When shelter-in-place orders meant people headed online for their groceries, Instacart delivered, accounting for one in five e-commerce sales in the US and more than doubling its valuation to $39 billion by March 2021. But as shoppers headed back into stores, the last-mile firm turned its attention to advertising — a more profitable enterprise in a post-pandemic world — and is aiming for $1 billion in ad revenue next year.
“Instacart as ad platform” makes sense as a way to reach potential shoppers at a key moment of intent, and currently, the last-mile platform offers sponsored listings when a shopper searches for a product. But Ryan Mayward, Instacart’s vice-president of ad sales, says it will soon increase options for display advertising and is investing in ways to give brands more insight into shoppers’ buying habits.
Instacart will certainly draw on the experiences of its new leadership, two executives intimately connected to the world of at-scale advertising: new CEO Fidji Simo, who ran the Facebook app division, and new president Carolyn Everson, who was head of ad sales at Facebook. In an interview with the Wall Street Journal in September, Simo said the company will build out a wide range of offerings for retailers, from ad platforms to fulfillment centers.
This partial pivot is most certainly due in part to slowing growth in delivery, but it also represents the massive transformation taking place among media, advertising and commerce, as each function blends with the other, driven by shifting consumer expectations, a flood of data, and an understanding that brands themselves are going directly to consumers themselves. It will surely help an IPO-bound company like Instacart, which will need to get to profitability fast. “The issue with last mile is that it’s not cost-effective in groceries,” says Sucharita Kodali, retail industry analyst at Forrester (watch her Signal Conversation here). Advertising may be the answer.
Consumers expect it all, everywhere
Consumers increasingly want their digital experiences to blend: They want to shop, be entertained, and to socialize all in one place. Video-sharing app TikTok — originally a place for entertainment — is expanding into commerce, with people now able to buy directly from creators’ videos as well as through ads, while idea discovery site Pinterest is also doubling down on shopping.
This shift is driven in part by younger generations, where a brand’s first interaction with a consumer is “mobile and social and digital,” all at once, says Steven Moy, CEO of digital agency Barbarian, part of Cheil Worldwide.
Reading these signals, some retailers are breaking out of their traditional boxes and weaving in elements of social media, adding Instagram Stories-style features to their websites to inspire shoppers, as well as integrating pictures of consumers with their products and personalizing online storefronts.
Data opens up possibilities
Retailers and last-mile platforms have data on key signals of buying intent, allowing them to serve relevant advertising and gain clearer insight into a customer’s journey when an item is bought.
According to Boston Consulting Group, large retail media is set to earn $100 billion a year from brands, which are keen to understand how their ads convert directly into sales – a step beyond other measurements such as click-through rates or impressions.
None of this would be possible were it not for the massive amounts of data captured at every point in the customer journey. Taking pole position on consumers’ point of sale data, the bigger retailers are aggressively expanding their media offerings. Walmart’s media business, Walmart Connect, added its own demand-side platform (DSP) in August to allow marketers to track shoppers and place advertising on other sites. And Target is ratcheting up its tech talent to counter Walmart’s moves. (Others, like Kroger and Carrefour, are following suit.)
This explosion in data means that retailers, online publishers and ad platforms can break out of their silos by gathering and analyzing their own first-party information on shopping habits. Walmart says its DSP will be able to connect online and offline data to get a complete picture of a shopper’s journey, down to a granular level. Instacart gives brands shopping data and performance feedback on their ads, Mayward says, adding that the platform expects to take share from the likes of Facebook, Google and Amazon, all experts in using data for targeting and business growth.
And brands are media, commerce and last-mile, too
Brands themselves are shifting roles, too, becoming media, store and delivery all at once at times — and gathering data along the way. With the rise of direct-to-consumer brands, major global marketers are recognizing the opportunity to develop relationships with consumers in much more intimate ways. P&G has jumped into the DTC arena with Olay, Gillette and several other brands. Heinz launched direct sales platform Heinz To Home in the UK in 2020, bundling goods together and letting people create personalized products.
Selling direct represents a huge change in the way brands think about commerce and is a world away from the traditional way of reaching shoppers, which had previously been mediated by retailers as well as the media owners that sold advertising inventory.
Brands are also eschewing ads in traditional media to promote new products directly. When Brooklyn designer New York or Nowhere — known as NYON — launched a collection in June, it did so via an Instagram Live shopping event in partnership with American Express, a first for the card company.
“You watch it, you click it, done. And then it’s shipped within 24 hours,” Barbarian’s Moy says — the agency worked with Amex on the activation, where shoppers could only shop NYON with one of its credit cards. Moy says selling in this way also makes brands think harder about linking first-mile and last-mile and means parcels themselves could become a new type of direct mail, via QR codes that link consumers’ data back to a brand when scanned.
Instacart’s Mayward says the firm is only “scratching the surface” of what’s possible in retail media and says brands should expect their ads to be customized and more integrated into the shopping experience. Industry experts expect it to go further, by partnering with other media platforms. Beth Ann Kaminkow, CEO of VMLY&R Commerce, WPP’s shopper marketing agency, says that if someone is watching a video on TikTok where a creator is talking about a food product that a viewer is inspired to buy, Instacart could be the partner to complete the transaction.
And according to Donna Sharp, managing director at advisory firm MediaLink, Instacart is taking ad spend directly from retailers, because they don’t — yet — have the technology to manage such demand. “Major retailers [are] turning away spend because they simply can’t manage the volume — there’s nowhere to go but up.”