DoorDash Takes a Bite Out of the Ad Market

DoorDash Makes Ad Platform Official

Yesterday, the popular food delivery service DoorDash (DASH) officially launched its advertising platform, enabling restaurants to purchase homepage banner ads and sponsored listings on the app. DoorDash already offered tiered services for restaurants on the platform, as well as some opportunities to buy ads, but the offerings launched yesterday mark the beginning of a new era for the company’s ad strategy.

DoorDash is joining rivals in the food delivery space which already offer sponsored listings. UberEats (UBER) launched its sponsored ads service last August while GrubHub (GRUB) includes sponsored listings in its commissions. This means that the more restaurants pay, the more visibility they get on GrubHub.

UberEats’ Success With Ads

So far, offering sponsored ads has been lucrative for UberEats. When reporting second-quarter earnings, Uber shared that UberEats will end 2021 with an ad run rate of over $100 million. The company expects the run rate to grow to at least $300 million in 2022. UberEats is much bigger than DoorDash, but these numbers give some insight into the potential for growth in the food delivery ad space.

DoorDash has over 450,000 merchants on its platform and 20 million monthly customers, while UberEats has 700,000 merchants and over 100 million monthly customers. DoorDash is betting its fee structure will give it an advantage. DoorDash only charges restaurants for orders placed via its ad while Uber charges merchants per click with sponsored listings.

Challenges Abound

DoorDash and Uber do face challenges in selling ads to their restaurant customers. After all, the platforms do not want to alienate users by bombarding them with ads, nor do they want to face backlash from mom and pop restaurants which are already unhappy about high delivery fees. Nevertheless, DoorDash thinks it can help restaurants and customers, not frustrate them. The delivery platform operator said most customers search for a type of food such as burgers or sushi, not specific establishments. For this reason, it hopes that ads will point customers to what they want to find.

DoorDash is betting that sponsored listings will diversify its business and boost its revenue stream. Judging from the success UberEats and other apps have had so far, DoorDash may not be wrong. It will be interesting to see how delivery platforms’ advertising efforts pan out.

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