Q2 2024 Earnings Summary
- Rapid Growth in Advertising Business: Instacart's advertising platform has expanded to over 6,000 active brand partners, indicating strong growth potential. The company sees opportunities both in increasing the number of advertisers and growing average revenue per user (ARPU). This growth is offsetting pullbacks from some large brands, showcasing the robustness of their advertising model. ,
- Increasing Customer Engagement and Repeat Purchases: With a large and growing user base of 25 million annual customers, Instacart is successfully increasing customer engagement through targeted incentives, growth in Instacart+ memberships, and new services like restaurant delivery. Instacart+ members shop at twice as many retailers and contribute a majority of GTV, highlighting their importance to the business. , ,
- Innovative Technologies Driving Future Growth: Instacart's in-store technologies, such as Caper Carts, are generating excitement among retailers and consumers, both in North America and internationally. These technologies enhance the shopping experience and represent new advertising opportunities with high potential. Instacart is scaling deployments from hundreds to thousands of Caper Carts, indicating a significant growth avenue. ,
- Management is cautious about future growth, refraining from providing long-term guidance beyond the next quarter, which may indicate uncertainty in sustaining current growth rates.
- Transaction revenue growth may not be sustained, as the company is already in the top half of its long-term range and expects transaction revenue to fluctuate over time.
- Scaling new initiatives like Caper Carts is operationally heavy and requires significant investments in integrating with retailers' systems, which may limit the speed of deployment and delay potential returns on these investments.
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Advertising Revenue Outlook
Q: How is the CPG advertising landscape affecting your ad revenue opportunities?
A: While some large brands are pulling back on advertising due to industry struggles , we're seeing strong growth from 6,000 emerging brands, which has more than offset this pullback . We're innovating with new ad formats like recipes, occasions, and bundles , and expanding our retail media partnerships with platforms like Meta and YouTube . This gives us confidence in our long-term ad revenue target of 4–5% of GTV . -
Partnerships with Uber Eats and Chase
Q: Can you elaborate on the Uber Eats partnership and address concerns about the Chase partnership changes?
A: Our partnership with Uber Eats is exceeding expectations . Since launching restaurants nationwide in mid-June, we're ramping restaurant adoption faster than new entrants in grocery . This helps attract new customers, increase order frequency, and drive Instacart+ adoption, creating a flywheel effect . Regarding Chase, we've shifted our strategy to focus on new customer acquisition by offering 10% cash back to a broader card portfolio . We're pleased with the partnership and excited about this next phase . -
Competitive Environment
Q: Are you seeing changes in the competitive environment?
A: We haven't observed significant changes . We maintain a leading category share with 50%+ of small baskets and 70%+ of large baskets over $75, which represent 75% of the industry and even more of the profits . We're approximately 5× better than new entrants at activating large baskets and converting small basket customers to large basket customers . Our leading selection and service continue to translate into strong category share . -
Customer Cohort Behavior
Q: How are customer cohorts performing and what's the outlook?
A: All our cohorts, both mature and new, are healthy with normalized behaviors . We're focused on deepening engagement with our 25 million annual customers, working to increase their purchase frequency . We're attracting new users, and GTV from new cohorts is higher than pre-pandemic levels . -
Average Order Value (AOV) Growth
Q: What's driving the positive trend in AOVs?
A: Several factors contributed to higher AOVs this quarter . New customer cohorts are reaching bigger baskets faster , and existing customers continue to make larger purchases . We also had a higher mix of club orders, which have higher AOVs . The increase in club orders is intentional, as customers who adopt clubs are more likely to retain over time . -
Enterprise Growth
Q: How can Enterprise growth accelerate faster than the platform?
A: We're seeing strong growth in both Marketplace and Enterprise . By onboarding more retailers to our Enterprise products—adding 30 retailers to our Storefront in H1—we generate incremental GTV . Our Enterprise business helps our Marketplace grow, and by integrating more deeply with retailers, both segments can accelerate . -
Expansion into Non-Grocery Merchants
Q: What's your approach to growing supply with non-grocery merchants?
A: We're pleased with the addition of retailers like Home Depot and Sally Beauty . Customers accustomed to large grocery baskets are primed to shop with these retailers . This not only attracts new customers but also increases order frequency among existing ones . It enhances the value of Instacart+, as members shop from more retailers . -
Retail Media and Off-Site Ads
Q: How significant is the opportunity with off-site advertising?
A: While still nascent and currently having a negligible impact on revenue , off-site advertising is a significant part of our path to achieving our 4–5% of GTV ad revenue target . We've added partnerships with Google, YouTube, Meta, NBCU, and The Trade Desk , and we're pleased with early performance, giving us confidence to expand this area .