Instacart is going all in on ads. Here’s why.

Photo by Lane Turner/The Boston Globe via Getty Images

Like your aunt and uncle, Instacart is a big fan of Facebook.

Specifically, its high-ranking execs.

In 2021, the $39B grocery delivery startup poached its new CEO (Fidji Simo), COO (Asha Sharma), and president (Carolyn Everson) from the House of Zuck.

No, Instacart isn’t building a social network…

… but its ads business is on the rise, pulling in ~$300m in 2020 with projections to hit $1B in 2022, per The Wall Street Journal.

What exactly are Instacart ads?

• Search-based: This is the core ad business, in which brands pay for placement on customer product searches (these ads are also bundled with coupons and deals).
• Display ads: Old-school banners on the website.

Ads are critical as delivery slows

Instacart’s delivery business boomed during the pandemic. Growth has understandably slowed by the startup is facing other headwinds, too:

• Competition — think Uber Eats and DoorDash (which almost acquired Instacart) — has eaten into market share, which was once more than 60% but is now hovering at ~50%.
• Labor and transportation costs have gone up.

Grocery chains typically sell shelf placement…

…to consumer brands (e.g., eye-level chewing gum at checkout) but may lose that revenue stream if those ad dollars are routed to Instacart.

WSJ notes that brands typically have separate budgets for in-store and digital ads. This could change in a post-COVID world — and if it does, grocers may like Instacart a lot less than Instacart likes Facebook.