Rapid Food Delivery Businesses Pick up Advertising Side Hustle to Make Ends Meet

Ultrafast grocery startup Jokr is looking to supplement its delivery business with a new venture — an advertising platform.

On Wednesday (May 11), the company is launching a service for advertisers to place digital ads in the company’s app and physical ads on drivers’ bags and within delivery orders, according to a Bloomberg report. As part of this effort, Jokr will leverage purchasing data to help brands be effective in their media placement.

“If we can share with retailers what people are buying, then it gives a very targeted possibility to advertise,” the company’s CEO Ralf Wenzel told the news outlet.

The news comes as ultrafast grocers struggle to make the economics of the model work. A January report found that these on-demand delivery services’ losses can amount to as much as $20 per order on average including ad spending. Russian-backed ultrafast grocer Buyk was unable to secure the funding it needed to weather the challenges posed by sanctions related to the invasion of Ukraine and as such was forced to close up shop. Jokr too has struggled, with a report earlier this year stating that the company was looking to sell its New York business.

Related news: Ultrafast Grocers’ Losses Mount in the Face of an Uncertain Future

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Additionally, those in other eGrocery categories express skepticism about long-term viability of the model.

“Everyone is talking about … the rise and potential fall of this ultra-quick, small-basket, 15-minute delivery phenomenon,” Chieh Huang, CEO of membership-free wholesale eTailer Boxed, said in an interview with PYMNTS last month. “So where does that go, and how does that reshape the online grocery world, and is it just a fad or is it here to stay? … That industry consumes so much money, because if you’re sending $20-$25 baskets out, there’s just not enough gross profit dollars to play with after delivery, after personnel, after marketing.”

Read more: Boxed CEO: Inventory Management Is Key to Winning Over eGrocery Customers

In a January interview with PYMNTS, Alex Weinstein, chief digital officer at online grocer Hungryroot, expressed a similar sentiment.

“It’s definitely structurally better if your item arrives in an hour than if it arrives in a week or longer because you don’t need to plan that far ahead,” he said. “However, at a certain point, there’s just diminishing marginal returns.”

See also: eGrocery Customers Expect More Than Digital Shelves; They Expect Personal Relationships

Across online grocery categories, many players are boosting their ad capabilities. In March, Kroger announced that it is expanding access for advertisers through its retail media business, Kroger Precision Marketing, enabling greater eCommerce ad placement capabilities. Earlier in the year, Instacart announced a suite of new marketing products for brands including branded pages and new display ads and a partnership with advertising agency WPP on new advertising solutions and measurement tools for consumer-packaged goods (CPG) brands that will give clients early access to Instacart Ads products, tools and features.

Additional details: Kroger Boosts Digital Ad Business

Instacart Steps up Ad Offering for Brands

WPP, Instacart Team on Online Grocery Ads