Marketplaces are Very Good…Ads Businesses?

Uber and other marketplaces are beating projections and profiting from their sneaky, strong ads businesses.

February 25, 2024

‍

Amazon, Airbnb, and Uber are marketplaces with massive consumer adoption. It turns out they are excellent ads businesses, too.

‍

In his Q3 2023 earnings call, Dara Khosrowshahi, the CEO of Uber, shared that Uber is on track to surpass $1 billion in ad revenue in 2024. Uber's full-year 2023 results, which were released on Wednesday, further supported his comments as they showed active advertising merchants on Uber Eats exceeded 550K in Q4 2023, up 75% YoY.

‍

Chart of Uber's ad revenue increasing to 1 billion in 2024, up from 650 mil in 2023

‍

When we zoom out, ad revenue is becoming a more significant percentage of marketplace revenue, per The Information.

‍

chat showing ad revenue as % of marketplace revenue is strong for Instacart, Etsy, Wish, Amazon, and Uber

‍

Traditionally, marketplaces make money from their take rate – or how much they charge every time a transaction happens. Take rates are typically between 10% and 30%. Now, these businesses can potentially pass those savings to consumers because they have this significant and growing revenue stream from ads. In doing so, they can accelerate adoption and take a winner-take-all approach to reach economies of scale. For example, Meesho, an Indian online shopping marketplace last valued at $3.5 billion, is already charging a 0% take rate across all categories.