Uber plans to advertise to riders based on destination data

Uber users, get ready to see more ads!

This week, Uber announced the formation of its advertising division and a few new ads formats. Per Uber:

With the addition of Journey Ads, Uber has created an engaging model that enables brands to share strategic campaigns across Uber’s mobility and delivery businesses, while connecting with consumers in brand-safe and captivating ways. Journey Ads place relevant brand content and offers in front of purchase-minded audiences as they transact throughout their journey – while waiting for their driver and during their trip

• Journey Ads that capture consumers’ attention during their trip with ad units that drive purchases and brand awareness as they move with purpose.
• Prominently placed Sponsored Listings across Uber Eats to get brands ahead of the competition and capture the attention of ready-to-purchase consumers, with clients such as Shake Shack already seeing increased engagement, ROI and customer acquisition.
• Sponsored Emails that enable brands to promote exclusive offers to Uber and Uber Eats consumers through email delivery directly into their inboxes.
• Homepage Billboards that give brands the ability to prominently display messaging on the homepage of Uber Eats, the world’s most-downloaded food delivery app.
• Post-checkout Ads which allow brands to promote to purchase-minded consumers as they await updates on their order.
• Storefront Ads where CPG brands can enjoy prominent placement of their products at the top of a digital storefront. PepsiCo has been a pilot partner of storefront ad offerings.
• In Menu Ads that enable restaurants to feature their seasonal or specially priced menu item to entice consumers to take advantage of the promotional offer. Chipotle has been a pilot partner on this effort.
• Highly visible digital out-of-home Car Top Ads whichenable brands to reach consumers based on location and time of day across top U.S. cities.
• Tablet Advertising pilot which will see strategic partners pilot in-car tablets in LA and S

Uber has one of the richest data on consumers on the market. It knows when, where and how often consumers go as well as what they order for food, from where and the frequency. Which other company can make the same boast? Uber also stores your payment details; which is important to run ads optimized for conversions. Facebook would kill to have your payment details stored on their platform! In addition, the company is one of the most recognized consumer brands. Therefore, it’s natural that Uber decides to invest in leveraging this rich asset, especially given the high margin of advertising and the premium that investors put on profitability these days.

23% of Uber Delivery merchants are already active advertisers on the platform. I am sure many of them will be interested in, at least, learning what the new ads types such as In-Menu Ads, Storefront Ads or Homepage Billboards can do for their business. On the Mobility side, Uber wasn’t able to monetize ads before. While this week’s announcement is a sensible inevitable step, I have doubt over how effective advertising will be on Uber rides. Let me explain.

Uber Eats users often take time to research what food to order and where to order it on the platform. During that process, they pay attention to what is on their screen and are more likely to interact if a relevant ads shows up. For instance, if someone is looking for Vietnamese food for dinner tonight and a local Vietnamese diner runs a promotion, of course they will be more likely to explore what the promotion is about. The intention to purchase is established.

The user experience is; however, very different on the Mobility side. When a user wants to order a ride, they open the Uber app, type in an address or choose a bookmarked destination, wait for the screen to load, connect to a driver, book a trip, leave the app to do something else, meet the driver, get to the destination and leave the car. It’s rare that a user will look for a destination on Uber. That’s not how people use it. Hence, there will be no spare time or attention during the booking process. The intention to buy is not as established as it is on the Delivery side. Consequently, ads will be ignored more often.

That’s not to say ads broadcast during trips has no potential. Leveraging geolocation data for real-time ads is a gold mine. For instance, if somebody is in an Uber car to a big shopping mall, retailers at that mall can and should run sponsored promotions to target that person. The question is in what format. I’d argue that a notification on the phone or in-car tablet ads would be the most effective. Imagine that you are going to Times Square and Macy’s blasts a 30% off promotion on a tablet attached to the back of the driver or passenger seat upfront or in a notification on your phone, chances are that you’d interact with the ads. The possibilities are truly endless in this scenario.

To realize the potential of their advertising business, Uber has a lot of work to do. First, there is a huge privacy concern. People do not feel comfortable that their trips to sensitive places like hospitals or abortion clinics are used for targeting ads. Uber already forbids ads targeting based on certain types of destinations, but will users trust the company and take them on their words? That brings us to the second issue: Uber’s image as a brand that consumers can trust. Credit to Dara and his team that since he took over, Uber’s image has been much better-received than it was under the original founder. With that being said, Uber has a long way to go to achieve the level of trust that the likes of Amazon or Apple have. It doesn’t help the cause when the company had missteps in handling users’ data before, the most recent of which was a hack by an 18-year-old. Last but not least, how would Uber ensure an enjoyable experience on their app with an increase in ads load? Nobody likes being shoved ads in the face. Uber has every incentive to lengthen the wait time and put ads in front of eyeballs. But at what cost? Numerous competitors are more than happy to take users away from Uber due to privacy concern and a compromised user experience.

Uber’s latest development is a sensible business move. There is plenty of potential to unlock, but nothing worth having comes without risks. This move is no exception. Uber has the ingredients in place, but whether they can bring everything together is a true test for Dara and his team.

This week’s Formula 1 Grand Prix in Texas saw McLaren introduce on-demand digital ads on their two cars. Imagine if Uber could do this on their fleet, show ads on-demand and share revenue with drivers. That would benefit both the company and its carriers. We are a long way from that vision, but it’s not impossible.