Delivery is an ads business now

Instacart hopes so, at least

credit: Cyrus McCrimmon / Getty Images

Instacart, the grocery ordering and delivery app, is (finally) gearing up for an initial public offering. It could debut on the Nasdaq as early as next week. 

Tech news site The Information reports that revenue at Instacart is up 30 percent during the first half of the year. But it’s not because the delivery business is necessarily growing. In fact, per the reporting, “the volume of groceries and other goods it delivered barely budged.” Instead, the revenue bump comes from its advertising business. 

Instacart probably hopes it’ll get luckier on timing. Last year, the company was said to be pursuing a direct stock market listing, that is, not raising new capital at its public debut. Months later, reports said the company would switch to a traditional IPO. But conditions changed quickly, and Instacart shelved those plans. In an October memo to employees, Fidji Simo, the company’s CEO said a 2022 IPO was “highly unlikely” thanks to unfavorable market conditions. 

Market conditions aren’t the only thing that’s changed. A couple years ago, the company was valued at $39 billion; now it’s valued closer to $13 billion. A Reuters analysis finds: “The slow IPO delivery has spoiled the goods.”

Might the ads save it? 

We think of delivery apps as convenience businesses, but they’re also in the ad business.

Amid all of this aforementioned market condition chaos and changing consumer behavior, a focus on driving ad revenue could become the best way forward for historically unprofitable delivery apps.