Uber is turning to ads in an effort to inject its business with much-needed revenue. According to an exclusive report from Techcrunch, Uber is starting to sell ads in Uber Eats, its food delivery platform.
An Uber spokesperson confirmed the company would be entering the ads business, “We are exploring relevant ads in Eats.” Selling ads could help it improve margins on Eats, where it only takes 10.7% of gross bookings as adjusted net revenue because it pays out so much to restaurants and drivers.
Uber Eats has traditionally made money by taking a cut of orders booked through the platform. The ride-hailing giant has been considering featuring ads on the platform since at least December when Techcrunch reported that a test was being conducted for customers in India.
As a part of the test, restaurants were also able to bundle food items together that are sold to consumers at a discount in exchange for a promoted placement in the app.
While it’s not clear how the ads will work or look, they may help to entice restaurants who participate in Uber Eats looking to boost sales. In rivaling food delivery apps like Seamless, restaurants can buy ‘promoted’ slots to rise to the top of the restaurant cue, meaning customers will theoretically see their products first.
The move makes sense for several reasons, especially fiscal. Restaurants have been conditioned by other ad platforms, including Google and Yelp, to pay for placement and exposure. And Uber is under significant pressure from investors to generate more revenue from more sources amid growing skepticism about the company’s capacity to turn a profit.
Advertising could ultimately add hundreds of millions of dollars to the top line for Uber Eats. Yelp, for example, had roughly $943 million in revenues in 2018, not all of which is advertising. However, Restaurants and Home Services are the company’s two strongest verticals. Yelp only sells ads in North America, while Uber Eats operates in more than 500 cities globally.
The fresh opportunity in ads comes at a critical time when Uber is desperate to show its future potential in the face of a sagging share price that closed at $28.02 yesterday, down 40% from a high of $46.38 in June. Today, Uber’s post-IPO stock lock-up expires and early investors can sell their shares, putting newfound pressure on its stock.
The more interesting question from a market and marketer perspective are whether Uber Eats could ultimately become a destination for restaurants generally and rival Google and Yelp over time as a platform for restaurant promotion and advertising.