Brace yourselves, commuters and foodies! The battle for your eyeballs has reached a new frontier – the apps you use to hail rides and order groceries. Get ready for an influx of advertisements popping up on your screen, vying for your attention during commutes and meal planning.
The ride-hailing and delivery giants – Uber, Lyft, Instacart, and DoorDash – are increasingly embracing advertising as a lucrative revenue stream. These ads boast margins significantly higher than their core businesses, reaching an estimated 40% advantage according to Youssef Squali, an industry analyst.
However, not everyone is thrilled. Rakhee Mehta, a globetrotting entrepreneur, expresses her frustration: "The minute you book a car, some ad or the other will pop up. It's annoying!" Companies like Uber, aiming for over $1 billion in ad revenue this year alone, face the challenge of striking a delicate balance – maximizing ad revenue without alienating their customer base.
These companies possess a goldmine – user data. Armed with information on your travel habits and food preferences, they position themselves as ideal platforms for advertisers to reach a captive audience. The average Uber ride lasts 20 minutes, translating to two minutes of captive attention within the app, according to Mark Grether, Uber's ad vice president. He emphasizes, "That is a lot of time compared to social media, where content flickers by in an instant."
The future of these in-app advertisements lies in personalization. Uber, for example, targeted attendees of the 2023 US Open with ads for Lacoste tennis apparel based on their ride data. To prevent user annoyance, companies are capping the number of ads displayed per trip – one for Uber and two for Lyft.
While ride-hailing apps might showcase a broader range of ads, from credit cards to clothing, grocery and restaurant delivery apps like DoorDash and Instacart prioritize ads relevant to their core offerings. "We're focused on helping families feed themselves, not pushing credit cards," explains Toby Espinosa, DoorDash's ad vice president. Their strategy involves personalized ad recommendations based on past purchases, increasing the likelihood of converting clicks into orders.
The road to in-app advertising success is paved with trial and error. Uber's initial experiment with ad push notifications backfired, causing user frustration. Similarly, Instacart's attempt to promote products based on imagined scenarios, like movie night snacks, fell flat with users. Companies are actively learning from these missteps through A/B testing and user feedback.
One ad format seems to resonate with users – Hollywood movie trailers. Universal Pictures successfully hijacked the Lyft app to promote "Trolls Band Together," replacing cars with the movie's colorful characters. Lyft drivers even enjoyed a boost in tips when their tablets displayed personalized information alongside the opportunity for riders to control in-car music.
Instacart, leveraging the power of generative AI, is exploring ways to recommend recipe-specific ingredients based on a user's shopping cart contents. For instance, if the app detects Thai curry ingredients, it might suggest complementary spices and coconut milk, with some recommendations potentially sponsored. The future envisions smart grocery carts displaying real-time, personalized suggestions based on your purchases and location within the store.
Whether you welcome them or find them intrusive, in-app advertisements are here to stay. As ride-hailing and delivery companies refine their advertising strategies, expect a more personalized and interactive experience within your favorite apps. The battle for your attention span has begun, and the winners will be the companies that can deliver a seamless and engaging advertising experience alongside their core services.
