DoorDash boosted its ad spend ahead of its IPO, and it says it did so while cutting losses

Tony Xu, co-founder and CEO of DoorDash speaks at the WSJTECH live conference in Laguna Beach, California, U.S. October 22, 2019.
DoorDash CEO Tony Xu.

  • DoorDash just filed to go public on Friday, saying in its IPO filing that it grew its business and increased its ad spending while still shrinking its losses in 2020.
  • While the company increased advertising 37% leading up to its IPO, advertising fell to 32% of revenue from 76% in the nine months ending September 30.
  • Other startups that have gone public in recent years took a profit hit when they increased marketing spend.
  • Visit Business Insider’s homepage for more stories.

DoorDash just filed to go public on Friday, saying in its IPO filing that its business has exploded while its losses shrunk in 2020.

The delivery company lost $149 million on revenue of $1.9 billion in the first nine months of this year, compared with a $667 million loss on $587 million in revenue for the full prior year. A surge in food-delivery orders also led DoorDash to post a $23 million profit in the second quarter of 2020. 

DoorDash’s sales and marketing expenses also declined as a percentage of its revenue.

 

While the company increased sales and marketing spending 37% to $610 million in the first nine months of 2020 versus the year-ago period, sales and marketing expenses declined to 32% from 76% in the same period.

Other companies that recently IPOed increased ad sales as a share of revenue ahead of going public as they ramped up marketing spend. Peloton, for example, spent $324 million on sales and marketing in fiscal 2019, up from $151.4 in 2018, accounting for 35.4% of revenue, up from 34.8% the year before. 

DoorDash said in its IPO filing that it spends most of its marketing spend on attracting new consumers and that existing ones consistently increase their spending on its platform. People that started using DoorDash in 2016, for example, increased their annual spend 57% in 2019, the company said. 

The company said it would continue to spend to attract new merchants as well as consumers — with US consumers on DoorDash representing less than 6% of the population — as it acknowledged competitors and changing consumer preferences could threaten its growth.

https://markets.businessinsider.com/news/stocks/doordash-increased-marketing-spend-leading-to-ipo-without-sacrificing-profits-2020-11-1029802429

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