How will grocers react to Instacart’s expanded digital ad network?

Discussion
Source: Instacart
Jan 27, 2022

Instacart has added a number of digital ad products on its site to give brands more opportunities to reach consumers as they shop for the groceries. The third-party grocery platform and delivery service has a clear revenue upside in expanding its digital ad offering. It also puts the service in direct competition with many of its grocery retailer customers who have networks of their own.

Adweek reports that the number of advertisers on Instacart’s ad network grew “fivefold” in 2021, bringing in $550 million in ad revenues. The company is expected to grow that number to $795 million this year, according to an eMarketer forecast.

Instacart says that it now works with more than 4,000 consumer packaged goods (CPG) brands across the U.S. and Canada. The third-party provider has more than 700 retail chain customers, covering 85 percent of the U.S. market and 90 percent of Canada.

CPG brands such as Ben & Jerry’s, Breyers, Kidfresh, Klondike, Milton’s Craft Bakers, Talenti and Tillamook have already signed up for Instacart Ads, a program that features brand-specific pages and other display options on and off the site.

A press release to announce the program says that brand pages are free and carry a unique URL connected to display ads on Instacart and outside the platform, as well. Advertisers have the ability to customize their pages and customers can shop directly from them. Pages will show product availability based on the last retailer shopped on the Instacart site.

Instacart is also promoting a number of display options that give brands the opportunity to target their messages based on anonymized purchasing behavior and keyword searches. Ads appear throughout the shopping journey on digital storefronts, in “departments” and in “aisles”.

“We know the way consumers shop on Instacart varies. Some people head straight for a specific aisle to browse, and some start with the ‘Buy It Again’ carousel displayed on the storefront to get their favorite ‘go to’ items, while others have a list of items already in mind or might use the search function to find inspiration,” Ryan Mayward, Instacart vice president of ad sales, said in a statement. “As more people turn to Instacart to shop from their favorite retailers and discover new products, we’re focused on creating unique ways to help brands engage consumers throughout their online shopping journey.”

DISCUSSION QUESTIONS: How should grocers that use Instacart for deliveries view its expanded ad network? Will the relationship between CPGs and Instacart affect retailer relationships?

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8 Comments on "How will grocers react to Instacart’s expanded digital ad network?"


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Ken Morris
BrainTrust

I have said this here multiple times that Instacart is disintermediating grocers, and this is yet another example. This amounts to digital slotting allowances. Pay-to-play slotting allowances were the secret cause of grocery, and now Instacart is getting ad dollars to fuel the engine.

Beware of geeks bearing gifts.

From a digital ad perspective, this will drive up keyword costs for retailers, too. So, except for the added page the grocer might get on the network, or unless grocers still get a cut from the pickup/delivery piece, all the upside goes to the Instacart column.

Nikki Baird
BrainTrust

I think this is ultimately a bad move for Instacart. Now they are moving from being a service that makes a retailer more accessible to consumers, to competing directly with those retailers. Albertsons just announced their media network, for example. They’ll be competing for the same dollars.

As a retailer trying to decide if you should build your own delivery service or partner with someone like Instacart, this could definitely push them over to deciding to build their own and keep Instacart out as much as possible. The money is in brand advertising, coop and trade funds — as soon as other companies try to take a bite into that budget, you can be assured that retailers will take that seriously.

David Weinand
BrainTrust

Another “cut” in the list of a thousand cuts. Grocery chains already view Instacart as a necessary evil. The more they directly compete with grocery chains and disintermediate revenue opportunities as well as direct relationships, the more it hurts these chains.

Kai Clarke
BrainTrust

This is both a good and bad business position for Instacart. They are in direct competition with many of their clients, who offer advertising platforms of their own. As their ad business continues to grow, and compete with their customers, Instacart will need to better define their business model: Are they in the advertising business or the product delivery business (especially at retail)? At some point, you cannot be both.

Lisa Goller
BrainTrust

Grocery partners could view Instacart’s ad network as an opportunity to win lucrative weekly baskets. Promoting unique products, private labels and competitive deals can differentiate a retailer as e-grocery gets more crowded.

Grocers may also wish to jump into digital ads, which emerged as a runaway freight train for revenue growth.

Instacart’s relationship with CPG brands could add tension to traditional brand-retailer relationships. Brands with big budgets gain power by having more advertising real estate as consumers migrate online.

Jeff Weidauer
BrainTrust

Any retailer that doesn’t see Instacart as a competitor isn’t paying attention. I’m still astonished how much major retailers have fueled Instacart’s growth while ignoring the long-term impact. This is a first shot — there will be many more.

Ryan Mathews
BrainTrust

Like Ken Morris, I have consistently held that Instacart is building its brand on the back of its retail partners, so I say … once again … Caveat venditor! They are a pure disintermediation player like Door Dash, Uber Eats, etc., etc.

Anil Patel
BrainTrust

Instacart customers often have a hard time discovering products due to the large assortments. And browsing products using search results is usually a struggle. Dedicated brand pages will help customers escape the hassle and purchase directly from the curated buying list. This enables a better buying experience and helps grocers promote seasonal products and special collections.

I don’t think the CPG-Instacart partnership will affect retailer relationships. Customers today have everything at their fingertips and don’t care much about exclusivity. It’s the experience that matters. And both marketplace retailers and Instacart come with unique market propositions that help brands offer the best of both worlds. Offline marketplaces help CPG brands to ensure a wholesome in-store experience while Instacart helps them bring the store to their customers.

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