Prepare for a surge in advertisements while ordering rides or food as the competition to capture your attention has escalated within the ride-booking and delivery sectors.
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SAN FRANCISCO, CALIFORNIA - MARCH 22: The Uber logo is displayed on a car on March 22, 2019 in San Francisco, California. Uber Technologies Inc. announced that it has selected the New York Stock Exchange for its much anticipated initial public offering that could be one of the top five IPOs in history. The listing could value the ride sharing company at over $120 billion.
Increasing In-App Ads
Ride-hailing and grocery delivery giants Uber and Instacart are ramping up their in-app advertising efforts, but not all users are on board. Both companies, along with Lyft, are experimenting with different methods to display lucrative ads to their captive audience, sparking mixed reactions from customers.
According to recent insights from The Wall Street Journal, Uber and Lyft have observed favorable responses to their advertisements, suggesting that passengers are less inclined to cancel rides when presented with ads while waiting.
Despite some success, Uber's attempts to place ads across various platforms have yielded varying results. While push notifications featuring ads were quickly abandoned due to negative feedback, passengers appear more receptive to movie trailers displayed on in-car tablets.
As companies strive for profitability, they are capitalizing on the higher margins offered by advertising. According to Youssef Squali, an analyst at Truist Securities specializing in the industry, advertising margins are estimated to be roughly 40 percentage points higher than those of rides and delivery services.
Not all customers have embraced the change. Rakhee Mehta, an entrepreneur based in Mumbai who frequently uses ride-booking services for her wellness business travels, finds the ads bothersome. According to her, ads often pop up as soon as she books a car, disrupting her experience.
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Uber anticipates surpassing $1 billion in ad revenue for the current year, while ads accounted for over 20% of Instacart's revenue in 2023.
Leveraging data on users' travel patterns and dining preferences, these companies are positioning their platforms as effective channels for advertisers to connect with a captive audience.
However, they are also striving to strike a delicate balance between maximizing ad revenue and avoiding alienating consumers.
Uber's Strategy
Uber is implementing a strategy to customize content using users' trip data, aiming to deliver personalized experiences. For instance, during the 2023 U.S. Open, Uber targeted individuals who had taken rides to and from the event with advertisements for Lacoste tennis apparel.
Both Uber and Lyft assert that passengers are receptive to ads displayed during rides, as they are typically between tasks. Additionally, customers who engage with ads while awaiting rides are less likely to cancel, according to the companies.
Acknowledging that excessive ads can be off-putting to users, both Uber and Lyft are taking steps to mitigate potential irritation. Uber limits riders to one ad per trip, while Lyft caps the number of ads at two to avoid overwhelming users.
While ride-booking apps feature a variety of ads, including promotions for credit cards and clothing, DoorDash and Instacart primarily focus on content related to their restaurant and grocery offerings.
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