out of DoorDash’s playbook.)
DoorDash has a couple of key competitive differentiators in courting CPG ad dollars, according to Andrew Lipsman, an independent media analyst at Media, Ads + Commerce. “The first is that it disproportionately drives incremental CPG purchases, and CPG brands favor these purchases because they’re typically higher margin and drive their topline, even if the overall volume isn’t as high as other platforms,” Lipsman said. He added that the ability to advertise alcohol brands was another benefit.
As for the restaurant side, “the biggest challenge is simply converting many small and medium-sized businesses, and local restaurants, who may never have advertised in this manner, into advertisers,” Lipsman said. “They may not have any budget allocated to this form of advertising, and it may require education to get them to do so.” In a bright spot, he said it was smart of DoorDash to highlight its lifetime value metrics to woo more restaurants.
“Especially in the case of local restaurants, acquiring a new customer who continues to order over time is really valuable,” Lipsman said.
Lipsman also said that the rollout of ad formats like sponsored brands and off-site ads was “an important step” for DoorDash to become a full-funnel retail media network, “which is key to attracting more brand investment.”
Marketplace news to know
- Amazon is upping the number of advertisements on Prime Video. It said that it did not see a subscriber number drop after first introducing ads.
- A judge threw out a case against eBay that alleged it was liable for selling harmful products.
- Pinterest unveiled new generative AI advertising products.