Instacart was all about grocery delivery. Not anymore.

As it prepares to go public next week, Instacart shows that one of the secrets to making money as a gig economy company is to become an advertising agency.

When Fidji Simo took over as CEO of Instacart in 2021, the start-up's growth up grocery delivery collapsed as its pandemic boom petered out. The board of directors asked her to find new ways for the company to make money.

Mrs. Simo, a former executive at Meta with experience in advertising, played to his strengths. She has aggressively expanded Instacart's advertising business, launched in 2019, which lets food brands pay for better placement in the company's app. Brands wondered whether the ads were useful, so Ms. Simo commissioned studies showing their effectiveness, two people close to the company said.

She also developed a plan to sell software. tools and other products to grocery companies to help improve shopping experiences, they said. She then embarked on a goodwill tour to visit grocery companies and hosted their executives at her home in Carmel, California.

While As Instacart prepares to go public next week, it's a markedly different company. Envisioned in 2012 as a service connecting people at home with contract workers who would shop for and deliver groceries, it has increasingly focused on advertising and software products as its business has grown. delivery has slowed.

Last month, Instacart revealed in an offering prospectus that ads and software sales allowed it to do what skeptics considered impossible: making a profit. Other so-called gig economy companies that use contract workers to deliver goods via apps have generally not been successful.

Nearly A third of Instacart's $2.5 billion in revenue last year was generated by Instacart. of its “highly profitable” advertising and software division, according to its prospectus. In the first half of this year, Instacart's $406 million in revenue from ads and software helped propel it to $242 million in profits.

Instacart is leading the way for a historically unprofitable sector. to access public markets, you need to diversify into more lucrative areas and move away from your roots in the gig economy. It's been a long road for the startup, which has overcome years of money losses and the 2021 resignation of its co-founder and former chief executive, Apoorva Mehta, after friction with the board. /p>

Still, Instacart's profits may not be enough to attract investors to its IPO. Once worth $39 billion in private markets, the company has cut its valuation several times, most recently to $10 billion. In a filing this week, he set a price range of $26 to $28 per share, valuing it at $8.9 billion at the midpoint. Instacart plans to list its shares on the Nasdaq stock exchange, days after the public offering of Arm, the British chip designer.

In an interview last year Last, Ms. Simo, who is now 37, said she was overseeing a “third act of the business” — after first attracting consumers, then grocers — that included software tools for retailers. She said her goal is for Instacart to compete more with Amazon, which offers grocery delivery services, and help grocery stores adapt to the digital world.

“It really shows very clearly where we are going as a company and this new ambition,” Ms. Simo said.

Instacart declined to comment, citing a quiet period before its IPO. New York Times CEO Meredith Kopit Levien serves on Instacart's board of directors.

Since its founding in 2012, Instacart has spent a lot of money, like other companies of the time that jumped on the proliferation of smartphones and cloud computing to offer real-world services through apps. With the press of a button, these apps referred to services such as dog walking, housekeeping, takeaways and taxi rides.