Ladies and gentlemen, thank you for standing by, and welcome to the DoorDash Q4 2020 earnings call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a Q&A session. To ask a question during this time, you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Andy Hargreaves. Please go ahead, sir.
Thanks, Elaine. Hello, everyone, and welcome to our fourth quarter 2020 earnings call. I'm Andy Hargreaves, the VP of Investor Relations. It's a pleasure to be joined today by DoorDash CEO and Co-Founder, Tony Xu, and CFO, Prabir Adarkar. We'd like to remind everyone that we'll be making forward-looking statements during this call, including statements related to the expected performance of our business, future financial results and guidance, strategy, long-term growth, and overall future prospects, as well as statements regarding litigation and regulatory matters. Forward-looking statements depend on assumptions, data, or methods that may be incorrect or imprecise, and are subject to risks and uncertainties.
Events that could cause our actual results and future actions of the company to differ materially from those described in forward-looking statements are set forth under the caption 'forward-looking statements' in today's investor letter and are described in our risk factors, including in our SEC filings, including our final prospectus for our initial public offering filed with the SEC on December 8th, 2020. You should not rely on our forward-looking statements as predictions of future events. Also note that the forward-looking statements we make on this call are based on information available to us and assumptions and beliefs as of today's date. We disclaim any obligation to update any forward-looking statements, except as required by law. During this call, we will be discussing certain non-GAAP financial measures.
Information regarding our non-GAAP financial results, including a reconciliation of such non-GAAP results to the most directly comparable GAAP financial measures, may be found in our investor letter, which was furnished with our Form 8-K filed today with the SEC and on our investor relations website. These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being audio webcast on our investor relations website, and an audio replay of this call will be available on our website shortly after the call ends. With that out of the way, I'd like to turn it over to Tony.
Thanks, Andy, thanks to everyone for joining our very first earnings call. 2020 really put into focus the mission of our company and why we started this journey seven and a half years ago. We exist to grow and to empower local economies. As this is our first earnings call, I thought I'd give you a snapshot into how our team has executed this mission during the most critical of times, and I'll follow by sharing a few thoughts on where we are going as we hopefully soon emerge out of this pandemic. 2020 was a difficult year for all of our audiences, and our operations met great challenges and faced enormous uncertainty. While exhausting at times, I'm proud that our team chose optimism, built plans, prepared for all scenarios, and executed 24/7 to ensure that we did our part in seeing the best of our local communities.
While much of the work began in March 2020, a lot of the impact has carried into Q4. We prioritized safety by shipping no-contact delivery, distributed more than 10 million units of PPE in the form of hand sanitizers, gloves, and masks to Dashers, and we collaborated with merchants on tamper-proof packaging. We prioritized Dashers' health by offering affordable telehealth visits with doctors, ensured financial assistance for those impacted by COVID-19, and just last week, hosted our first webinar to provide Dashers with information about the vaccine. Equally important, we became a lifeline to millions of people who sought flexible earnings opportunities, especially after furloughs and other forms of job loss. In Q4 alone, over 1 million Dashers earned over $2 billion in supplemental income on our platform.
We reduced our commissions by half to local merchants, an investment totaling over $100 million, while funding national marketing campaigns to drive growth and add instant liquidity. We provided grants to more than 2,000 local restaurants to help them adapt to the COVID winter. By the end of Q4 2020, our analysis showed that the odds of surviving during the pandemic were eight times better for merchants on DoorDash versus all U.S. restaurants. For consumers, we accelerated our entry into the convenience and grocery categories. From September to December last year, we observed 95% growth in consumers who ordered from these new categories on the DoorDash marketplace.
Finally, we supported our community by donating free DashPass subscriptions to healthcare workers across the country and partnered with organizations like the New York City Department of Public Schools, United Way, and Feeding America to deliver food, groceries, and supplies to those most in need, powering the delivery of 6.5 million meals to those in need during 2020. I want to thank all of our teams worldwide and the millions of consumers, Dashers, and merchants who each stepped up in their own ways to navigate this pandemic. As we progress out of the pandemic, I thought I'd remind everyone of our long-term vision, which will take decades to build. In order to grow and empower local economies, we plan to build a marketplace and platform to enable every brick-and-mortar business to compete in today's convenience economy.
