Instacart's flat shopping orders could hurt ad growth - analysts
By Arriana McLymore
NEW YORK (Reuters) — As Instacart touts its hefty advertising revenue in its hotly anticipated IPO offering, purchases on the online grocery platform have flattened in the first half of 2023, a possible obstacle to future ad growth.
San Francisco-based Instacart's 5.1 million subscribers typically pay $99 a year or $9.99 a month for free deliveries on orders of $35 or more from any of the service's 1,400 retailers. Instacart also sells ad space on its site, including to Pepsi and Kellogg (NYSE:K)'s, which want to promote products online.
In April, it formed a partnership with video streaming company Roku (NASDAQ:ROKU) that aims to better track spending habits of those who use the services.
Instacart, valued at $9.3 billion, said its grocery orders remained flat for the first six months of 2023 at 132.9 million compared to the year-ago period, Securities and Exchange Commission filings showed.
Gross transaction value rose 4% to $14.94 billion over the same period, while ad revenue grew 24% to $406 million from $327 million.
When Chief Executive Fidji Simo joined the company in 2021, she aimed to sign up diverse retailers including beauty supply stores and convenience stores to attract more shoppers and advertisers.
Andrew Lipsman, principal analyst at Insider Intelligence, sees potential ad growth in video streaming, but wants Instacart to expand deliveries more quickly to enhance its appeal to major advertisers.
«If you have an increase in orders, there's also more ads to deliver on that activity,» Lipsman said.
Many other retailers also sell ads on their websites to packaged food companies and consumer product makers.
«Most CPG (consumer packaged goods) brands are already advertising on Instacart.
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