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10 minutes of expert insights every weekday. Your morning ritual for staying ahead in retail media.
If DoorDash Buys Instacart, Who Wins in Retail Media?
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[00:00:00] Kiri Masters: In 2020, I co-authored a book called Instacart for CMOs, and it was the follow-up to Amazon for CMOs, a book that had done pretty well. And Instacart was the only other retailer that I chose to give the same [00:00:15] treatment and go through the turmoil of writing a book about. Most consumer marketers misunderstood it, and I thought that it was one of the most under-recognized marketing channels that was available to them at the time.[00:00:30]
[00:00:30] Now, six years later, nobody would call Instacart under-recognized. Instacart's ads and other revenue hit $297 million in Q2 of this year, up 16% year over year, and [00:00:45] roughly makes up 28% of the company's total revenue. And you probably are aware that DoorDash is now reportedly in advanced talks to buy the company for around $17 billion.
[00:00:59] [00:01:00] The public story will be about delivery and about the real wolf at the door, which is Amazon and Walmart. But the real money is in the ads business. Both companies run ad businesses worth more than a billion dollars a year, [00:01:15] and ads are widely understood to be the highest margin revenue that either one of them earns.
[00:01:20] I'd bet that the ad business is getting plenty of airtime in the deal room right now. So what would a combined [00:01:30] DoorDash and Instacart mean for retail media specifically? On balance, I think it would be good for the ecosystem. For advertisers specifically, I'm less sure, and so is my network. I put out a [00:01:45] poll on LinkedIn this week where I asked advertisers if they think that the deal would be a net negative or a net positive for them, and that is split right now almost 50/50.
[00:01:58] But in this episode, I'm gonna [00:02:00] share three reasons why I think this would ultimately be a good deal for the ecosystem. Let's jump in.
[00:02:07]
[00:02:08] Kiri Masters: So first of all, first benefit here is creating a true weapon against Amazon and [00:02:15] Walmart. Retail media is dominated by Amazon and Walmart, and I really believe that both of them earned their place there through years of heavy investment and innovation.
[00:02:27] But it's still a [00:02:30] perilously concentrated market where you look at where the ad dollars go today. And that is especially true for CPG brands that do most of their sales in physical stores, but Amazon often accrues a far bigger [00:02:45] share of their retail media budget than it delivers in actual sales because its ad platform is that good.
[00:02:54] It is performant. It is great at [00:03:00] capturing measurement. it captures all parts of the funnel. They have just simply done a great job for a long time. Now Instacart and DoorDash both have very good ad platforms too, with [00:03:15] a great reputation among high-volume media buyers for their ease of use, for their audience targeting, for measurement and reporting.
[00:03:25] On their own, they would simply continue to nip at [00:03:30] the heels of Amazon and Walmart on ad tech and talent
[00:03:34] But Together, they'd be a much stronger competitor and also have the benefit of most brick-and-mortar retailers actually rooting for them.
[00:03:43] Now look, the relationship [00:03:45] between retailers and these delivery ecosystem players is kinda complicated. Instacart, for example, opens up new demand for grocers, but it also takes some of [00:04:00] that ad spend that it might otherwise go to a retailer's own media network. And DoorDash, through its DashMart stores, is a retailer itself.
[00:04:11] Still, all things [00:04:15] considered, in the long war of attrition against Amazon and Walmart, most grocers and other retailers would treat these companies more as allies than as foes, particularly, you know, comparing [00:04:30] them to the other wolves at the door. For example, if I'm Kroger, would I rather get all of those customer orders and all of that ad revenue directly?
[00:04:40] Sure. But if Instacart brings me customers who'd [00:04:45] otherwise be shopping at Walmart, then count me in poor audience targeting is frustrating, but for retail media teams it can be costly [00:05:00] too. With Growth Loop's composable commerce media solution, you can turn your first-party data into hundreds of high-value audience segments and launch campaigns faster. After [00:05:15] partnering with Growth Loop, instant commerce pioneer Gopuff scaled from a hundred syndicated audience segments to more than six hundred, and now it takes less than forty-eight hours to turn around a custom [00:05:30] segment for one of their brand partners.