The job of our marketplace is to grow merchant sales. We aspire to bring all of your city to you in minutes, not hours or days. Today, most of our business is in the restaurants category, where we still see massive runway. We are investing to extend our category leading position in the U.S., while doubling down on the momentum we are seeing overseas in Canada and in Australia. Outside of restaurants, we're excited about the early progress we're making after launching into the convenience and grocery categories. According to third-party data, DoorDash became the largest online convenience delivery platform in the U.S. in less than a year, demonstrating the extensibility of our platform. This is just the beginning, as we have a long way to go in building our marketplace to serve these and many other categories in the future.
The job of our platform is to empower a brick-and-mortar merchant to build their own digital channel, a task necessary to have adapted to evolving consumer preferences before the pandemic, and a task certainly necessary to have survived COVID-19. This business is even more critical as we come out of the pandemic, as consumers have only become more habituated to a convenience economy, aided by a possible longer-term trend towards working from home. Today, merchants can use DoorDash Drive to offer on-demand and same-day delivery from their own digital channels. In cases where merchants don't have an online ordering solution, they can use DoorDash Storefront, which enables them to participate in e-commerce and gives them a product that seamlessly ties to their back-of-house systems.
Over time, we will have to build even more products and services to enable merchants to run their digital business as effectively as we operate our marketplace. Underpinning our marketplace and platform is our maniacal focus on operating efficiency, where we believe best-in-class execution will result in an improving cost structure that unlocks further investment capital as we grow our scale. With that, let me hand it over to Prabir.
Thanks, Tony. Good afternoon, everyone. Throughout our history, we've been laser focused on our four core constituents, merchants, consumers, Dashers, and our employees. Today, we are excited to welcome our fifth constituent, our shareholders. I want to take this opportunity to share how we manage the business and allocate capital. We are still early in our life cycle and believe we have substantial growth opportunities ahead of us. We intend to invest aggressively to pursue these opportunities. When allocating capital, we start small and experiment until we find product market fit. If we see strong demand with a path to unit economics that meet our thresholds, we invest incremental capital. Each project we invest in must continuously earn capital on its own merits.
To date, the bulk of our investments have been made through our income statement rather than through our balance sheet. We expect this to remain the case for the foreseeable future. We are the category leader in the U.S. Despite our scale, we see significant room for growth. Consequently, we are managing the business to maximize scale and long-term profit dollars rather than take rate or margin percentage. In practice, this means we intend to invest aggressively into the business in order to further our growth initiatives and expand our competitive advantages. As you likely saw, we intend to provide guidance for marketplace GOV and adjusted EBITDA going forward. We do not plan on guiding to revenue, as we do not directly manage the business to this metric.
In our model, revenue is an output, reflecting in part dynamic decisions we make around consumer pricing, the ideal mix of advertising to promotions, our relative success with DashPass, and the mix of Drive volume. We focus intently on inputs in each of these areas, but we'll manage the business to marketplace GOV and adjusted EBITDA dollars. We provided our guidance for Q1 in 2021 in our investor letter, but I'd like to provide a little more detail behind that. Underlying our 2021 guidance is an assumption of accelerated market reopenings and a return to in-store dining. While we have seen many positive signals from consumers and markets that have temporarily reopened during the pandemic, we acknowledge that vaccination and full reopenings could drive sharper changes in consumer behavior than current data would predict. Consequently, our 2021 full-year guidance reflects this uncertainty.
We are deeply hopeful that markets will reopen soon and will manage our business to provide exceptional experiences to merchants, consumers, and Dashers in any scenario. With that, I'll open it up to questions.
As a reminder, if you would like to ask a question, press star one on your telephone keypad. Your first question comes from the line of Doug Anmuth from JP Morgan. Go ahead, sir.
Thanks for taking the questions. I have two. First, just on trends a little bit in 1Q. We've seen some signs of accelerating growth in the quarter from some of your peers. Can you just talk about what you're seeing in the first quarter and how that ties into your guidance for 1Q in terms of GOV? Secondly, can you just talk more broadly about how you're thinking about the marketing, and competition in the category, in the U.S. now that we've seen a degree of consolidation over the last year and reopening happening, and how you view kind of rationality in the space going forward? Thanks.
