DoorDash and Uber Eats Can Grow Your Business With Ads But Run the Risk of Upsetting Everyone Else
DoorDash is not alone. In addition to its own commission levels, which include services such as delivery and marketing, Uber Technologies’ Uber Eats last August announced sponsored ad listings in the US. The company says the ads are now also available in the UK, Australia, Brazil, Mexico, Canada, France, Germany, Portugal, Spain, Taiwan and Japan. Meanwhile, Grubhub says that sponsored listings have its commissions baked in, with more money buying more visibility.
Uber’s economics offers some insight into how big DoorDash’s business can become. Uber said on its second-quarter earnings call that it expects to exit with an ad run rate on Eats of more than $100 million this year and at least $300 million in 2022, suggesting that The ancillary business is popular and growing rapidly.
Whether DoorDash can stay on top in the near future remains to be seen, but the company could offer a distinct advantage to its merchants: While Uber’s advertising merchants pay per click for sponsored listings, DoorDash only charges for that service. Pays for orders placed through its advertising. This could add to DoorDash’s value proposition and potentially offset its smaller footprint. DoorDash says it has more than 450,000 merchants on its platform, while Uber said it had 700,000 merchants on Eats in the second quarter. And while DoorDash says it sees 20 million customers each month, Uber, which doesn’t break out its Eats customers, said its total monthly active platform users exceeded 100 million in the second quarter.
Uber Eats may be more eager to use ads to drive profit. Its parent company, which has yet to report a profitable quarter for its business, has said it could see its first quarter of profits this quarter based on adjusted earnings before interest, taxes, depreciation and amortization . Its ride-hailing rival Lyft reached profitability on that basis in the second quarter. Uber chief executive Dara Khosrowshahi said in a Businesshala interview last month that its Eats business is “reaching EBITDA profitability levels” by the end of the year. Meanwhile, DoorDash has already reported profits for five straight quarters, but also said Tuesday’s announcement was just the beginning of its advertising journey.
For all food-delivery platforms, growing an advertising business will require a delicate balance. Platforms want to weigh the benefits of a high-margin business, such as advertising, with its impact on the consumer experience, for one. DoorDash thinks its advertising products can help consumers choose what to eat from a range of options. The company says that most of its consumers search for food like sushi or pizza, rather than specific restaurants.
On the merchant side, small mom-and-pop restaurants have long complained about the sky-high food-delivery commissions and ads can fuel their discontent. Uber says that Eats’ sponsored listing is different from its ranking algorithm, which has dedicated spaces in its feed. DoorDash says it ranks all eligible ads based on a combination of bid and quality scores, with the latter measuring how likely consumers are to make a purchase from a merchant. Both Uber and DoorDash talk about ads as if they’ll level the playing field for restaurants of all sizes. Ultimately, though, those who pay will be served – if not more in the feed, then at least more often.
Food-delivery platforms can go hungry, but they run the risk of overeating.
Laura Forman at [email protected]