[00:05:33] Learn more about how Growth Loop is powering Gopuff's best-in-class retail media operations at [00:05:45] go.growthloop.com/breakfast. That is go.growthloop.com/breakfast Benefit number two is the full ad stack for every other grocer. The more grocers pour [00:06:00] into their own media networks, the less keen they'll be to watch their brand budgets flow to Instacart instead. Now, Carrot Ads is Instacart's answer to that. Rather than competing with retailers for those dollars, [00:06:15] Instacart sells them the ad tech that they need to run their own network, and they obviously attract a technology fee while that retailer gets to keep most of the revenue from it.
[00:06:28] So [00:06:30] today, the most recent stat that I found is that more than 310 retailers use Carrot Ads now, and one of the most recent, companies to sign on was Gopuff, which I covered last [00:06:45] week. DoorDash, for their own part, they made a big technology investment last year in acquiring Symbiosis, which runs offsite campaigns across search, social, and display for [00:07:00] RMNs.
[00:07:00] Dollar General, for example, uses DoorDash to run meta campaigns for brands and sponsored product campaigns that span its own site and its DoorDash storefront. So if you put those two things together, you [00:07:15] put the Carrot Ads on site and the Symbiosis off site, put all of those together under one roof, and a regional grocer could buy a complete media setup from one vendor with [00:07:30] thousands of brand advertisers that are already buying through that system
[00:07:36] Now Andrew Lipsman, fellow retail media industry analyst, made the case for that aggregator role in a comment on a LinkedIn post [00:07:45] this week. He said, "Instacart's valuation has always been tied to the ads business, and there's a huge upside there as an ecosystem aggregator for all the regionals. None of those grocers can sustain a retail media business without [00:08:00] standardization and consolidation.
[00:08:02] That's a role that Instacart is well-equipped to play."
[00:08:05] The catch is that the vendor would also own DashMart, which competes with those same grocers for orders, at least in [00:08:15] some markets. Now, some retailers who are comfortable handing their ad stack and shopper data to Instacart may think twice about handing it to Instacart's new owner. And finally, my final, uh, [00:08:30] piece, this is where I'm very interested in getting feedback from the audience, actually.
[00:08:35] If you're listening to this and you have a POV here, I'd love to hear from you. I asked my LinkedIn network whether the deal would be a net win or a net loss for [00:08:45] advertisers. like I said, at the time of putting this out there, the peanut gallery is split about fifty-fifty. I think the case for advertisers is easiest to make for smaller brands.
[00:08:58] Instacart and DoorDash [00:09:00] both aggregate retailers that a single CPG might not have the budget or team capacity to buy individually
[00:09:07] But having one place to plan campaigns, one set of reports, one account rep would make it easier for a [00:09:15] brand that has tested one platform to also try the other one
[00:09:18] Jorgens Cacarte, who is the on-demand delivery lead at Mars Snacking, wrote on my LinkedIn poll
[00:09:28] That he thinks [00:09:30] consolidation could benefit the challenger brands, but it's less clear for established brands. So
[00:09:36] For the CPG conglomerates that are already spending on both of these platforms, I can't see a lot of budget collapsing [00:09:45] because the two of them reach different shopping occasions. You have your weekly Instacart shop at Costco. That is a very different mission from your frozen pizza and ice cream dash on movie night
[00:09:58] Probably the bigger [00:10:00] concern is that big brands might lose some leverage. Today, if CPCs climb on one platform, there's somewhere else to move that budget. But after a merger, the somewhere else is the same company. [00:10:15] So that's three main reasons why I think DoorDash acquiring Instacart would be a net benefit to the retail media ecosystem.
[00:10:24] Clearly, not everyone agrees with me, and I would actually truly love to learn more from the people who [00:10:30] think that advertisers would be worse off. So the best way to be part of that conversation is jump into the LinkedIn post today from my profile and get engaged with the conversation Depending on [00:10:45] the interest, might do a follow-up to this piece next week where we might actually have, some news on that acquisition as well.
[00:10:53] Until then, thank you for listening, and I'll catch you next time
[00:10:57]