Hey, Doug, maybe I'll take that question. First, in terms of the first quarter, we are seeing acceleration in January relative to our order growth in December as well as in Q4, so that answers that question. With respect to marketing and competition around that, we continue to acquire more of the new customers joining the industry in any given period. Part of what's driving that is the consistent gains we drive in our unit economics and the retention and engagement of our consumer base, which then allows us to pay higher and higher amounts in terms of CPAs to acquire customers. We believe it's a competitive advantage where our increasing unit economics help drive an LTV increase that then translates into an ability to acquire more customers than others.
Thank you.
Your next question comes from the line of Ross Sandler from Barclays.
Hey, guys. Thanks for the chart in the letter about the marketplace versus the Drive partner store growth rate. A question about the latter. On Drive, I think order growth was growing around 700% in mid-2020, and looking at the take rate in the fourth quarter, might have slowed down a little bit. Just is that true, and what percent of orders are coming from Drive at this point? Just any thoughts on the long-term outlook for that business? That's it. Thanks a lot.
Hey, Ross. Let me take the second part of the question first, which is, I think you were talking about take rate changes going from the third quarter into the fourth quarter. In the third quarter, take rate was 12.1%, which reduced to 11.9% in the fourth quarter, and really, the two things driving that was incremental Proposition 22 costs. Remember, Proposition 22 passed in November, and so we have a portion of the quarter during which we had to incur those costs, as well as the impact of commission caps or price controls in certain jurisdictions in Q4. Those price controls, I believe we disclosed in the letter, the net impact to revenue from the price controls was $36 million or 44 basis points.
If you add that back, you get a cleaner picture of what the actual underlying increase in the take rate was, inclusive of the Proposition 22 costs. On Drive, we continue to be excited by that business. Drive continues to grow strongly, faster than the core marketplace, and Drive orders grew both quarter-over-quarter as well as on a year-over-year basis. The thing that's interesting about Drive is, about a year ago, we were largely concentrated in the restaurant vertical. Since then, we've diversified beyond restaurants and have now brought onto the Drive platform merchants and local businesses in other verticals such as retail. We signed Michaels and Macy's. In pet supplies, we signed PetSmart and Petco. We're doing pharma delivery for Sam's Club as well as flowers. We continue to be excited about the growth here.
We haven't disclosed exactly what percent of Drive orders took place in this past quarter. Suffice to say, Drive continues to grow strongly, both quarter-on-quarter and year-on-year, and faster than the core business.
We can go to the next question, operator.
Okay, your next question comes from the line of Ron Josey from JMP.
Great. Thanks for taking the question, guys. I wanted to ask a little bit more about usage. In the letter, I think you talked about improved retention from DashPass subs, and DashPass subs grew, I think, a bigger, larger part of the mix of orders. Can you talk about retention a little bit more, particularly as we think about January and trends going forward in terms of consumer behavior trends? Any sort of insights on DashPass usage and just frequency of use would be helpful. Thank you.
Hey, Ron. Yeah, in terms of DashPass, we haven't disclosed the number of subs. I will say that they have grown sequentially since our disclosure in the S-1. We continue to invest behind this because, as we had explained in our S-1, DashPass drives increased engagement amongst its subscribers due to the zero delivery fee. It's certainly an avenue for growth that's exciting to us. In terms of retention as well as engagement, we continue to see retention and engagement remain at COVID highs. In fact, engagement continues to improve both within the DashPass product as well as amongst non-DashPass users of the platform. We're seeing positive trends there.
In terms of the long term, in our experience, consumer behavior tends to be sticky, and so once a consumer has discovered DoorDash and they've ordered from their favorite restaurants and enjoyed the benefits of on-demand convenience, new habits get formed, and we believe this habituation will persist over the long run. Even when you look at markets like Texas and Georgia and Florida that reopened, that were sort of partially open even through the pandemic in the U.S., against that backdrop, we continue to see our weekly order volumes in these markets continue to grow. That's a promising sign.
I suspect your question was sort of heading into a guidance question, so maybe I'll address that right now, which is embedded in our guidance, we're assuming that as the vaccine gets fully rolled out, then consumer behavior will start reverting back to pre-COVID levels, and so that's what's embedded in the guidance along with standard Q2, Q3 summer seasonality, when people generally tend to go out versus order in. You're seeing that embedded in our guidance. There's a certain amount of uncertainty with respect to what consumer behavior does post-pandemic, and we're trying to reflect that in the guidance we've provided.
Super helpful, and you read my mind. Thank you.
Your next question comes from Heath Terry from Goldman Sachs.
