Advertising is quickly becoming an important way for platforms like Swiggy, Zomato, Blinkit and Zepto to bump up their overall revenue, industry executives and advertisers told ET, while the diversity of brands advertising on these platforms is also expanding.
About 10-12% of revenues for food-delivery companies come from advertising, people in the know said. Swiggy is currently at an annualised run rate of Rs 1,000 crore in advertising revenue, and is likely to bump that target up to Rs 2,000 crore next year, an executive added.
For food-delivery and quick-commerce firms alike, advertising revenue often offers the highest margins of between 90% and 95%, executives in the industry said.
Further, along with the introduction of flat, per order fees levied on users, expanding ad monetisation opportunities on their apps is increasingly becoming a lever for these platforms to improve their take rates, or the percentage of money they earn on every order.
This particularly assumes significance as platforms, particularly those engaged in food-delivery, are finding it increasingly difficult to increase commissions that they charge restaurants without attracting their ire.
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ETtechExecutives in the space look at advertising on apps as primarily two processes – sales driven or tech driven. Sales driven ads emanate from conventional placement properties such as branding on the homepage or the category page of an ecommerce app, whereas with tech-driven ads, these platforms leverage data such as search traffic and clicks to sell ads.
Both food-delivery and quick-commerce platforms deal with first-party ads – such as restaurants or FMCG brands being sold on the app – or third-party ads, which come from brands not being sold on the platform but are targeted for certain users. These include ads from sectors like banking and financial services (BFSI) and automobiles, one executive said.
“BFSI brands are very active with third-party ads, especially in the check-out page, as payment systems are on top of the user’s mind when they are on that page… for BFSI, automobile and media brands alike, targeting customers with credit cards or high spends is very important as the value of conversion is lifelong,” the senior executive quoted earlier said.
“As advertising budgets rationalised last year, food-delivery and quick-commerce platforms became more attractive as they offered an audience with demonstrable disposable income and had a pretty good level of targeting,” a senior executive in the media placement industry said, declining to be identified.
Zomato, Swiggy, and Zepto did not respond to requests for comment for this story.
Work in progress
A key metric tracked by ecommerce platforms globally is the ratio of ad revenues to their gross merchandise value (GMV). According to advertising industry insiders, Indian platforms including Swiggy and Zomato are seeing this metric in the 3-3.5% range. This means their revenues from advertisements are 3-3.5% of the GMV on their platforms.
In comparison, Amazon, which is deemed to be the gold standard of internet marketplaces earning ad revenues, clocks 4-4.5%. Meanwhile, European food and grocery-delivery firms Delivery Hero and Deliveroo track in the 2-2.5% range, albeit on a much higher scale.
ET reported on December 29 that Indian ecommerce marketplaces Amazon and Flipkart’s cumulative ad revenue came in at Rs 8,705 crore, or over a $1 billion, during the fiscal year ended March 2023
However, an important hurdle that food and grocery-delivery companies in India still need to cross is the move towards outcome-based advertising.
“The most basic way of earning through ads is to sell space on the app for a fixed period of time. If you go a bit deeper, you’ll see a lot of traffic comes from search pages and if a relevant search ad can be placed, there is a potential to be paid higher because there’s high user intent. The deeper you go, the more targeted opportunities keep emerging,” Siddharth Jhawar, country manager-India at Tiger Global-backed Moloco told ET.
Moloco builds tech solutions for consumer internet platforms offering advertising opportunities.
“The smaller merchants care about real outcomes…there is a clear preference for smaller advertisers for outcome-based advertising. Globally, tech-based advertising is moving from impressions and clicks to number of orders or revenue. But in India, outcome-based advertising is not being done yet, something that platforms in Europe, the US and Asia do,” Jhawar added.