Hello from Zurich!

I’ve had this post mostly written since mid-October, but it’s only been the last few days that I’ve finally had the time to finish it up. I’ll most likely be working on the draft to this post’s follow-up on my flight back to New York (in my attempts to feign the look of ~*~international business man~*~).

New advertising offerings from key delivery players

Almost in tandem, both DoorDash and Uber () announced their ambitions for larger advertising dollars in October. Where DoorDash expanded their ad offerings by way of third-party integrations and self-serve ads for consumer product goods (CPG), Uber declared cross-channel usage of its data by providing CPG marketers the opportunity to advertise on the ride hailing app (and not just on its food delivery platform) via Journey Ads.

The end goal for both companies are seemingly the same: compete with the platforms who currently occupy a space in digital retail advertising. By launching new advertising solutions, DoorDash and Uber are looking to build for themselves viable pathways to go up against the likes of Instacart, Walmart, Kroger, and Target.

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As mentioned above, we’re going to break this post up into two parts—one post on each company. For this edition, I want to talk about the company whose potential is heightened by having similar, yet different lines, of businesses: Uber.

On not just being a rideshare company

During Uber’s Q3 earnings call last month, CEO Dara Khosrowshahi conceded that while customers are not taking as many trips as they did pre-pandemic, the boom in ridership is promising. The numbers convey back up the claim: monthly active users reached a new high (125M) and the number of people taking rideshare trips increasing by 22% in Q3.

To look at how much this increase in ridership has improved the bottom line, let’s look at the last two years. From the height of the pandemic (Q2 of 2020) through now, the delivery division outperformed the mobility division (i.e. rideshares) in terms of sheer revenue. As of last quarter, though, the two divisions finally reached parity—each bringing in $13.7B for the quarter.

If we view it by percentages, Uber’s mobility business saw a lift of 38% from this time last year, whereas delivery only saw a 7% year-over-year gain from October 2021. Bloomberg anticipates that Uber’s rideshare bookings will surpass delivery this quarter, as takeout demand and growth steadies itself. It’s not to say that Uber Eats will be left to the wayside as growth in the online food ordering space wanes. The division now accounts for 33% of the company’s total revenue.

The pandemic delivered a reckoning for businesses reliant on single revenue streams. Restaurants put all their eggs (pardon the pun) in one basket providing a service that relied on customers coming to them. Similarly, Uber and Lyft found themselves in similar predicaments when stay-at-home directives were issued—there was no longer anyone to transport. While Lyft remained dormant amidst driver and rider shortages, Uber leaned into an identity of being in the business of transportation and movement, as opposed to one being just about rideshares. And by focusing on the movement of food from point A to point B, the company was able to mitigate some of its heavy losses during the height of the pandemic.

The question now, though, is how else to generate revenue, and preferably one that does not need as much infrastructure or startup costs (i.e. Uber Freight). Looking inward at current programs to expand, the fledgling advertising division one makes the most sense. After all, Uber has been collecting data on its customers for years—and it’s valuable information at that. Consumer behaviour, informed by the rides you’ve taken and the meals you’ve ordered, has been documented without pause, which, in turn, have given Uber a leg up against Lyft and DoorDash.

If we look at Lyft and DoorDash, we come to realize that both share the similarity of being singularly focused, which have affected the two in different ways. Lyft only provides rides to and from places, which works well when there are places to go, but when there are stay-at-home orders in place, the opportunity for data collection dries up. As for DoorDash, even though the expansion into grocery and home goods has delivered a rounded out profile of consumer habits in recent years, the platform still remains limited in relevant inventory and opportunity for potential advertisers.

So, does Uber have a shot?

Khosrowashahi’s declared his ambition to deliver $1B of advertising revenue by 2024. During the earnings call, the CEO highlighted that the business reached $350M in run-rate revenue during the previous quarter. And I think it’s entirely possible.

Spending money in the contemporary “walled garden” that is Google, Facebook, and Amazon over the years has become contentious for many advertisers who have advocated for more transparency, ease to work with, and control. While Uber’s key advertising competitors have built protective walls around their consumer data, the key difference between them and the tri-opoly is the open ad tech ecosystem that runs underneath, hopefully allowing for increased ease of use. Even though Uber hasn’t announced any third-party integrations as of yet, I speculate that they’ll soon be quick to follow, especially given that DoorDash announced their partnerships with PacVue and Flywheel.

Despite budget sizes, large brands (think: CPG and large restaurant chains) and small- and medium-sized brands (think: indie restaurants and regional restaurant groups) all look for ways to best spread their messaging. Spending dollars that only contribute toward one avenue of advertising isn’t effective. For example, sponsored listings on just the homepage may contribute to a conversion, but the path is far slower than a multi-channel approach that makes use of different types of ads (such as digital billboards, and email placements). It’s kind of like when you enter a contest, and you’re looking for a way to maximize your chance to win, and there’s always mention of “more ways to play”. That’s what advertisers want to capitalize on—more opportunities to win.

And Uber knows that. Before their October announcement, the company was already slowly building its omnichannel and cross-business line approach. The release of Journey Ads solidified their comittment to becoming a player, as opposed to just signifying their ambitions.

Further reading

Vox: “Where do restaurant ‘service fees’ really go?”
The Toronto Star: “Congee Queen has been serving Toronto suburbs for two decades. It’s finally come downtown.”
Vox: “New York seems to have a weed store on every corner. None of them are legal.”

Chortle Chortle

Why Uber's bet on advertising makes sense