Great. I was wondering if you could give us a bit of an update on your experiment, it's probably more than an experiment, but the work that you're doing in general merchandise, the relationship with Macy's and Bloomingdale's and others, what kind of progress you're seeing so far, to the extent that we just came out of a holiday season where companies like Nike were being told by third-party delivery networks that they couldn't ship through them, how you see the size of that opportunity and the pace that you're going to try and address it?
Hey, Heath, it's Tony. I'll take that question. If you can think of any silver linings of this pandemic, I think it is that every brick-and-mortar store, whether they are a restaurant or a retailer, is participating in e-commerce, sometimes exclusively in e-commerce, given some of the restrictions that we saw during the past year. For us, we really were seeing that on both sides of our business as a marketplace as well as a platform. On the marketplace front, we launched our second category of convenience item deliveries about a year ago when we announced partnerships with 7-Eleven, CVS, Walgreens, and many others. Already, that has picked up quite a lot of momentum in the early progress. Again, very early, but according to third-party estimates, DoorDash already is the largest delivery platform for convenience goods in the U.S.
I think you're seeing some of the extensibility of starting with the highest frequency category of restaurants, building the biggest audience there, and covering the most number of stores there, just given the nature of how many restaurants there are relative to how many other types of stores there are, that have made us be able to accelerate very, very quickly into some of these other categories. On the platform front, we've actually been delivering from a lot of these partners for a while. DoorDash Drive launched in 2017 Q1, so it's about four years old now. Prabir mentioned some of the categories that really came into fruition in the past year, whether that be in retail, as we partnered with the likes of Macy's and Michaels, Pet Supplies, PetSmart, and Petco, or pharmacy with Sam's Club.
I think what you're seeing is every business recognizes that omni-channel is a great thing. Every business is trying to figure out how to redo their supply chains to really meet a post-pandemic omni-channel presence, which they expect to grow. We'll be there with them, both with our marketplace as well as our platform.
Great. Thank you very much.
Your next question is from Eric Sheridan from UBS.
Thank you so much for taking the question. I want to come back to the constant around investments against the longer-term opportunities. You've talked before about geographic expansion. Can you just give us a bigger sense of the way you're thinking now, post the IPO, about the process of either building businesses globally or acquiring businesses globally and sort of the puts and takes of both organic and inorganic growth outside your core markets? Thank you.
Yeah. Hey, Eric, I'll take that one. Look, if you think about our portfolio of investments today, we are growing in our core category of restaurants, which we believe has massive runway ahead. We're adding categories to becoming a multi-category marketplace. We're adding products on our platform, in addition to Drive and Storefront. The fourth area is international. Our perspective on international opportunities is really taking a very long-term view and becoming a global company over the long run.
Given what we've seen, even with our current footprint in Australia and Canada, where we believe we gained share in 2020 and saw improvements in our unit economics, we're really liking what we've seen with our playbook, and we also like what we see in terms of some of the geographic opportunities outside of the ones we operate in terms of just how under-penetrated and how large some of these opportunities are, especially as we bring a multi-product portfolio into those geographies. With respect to how we enter, obviously we'll look at any opportunities and weigh them against our own organic efforts. So far, we like our playbook, and we'll always seek to enter markets in a differentiated way for all of the audiences.
Just to add to Tony's point, I want to make sure we don't lose sight that even within the core food delivery business, the runway for growth is massive. If you compare just our GOV compared to the overall restaurant spend, we're a tiny fraction of that. There's a lot of runway for growth just in food delivery alone. Now, you tack onto that new verticals such as convenience and grocery, and that further adds to our addressable market. We're a tiny fraction of that. International is definitely an important priority and is an area where we certainly aspire to grow into, but even the core U.S. business has many avenues for growth, and we're relatively early in those opportunities.
Thanks so much.
Your next question is from Alex Potter from Piper Sandler.
Thanks, guys. Just a question, maybe follow on the previous discussion we were just having there. If you were to maybe, I guess, divide management bandwidth, like the amount of brainpower you're spending on these different growth opportunities right now, the various different verticals within Drive, international, I know it's easy to just say they're all important, but you go to bed at night, what are the things that you're thinking of most versus less?
