Research Briefing: Instacart pushes retail media ads to drive growth
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In this edition, we share focal points from Modern Retail’s CMO strategies report on retail media.
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Instacart’s ad business grew 24% in the first six months of 2023
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Instacart’s IPO is driving buzz in the tech and retail space. Instacart, known for its fast grocery delivery service, also has another growing business: advertising. Its ad business is relatively new, but has seen an upward trajectory as it grew 24% in the first six months of 2023 to $406 million. The company has continued to build out its business with self-service access in October 2022 and shoppable ads in November 2022. Its commitment to the channel is a clear indicator of its potential in the retail media space.
When looking at the retail media space in general, the channel ranked third in marketer usage, after display ads, with 38% of respondents saying they use retail media. That is according to Modern Retail+ Research’s CMO Strategies survey.
With the end of the third-party cookie looming and data regulations increasing, marketers will likely increase usage of retail media due to its access to first-party purchase data. Andrew Lipsman, principal retail and e-commerce analyst at intelligence company Insider Intelligence, said about the future of the channel, “The long-term opportunity with RMNs is about leveraging that retailer’s first-party data on people who are brand and category buyers.”
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In Modern Retail’s survey, marketers noted that the main KPI that they used to measure retail media was commerce or sales. Unlike other channels that focus more on branding, such as display ads, which had its main KPIs in clickthrough rates and impressions, retail media focuses more on checkout — in part due to its proximity to checkout by being on the retailer’s site.
Retail media has been a strong performer for Instacart in particular. “One of the things that we see is the ROI for our CPG partners,” said Laura Jones, Instacart’s CMO. “And we have a lot of tools available … for them to measure on our platform, for example, AB testing and lift testing.”
“[One of our partners], for example, saw an incremental sales lift of 35% from one of their campaigns,” she added. “And, on average, our ads are delivering more than a 15% incremental sales lift for our brand partners.”
This aligns with a 2022 McKinsey & Company survey, where about 70% of advertisers said they see better performance with RMNs than with other channels — indicating that the channel does lead to more sales than others, or at least is directly contributing to more sales.
Key findings:
- Retail media ranked third in marketer usage in Modern Retail+ Research’s CMO Strategies survey, witht 38% of respondents saying they use the channel. With the end of the third-party cookie looming and data regulations increasing, marketers will likely increase usage of retail media due to its access to first-party purchase data.
- Unlike other channels that focus more on branding, such as display ads, which use clickthrough and impressions as KPIs, retail media focuses more on sales — in part due to its proximity to checkout by being on the retailer’s site.
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