Instacart is about to go public, and there's a lot for investors to digest from its financial filing with the Securities and Exchange Commission (SEC).

Aside from investors chasing the next hot initial public offering (IPO), a group of investors that should be digging into Instacart's financials are Uber Technologies (UBER -0.38%) shareholders. Instacart is the leader in grocery delivery apps, and Uber ultimately wants to take the crown. And while Uber has a small foothold in grocery right now, it already has significant overlap with a couple of products offered by Instacart.

Looking at Instacart's S-1 filing with the SEC shows Uber still has a lot of potential to expand its advertising business and its subscription offering.

Building a bigger advertising business

Instacart is one of the biggest platforms for advertisers in retail media.

Last year, the delivery service generated $740 million in ad revenue. Through the first six months of 2023, it's brought in $406 million in ad sales.

By comparison, Uber exited 2022 with a $500 million run rate on its advertising unit. Through the first half of 2023, it's brought in about $300 million based on company disclosures.

And while that might sound like Uber's not that far off from Instacart, Uber's user base is spending twice as much on delivery as Instacart customers. Not only that, but Uber's total user base dwarfs Instacart's. As of the end of the second quarter, Uber had 137 million monthly active platform consumers. Instacart counts just 7.7 million monthly active orderers.

That means Uber users are severely under-advertised to compared to Instacart's users. And while Instacart's users are spending significantly more on average, there's still room for Uber to increase its ad sales as a percentage of gross bookings. In the long term, there's the opportunity for it to increase order volume per user.

Uber's currently making a push to attract bigger enterprise customers to its ad platform, and it just started working on ad products for consumer packaged goods (CPG) companies. CPG companies are the bread and butter of Instacart's ad business, and they present a significant opportunity as Uber pushes into more grocery and convenience store deliveries.

Management's currently targeting $1 billion in ad sales for 2024, but that may be just the start for Uber.

The subscription business could be massive

The vast majority of Instacart orderers subscribe to its Instacart+ subscription. That may be an indication of where Uber's subscription business could go.

As of the end of the second quarter, 5.1 million of Instacart's 7.7 million customers subscribe to Instacart+. Those members receive free delivery on orders over $35 and cash back on each purchase that can be used on a future order.

Uber doesn't disclose how many Uber One customers it has. But on its second-quarter earnings call it said they generate between 20% and 30% of gross bookings, and subscribers spend about four times as much on average. So some back-of-the-envelope math suggests around 7.5% of Uber users are subscribers.

That's significantly below the two-thirds of customers that subscribe to Instacart's offering. Side by side, the two services offer very similar perks. Instacart's advantage stems from its existing store partners. As Uber builds out a broader selection of stores for delivery, and makes it clear to customers what it's offering, it should see subscriptions grow significantly.

In the near term, management sees the potential to reach 50% of gross bookings penetration. That would put its subscriber base around 20% based on Uber One subscribers spending four times as much on the platform. While it's unlikely Uber can reach the same level of penetration as Instacart (due to its broader use cases), it's another area where it can significantly outperform in the long run.

Winning more Uber One subscribers is a key initiative for Uber because it increases customer lifetime value and reduces switching between Uber and competing apps. The more attractive it makes Uber One, the more likely users are to sign up and forget about the competition.

Pushing toward profits

The key to both advertising and subscriptions is that Uber is leveraging its existing product to add value. That means the revenue those products bring in comes with low marginal costs and big potential for profits.

After the company posted a profit under generally accepted accounting principles (GAAP) in the second quarter, investors should look for Uber to show continued operating leverage as it grows these businesses and expands its user base. Instacart's IPO filing gives a hint at the potential of these businesses when applied to a much bigger user base. And if you think Uber can execute on that potential, you should consider adding shares of the stock to your portfolio.