Yeah, I'll take that. Look, certainly, we have a full plate, and it's a broad surface area. The goal was always, over many decades, to build both a marketplace and a platform in which we can transform every brick-and-mortar business. That aperture was wide even seven and a half years ago when we started the company. The way I tend to think about this is less about which thing comes up, I guess, most often in my dreams. It's more, do we have the right leader, and are we setting up that leader with the right cross-functional team for success? As Prabir mentioned in some of the opening remarks, a lot of these projects that we're talking about, they're in very different stages of progression.
We tend to invest commensurate to what we see, both in terms of achieving product market fit as well as just where we are in the maturation and development of that market opportunity. It's making sure that we always have that portfolio of investments and making sure that so long as we have the right team and the right single-threaded focus on that area, that the focus is really just on that execution and nothing else.
Okay. Maybe another question, I guess, on the regulatory front. There's been some rumors, I guess, in the press of potentially talking to unions nationally in order to prevent sort of a state-by-state Proposition 22-type legal fight. If you deal with unions one time nationally, then maybe you can come to some sort of labor agreement, and it's kind of a one-and-done setup. Is that accurate? Are you guys having discussions like that? What are the odds something like that actually happens? Thanks.
Well, I think it's important to start with what it is that we want to achieve with respect to anything policy when it comes to Dashers. For us, that always starts with what it is that Dashers want. I think what you saw in Proposition 22 was that both politics and policy sided with the Dasher. Both sides of the aisle in California came together to support Dashers' desire to keep the flexibility that frankly doesn't exist in any other type of work opportunity, and it paired that flexibility with greater security. Wherever there are opportunities to have discussions about how can we maintain the flexibility and really create a set of standards around it that gives portable and proportional benefits tied to this flexibility, we're happy to have those conversations.
If you just look at some of the outcomes that have been achieved with Proposition 22, you see a 50% increase in Net Promoter Score for Dashers post Proposition 22 in the state of California. I think this is an instance where business and policy actually achieve the outcomes, or the outcomes actually achieve the objectives that it set out to accomplish.
Thanks very much.
Your next question comes from Lloyd Walmsley from Deutsche Bank.
Thanks. Two questions, if I can. First, can you just give us an update on how you're approaching the incremental Proposition 22 costs? How are they coming in versus your estimates? How are you passing along or not passing those along to consumers? What are you seeing in the competitive environment that may inform what you do? I guess the second would just be on kind of active efficiency talked about in the letter continuing to improve. Is there an opportunity? Do you feel like there's multiple years left, or are there regions where you have strong density or other factors that might serve as a leading indicator where you could give us a sense of more mature contribution margins or regional EBITDA margins? Anything you could share there would be great. Thanks.
Hey, Lloyd. Maybe I'll take that. First, in terms of the Proposition 22 costs, we're absorbing the vast majority of the Proposition 22 costs. We are passing them along in certain instances, but for the vast majority of the costs in California, we're absorbing them in our P&L. If you think about why we're doing it's first and foremost in order to benefit merchants, because if we keep prices low to consumers tend to order more. Those orders ultimately benefit our merchants, and so to the extent we can continue doing so, we will. It also is consistent with our overall philosophy to manage the business, to maximize scale and top-line growth while maintaining discipline on EBITDA.
What's embedded in our guidance for Q1 and 2021 as a whole is an assumption that we're going to continue absorbing Proposition 22 costs to the degree that we currently have. On your second question around active efficiency, I remember we had this discussion even at the time of the IPO. Our active efficiency has continued to grow, obviously, year-on-year, but also on a quarter-on-quarter basis. The reason for that is because active efficiency is not simply a product of the traffic that's on the streets or the waiting time at restaurants. There's a ton of product work that goes into dispatching a Dasher appropriately, ensuring Dashers are prepared well, ensuring wasted time at the restaurant is eliminated, and so on. We've not found the ceiling yet, and I feel good about the fact that there's continued improvement in active efficiency where possible.
We don't have at least a view in terms of where it will saturate at this point.
All right, thank you.
Your next question comes from Jason Helfstein from Oppenheimer.
Thanks. I'll ask two. Just maybe, how are you thinking about driving more adoption of Storefront? Obviously, there's a lot of suites out there for SMBs, but yours integrate into your whole backend. Maybe just talk about how you drive that adoption. If there's certain pricing mechanisms you're using or other ways to get that out there. Secondly, just maybe talk a bit more about.
