Uber says it's on track to build a $1 billion advertising business and that in-car ads will make your rides cheaper
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Uber's advertising business is making investments in new ad formats and an international salesforce as it races toward a $1 billion annual revenue target that it hopes to reach by 2024.
This week, the ride-hailing company is expanding the rollout of what it's calling Journey Ads, which appear in the app throughout the user's entire trip.
Charged on a cost-per-trip basis, Journey Ads will be exclusive to a single advertiser, who can display multiple messages between the user requesting a driver and arriving at their destination. Uber declined to disclose the average cost of these ads, saying the fee will depend on the type of user the advertiser is targeting and their location.
Uber now offers an array of ad formats throughout the Uber and Uber Eats apps, and also on emails, cartops, and in-car tablets. The retail ads on Uber Eats can be bought via a self-service platform; Uber app ads are currently sold directly to advertisers by its sales team, though Uber eventually plans to make those ads purchasable through automation.
Uber Ads General Manager Mark Grether said the addition of ads would ultimately make rides cheaper for consumers, though he declined to say by how much.
"By helping us to lower the cost for trips we can attract more riders, which will obviously attract more earnings to the platform, and with that the flywheel is spinning faster," Grether told Insider.
Grether, formerly an executive at Amazon Advertising through its acquisition of the adtech company Sizmek where he had served as CEO, joined Uber last summer to lead its ads division. The unit currently comprises more than 100 people and it is now actively recruiting in international countries such as Australia, Brazil, France, Mexico, and the UK.
Uber has joined a spree of app-based companies — from Netflix, to Disney+, to Drizly, and Lyft — to enter the advertising market over the past year, as businesses look to unlock a source of additional, high-margin revenue.
At Uber's February investor day this year, Grether outlined how the company aims to reach $1 billion in revenue by 2024, up from $141 million in 2021. Advertisers on the platform so far have included Heineken, Shake Shack, and NBCUniversal. Uber's advertisers almost doubled to 230,000 in the second quarter of 2022 compared to the prior year, the company said in its most recent earnings report.
Grether told Insider the company remains "on good track" to reach its $1 billion-plus revenue target by 2024. He said marketers have been impressed by Uber Ads average click-through rate, which he said is 3% — above the industry average of around 0.35% for display ads . The platform also has a significant audience of more than 122 million monthly active users who took 1.87 billion trips in the second quarter this year.
Grether said he sees an opportunity to build a "mobility media" advertising category that will grow significantly as self-driving cars become more mainstream.
"As cars become our living rooms, what we're doing here is creating an entire new category where in the future we'll be consuming a lot of content as well as highly engaging and locally relevant advertisements," Grether said.
Ana Milicevic, principal at digital technology consultancy Sparrow Advisers, said Uber's proposition will draw interest from advertisers thanks to the custom ad formats and ability to combine reliable and accurate location data with other personalized user targeting.
"Therein lies the rub: Consumers might not appreciate good advertising as much as a direct offer or a ride discount, and that changes the math for advertisers and platforms alike," Milicevic said.
"Some of us don't necessarily want to go on a journey each time we're buying toothpaste," she added.
