DoorDash adds ad to restaurants on top of search results

DoorDash Inc. has started selling restaurant ads that appear on top of the search results in its app, as companies in the mostly unprofitable food-delivery industry dive deeper into advertising to boost revenue.

The company already let marketers to use paid to run ads offering free delivery or discounts, as well as banner ads, but hadn t offered ads above its search results before it began testing the tool earlier this year.

DoorDash has also built an ad platform that allows restaurants to purchase the placements through a bidding system without the help of an ad-sales person. DoorDash said the self-serve system is designed to help local restaurants boost their brands, saying it can help them better serve their customers.

Any mom-and-pop shop can go in and collect a budget, and we only go in if they get the transaction, said Toby Espinosa, vice president for DoorDash ads. In addition to the new restaurants, DoorDash is offering featured listings for consumer packaged goods brands to boost their placement in the convenience and grocery categories.

The move comes as consumer-facing businesses, including Walmart Inc. and CVS Health Corp., have been offering more ways to reach consumers using retailer data.

DoorDash, founded eight years ago, generated a profit in the second quarter of 2020 as demand for home delivery surged early in Covid - 19 pandemic, according to paperwork filed for its initial public offering last year, but it has never turned an annual profit. It reported a net loss of $102 million in the three months ending June 30. The company says it has more than 450,000 merchants selling via its platform.

DoorDash is wary of turning consumers off of the competitive food-delivery business by sifting too many ads into its app. For restaurants, it will display one sponsored listing on the top of the search results or in the same sections of the app for cuisine-specific food. For other areas, such as the grocery, convenience, pet or alcohol categories, it will allow two ads.

We cannot mess with consumer experience. You won't see me going way overboard, Mr. Espinosa said. From ad platform we have created an ad platform to align incentives between the advertiser, the consumer and DoorDash. DoorDash declined to disclose how much of its revenue comes from ad sales or how much revenue it hopes to generate from the new ads products. The company said its goal for its advertising services is to Boost its merchants success, not just its own profitability. We feel that this aligns us with our merchant partners, creating the best long-term outcome for everyone, a DoorDash spokeswoman said.

DoorDash holds more than half of the U.S. market share for delivery apps, ahead of rivals such as Uber Technologies Inc.'s Uber Eats and Postmates, according to Bloomberg Second Measure, a consumer data analytics company.

All the companies, however, are competing not only for consumers but also advertising.

Grubhub runs a marketplace that lets restaurants secure better placement in search results and provides other marketing assistance on a commission-based system. That company s chief executive said earlier this year that advertising is the key to future profitability of the company.

Nicole Milnthorpe, chief financial officer of Florida-based restaurant Smokey Bones, told her company works with many vendors, but its primary partners are Uber Eats and DoorDash. With 60 full-service Smokey Bones restaurants in the U.S., two ghost kitchens and two service-only chains she said different advertising tools give the chains flexibility.

Different markets respond differently to different types of marketing, Ms. Milnthorpe said.

Smokey Bones ran an ad test on the key term barbecue in DoorDash's search results and in the Mobile barbecue category and saw a more than 30% increase in deliveries from the group of consumers that saw the ads, according to Ms. Milnthorpe and DoorDash.

A lot of what we see from other partners or just other advertising metrics are based on impressions and it is very difficult to equate an impression over to an actual order, she said. A pay-for acquisition is a very clear metric.