Kind of the caps and some of the pushback. Number one, any information you could share about how non-chain restaurants are increasing online prices to offset fees and just in general, that behavior, and the awareness that's a pretty healthy way to manage. Can you see any way that permanent jurisdictional price caps are legal? Thanks.
Yeah. Jason, maybe I'll take the first part of the question. I think the first question was on Storefront. Look, Storefront is very early. It's a little over six months old as a product, and it has grown extremely quickly since launch. You're right, in some sense for merchants, it's a bit of a no-brainer because it already integrates with all of their back-of-house systems that we've had to do on our marketplace. On the flip side, there's a lot of work to be done to making sure that it works with a wide variety of merchants. We're very privileged and proud to serve hundreds of thousands of businesses, but that also comes with lots of complexity in terms of their operations, their protocols, their reporting requirements and things, and so on and so forth. That's really where we are.
Back to how we think about investment horizons and how we manage capital allocation. Right now, Storefront is really in the product market fit phase. We're just trying to create more and more features such that it can deliver more and more of the benefits that we see in our own marketplace to a merchant's own digital channel.
Jason, just on your question regarding price caps. As of the end of Q4, we were subject to price controls in 73 jurisdictions, which is up from 32 at the end of the third quarter. Based on all the conversations we've had with city officials, these price caps are temporary in nature, and they're all tied to emergency orders that are related to in-store dining. It's our expectation that when in-store dining resumes, these price caps will fall away. In the interim, we've begun implementing incremental consumer fees in order to recoup some of the costs related to price controls. Remember, in the long term, our north star is to continue reducing consumer fees, and so we'll do this as long as price caps are temporary, and the fee increases will go away once the price caps drop away.
In Q4, those price caps had an impact of $36 million in terms of revenue or about 44 basis points on our take rate. We're planning to manage to that similar dollar impact over time. In terms of the legality of permanent price caps, I don't want to comment on a hypothetical. Because based on all the conversations we've had so far, a city official insists these are temporary in nature.
Just if there's anything you want to share about maybe proportion of restaurants that are using separate pricing for online versus in store to try to recoup fees?
Yeah. Some restaurants are using menu inflation and price inflation in order to recoup fees. So far, again, this might be a function of the fact that in-store dining is shut down and consumer price elasticity, the impact on price elasticity is relatively minimal. We're hopeful that as in-store dining resumes, merchants will recognize that keeping prices consistent with their in-store is actually the right path forward because it boosts the amount of demand that's possible through their delivery channel.
Thank you.
Your next question comes from Ralph Schackart from William Blair.
Good afternoon. Thanks for taking the question. First, on the annual EBITDA guidance for DoorDash, that contemplates a fairly wide range between 0 and $200 million or so. I know you talked about price controls as well as Proposition 22, but just can you give a sense, what would drive either outcome on the low end or the high end, especially after coming off, obviously some strong tailwinds with COVID, but up a strong 2020. Then just maybe a follow-up on the competitive side. You talked about CAC being a little bit more expensive, but within your normal range. Maybe just give a sense of how the supply side looks for drivers and your ability to continue to add merchants, particularly on the restaurant side. Thank you.
Sure. Ralph, on your first question regarding the guidance, really the objective there on the EBITDA line, to the extent that we're outperforming on the top line, either due to the core food business or outperformance in products such as Drive or new verticals such as convenience, we will be towards the high end. On the other hand, we've got some interesting opportunities ahead of us, particularly as it pertains to convenience. As you likely saw, third-party data shows us as being the leader in the online convenience space, and this is after having launched that particular vertical about a year, maybe less than a year ago.
If we start seeing incremental progress and positive signals in some of these new projects, including Storefront and Drive and other things, we're inclined to invest as long as it meets our return thresholds, in which case we will likely end up towards the lower end of that range. Again, we're managing the business, just as a reminder, to maximize scale and top-line growth with an intent to try to land inside the range in EBITDA, as opposed to trying to beat EBITDA. On your second question with respect to the supply side. Let me talk about merchants first. With COVID, and the recent pandemic, it became clear to merchants that they need a delivery channel. Merchants that weren't participating in delivery prior to the pandemic needed to get on a delivery platform quickly.
We saw a massive influx in terms of merchants, which led to selection growth. You can see that in the chart that we include in the shareholder letter, where the selection that's available on the platform has continued to grow. In terms of our cost to acquire merchants, has been relatively stable. The same goes on the Dasher side, where you've had sort of a tale of two cities. On the one hand, you'd have expected a large influx of Dashers as a result of heightened unemployment, but that was offset to some degree by stimulus checks. Regardless of all of that, our cost to acquire Dashers have been stable and within the realm of what we were expecting.
