Food-delivery platform Grubhub is launching an ads business.
The company is pitching ad products to its core restaurant merchants to acquire new diners and drive repeat sales.
The company is partnering with adtech firm Koddi to power ads on its website. Ads will appear when people search for specific cuisines or when people are searching for local restaurants. Grubhub is also working with ecommerce firm Rokt to sell ads that appear on the confirmation pages of its website after someone places an order.
“We know that there’s a number of retail media platforms out there—we also know that retail media is the fastest-growing advertising segment,” said Kyle Emmett, senior director of retail media and merchant solutions at Gruhhub. “We’ve heard from our merchant partners that they’re looking for ways to separate themselves and grow their brands.”
Advertisers are expected to spend $140 billion globally on retail media this year, per Emarketer. Grubhub is the latest food-delivery company to try and cash in on ads. Grubhub will vie for ad dollars against competitors Uber Eats, and DoorDash, which have long had large ad businesses aimed at restaurants. Uber, for example, will make more than $1 billion this year from ads—with its restaurant-delivery service Uber Eats contributing significantly to the ad business.
But Eric Seufert, an independent analyst, consultant, and editor of Mobile Dev Memo, notes that advertising is standard for food-delivery apps, and Grubhub may be behind the curve of its competitors.
“The only thing surprising about Grubhub launching restaurant marketing is that it hasn’t done so sooner,” said Seufert. Advertising is an obvious, high-margin complement to any scaled food-delivery platform.”
Boosting recommended restaurants
Small and midsize restaurants buy ads through Grubhub’s self-serve ad dashboard, and ads are priced using a cost-per-click model. Grubhub also has a managed service arm that works with larger restaurants.
Grubhub has previously sold sponsored listing ads that appear in searches as part of larger marketing programs with restaurants that also include promotions and loyalty programs.
The launch of a standalone ad business will let advertisers create better targeting tools to find specific audiences, said Emmett. For example, restaurants can target ads by time of day and geographic location to reach late-night orders placed on college campuses.
In another example, Emmett said that advertisers can target members of its loyalty program, Grubhub+. Grubhub has a key partnership with Amazon to offer Amazon Prime members free Grubhub+ memberships, which includes perks like free delivery on orders.
“The Amazon tie-in is key there—that’s a substantial audience that’s differentiated,” said Eric Brackmann, VP of commerce media at Koddi.
Advertisers can also manage their campaigns and budgets with Grubhub’s ad dashboard.
“It’s a much more in-depth view,” Emmett said.
Betting big on ads
Over time, Emmett said that Grubhub wants to expand the ad offerings to include offsite ads and pitch other businesses besides restaurants, or so-called nonendemic advertisers that are not part of Grubhub’s marketplace. As Grubhub expands its partnerships with grocery stores and retailers, those advertisers include consumer packaged goods brands that are large buyers of retail media.
Emmett said that it’s too early for Grubhub to forecast how much revenue will come from the new advertising arm.
To get advertisers onto the platform, Grubhub is offering restaurants ad credits for the first couple of months. Advertisers who test ads on the platform will get back between 10% to 20% in credits that can be put towards Grubhub services, Emmett said.
Grubhub’s push into advertising also comes as parent company Just Eat Takeaway.com’s U.S. revenue has sunk from a slowdown in food deliveries. The company reported a 6% year-over-year decline in orders during the third quarter, with U.S. orders declining 11%. In response, Grubhub has grown its loyalty program and partnerships. Just Eat is exploring a partial or full sale of Grubhub, the company told investors in its third-quarter earnings.
Janna Navarro, VP of brand strategy at ad agency Wpromote, said that she’s interested in seeing if Grubhub’s ads can turn one-off orders from diners into repeat orders.
“Since food delivery customers often become repeat buyers, advertising on Grubhub not only aids in acquiring new customers but also enhances their lifetime value,” she said. “Stickiness of consumers is key to growth.”