Great. Thanks, Prabir.
Our next question comes from the line of James Lee from Mizuho.
Great. Thanks for taking my questions. On the shareholder letter, you guys mentioned that consumer acquisition costs increased in 4Q. Is that the trend we're expecting or you're expecting going forward? Second thing, how should we think about maybe contra revenue going forward into FY 2021? Is that on a rising trend as well? Specifically on advertising, can you talk about maybe what channels working very well for you, what channel that you'd like to improve? Any particular regions that you want to go after a little bit more aggressive? Thanks.
Maybe I'll start with your first question on customer acquisition costs. To be clear, we manage our business to payback thresholds, the customer acquisition cost of CPA that we pay in order to acquire customers is simply an output resulting from a payback period that we're trying to hit. To the extent that we continue increasing the LTV of our customer base through improved profitability, through improved engagement through levels such as DashPass, it gives us more flexibility to increase our CPA. I view our increasing CAC as a feature where we're able to fund higher and higher amounts of customer acquisition in order to acquire a larger and larger share of new customers joining the industry, which then when you couple that with our industry-leading retention, leads to continued market share gains in the future.
The increase in customer acquisition costs are a choice that we're making to reinvest the profitability in our business. On the question around contra revenue, just looking at 2020 versus 2021, again, we don't guide to revenue, but what I would point you to the fact that we have an incremental cost resulting from Proposition 22 that didn't exist in 2020 for the most part. You will see a decrement to our take rate in 2021 as a result of that incremental Proposition 22 cost, the vast majority of which we're choosing to absorb. Lastly, on the advertising front, again, we don't preference one channel over another necessarily. We're managing the business for payback periods, and so we will flexibly deploy capital across regions, across channels, as long as it hits our payback thresholds.
Great. Thanks so much.
Your next question comes from the line of Michael McGovern from Bank of America.
Hey, thanks for taking my question. I was just wondering if you could provide a little bit more color on maybe the trajectory of AOV versus total orders for the 2021 guidance, with AOV down five points in the fourth quarter. Do you kind of expect AOV to stay in the negative territory throughout 2021? Maybe if you could also talk a little bit about the cadence for, on a quarterly basis, do you kind of just expect seasonality to return to maybe like a pre-COVID level in 2021, with a normal bump in Q4? Thanks.
Sure. On the first question with respect to AOVs, the first thing I should clarify is if you take our GOV and divide it by our total orders, remember that AOV compression in part is driven by the fact that our total orders includes Drive orders, but the value associated with the Drive order is not contained in our GOV. When you see deceleration in AOV, some portion of that deceleration is being caused by an increasing mix of Drive orders. I want to make sure I clarify that. Second, having said that, if I just look at our marketplace orders alone, AOVs remain above pre-COVID levels, but not massively above pre-COVID levels. They've continued sort of normalizing over the course of 2020.
They were at a high in Q2 and sort of continuing normalizing since then, but they're still modestly above pre-COVID levels, and we expect continued moderation over the course of 2021. On your question on seasonality, what I'd say is what was embedded into our guidance is an assumption that the vaccine will be broadly available soon, and that in-store dining will resume relatively soon. As a result, starting from Q2 onwards, we're going to see a reversion towards pre-COVID behavior within the customer base. That includes a reversion in terms of AOVs as well as order frequency, and that's compounded by the traditional seasonality you see around the summertime where our order frequencies are impacted as consumers can get out more and go to restaurants a lot more.
To the extent the consumer behavior remains propped up as a result of a delay in the vaccine or other factors, obviously, we'd perform to the upside.
Got it. Thanks.
Your next question is from Youssef Squali from Truist.
Great. Thank you very much. Two quick questions from me, please. Starting with just your, I know you're not guiding to revenues per se, but since you are guiding to GOV, I was wondering, as you look out, not just for 2021, but beyond, say, the next five-plus years, how do you see your take rate over time evolving? Is there a point at which you kind of prefer not to have it go above a certain threshold because then it just creates so much friction with consumers, with restaurants, and potentially even brings some jurisdictions to take a harder look at the unit economics of the business? Maybe just looking at the business internationally.
I know the focus is primarily on the U.S., Australia, Canada. As you look beyond, and there were some press articles about your interest in Japan, et cetera, can you just flesh out what you look at in terms of an attractiveness of a market? I think your main competitor talks about wanting to be number one, number two, and otherwise they're not in that market. I'm not seeing that many markets where people can still be number one or number two. Maybe if you can just flesh that out for us a little bit, your strategy around international expansion beyond the other two markets you're in, that would be great. Thank you.
Great. Hi, Youssef. Let me take the question on take rate first, and then Tony can talk about international. I'd say, when we think about our strategy long term, the idea is to lower commissions and fees on merchants, to lower fees on consumers, and to increase Dasher earnings. That's the simple sort of equation that we're trying to solve for. The way we do that is by, on the merchant side, as we unlock greater efficiency in the P&L, whether it's through active efficiency or it's through eliminating wastage, or it's through reducing defect rates that then help our customer support costs and so on, we'll invest that both on the merchant side as well as the consumer side. As an example, on the consumer side, as we keep increasing the adoption of DashPass, that has a natural deflationary impact on take rate.
Although our unit take rates decline, they're more than made up for by the increase in engagement amongst DashPass consumers. If you look at total revenue per MAU for a DashPass user versus somebody that doesn't use DashPass, the total dollar of revenue or total dollar of gross profit for a DashPass consumer tend to be higher than they do for non-DashPass consumers. We're actively choosing to make that trade-off. Over time, as we unlock these efficiencies in the P&L, and as we provide merchants with additional products and services, the idea is to continuously reinvest those dollar into reducing merchant commissions, reducing consumer fees, and increasing Dasher earnings, because it's our belief that as we continue doing so, it will enable more adoption, and we'll have access to more of the TAM that will ultimately translate into growth over the long run.
Not only growth, but sustained growth.
Hey, Youssef, on your second question around international, I touched upon this a little bit earlier, but for us, it's really taking a very long-term view. Otherwise, candidly, we would not have launched in the United States either, as we were not the first player in 2013 when we founded the company. I think for us, it's really looking for areas of opportunity where we can bring something of unique difference and taking a pretty long-term view on what it is that we can do for all of the audiences, consumers, merchants, and Dashers. If you look at some of the markets, well, frankly, even in the U.S., it's still pretty early days. The penetration levels are quite low in these very large geographies, including those that have players already existing there.
For us, it's always just obsessing over the consumer, merchant, and Dasher, and I think if we do that, our products will speak for themselves.
Great. Thank you both.
Our last question comes from the line of Samuel Lourensz from Arete.
Hi. Thank you for taking the question. Two, please. Firstly, could you maybe talk a little bit about your testing in DashMart, how you're thinking about the business model here, and if it can bring attractive returns in excess of your thresholds? Secondly, could you talk a little bit about your progression with order batching, and as you add new verticals, how do you envision this becoming more material in the longer term? Thanks.
I'll take the first question on DashPass. I think since Prabir talked earlier about active efficiency, I'll let him take the second question on batching. With respect to DashMart, we're super excited about the DashMart business. It's, again, very early days. What turned into an experiment at the end of 2019 has been something that we've invested into 2020, we're certainly seeing the right input metrics to cross our investment thresholds and stage gates for further capital allocation. Really, if you think about the thesis behind DashMart, it's really bringing selection to where it has not existed before, whether that means giving merchants, it's really a win-win for merchants and consumers. For merchants, it gives them the opportunity to bridge into certain geographies that they may want to be in, but aren't currently in the depth or magnitude that they wish.
For consumers, it's getting selection that they've never had before. For example, if you think about restaurateurs, they also sell a lot of retail items, as an example, where in places like Chicago, we carry the sauces of chefs like Stephanie Izard and many others, in which we're serving the restaurants on DoorDash and Caviar. We're also now serving some of their other products through DashMart. Equivalently, that's also happening in other categories as well, where again, for merchants, this is an extension to bring them beyond their four walls, wherever they are. For consumers, it's giving them selection that they've never had access to before.
Samuel, on your question on batching, batch rates have been relatively consistent since Q2. I want to make sure that we don't assume that batch rates are the only driver of active efficiency or efficiency of the logistics network. There are several other sources from the product perspective that we make progress on, which has also led to the consistent and sequential increases in active efficiency over the course of the past year. It's things like eliminating wasted time that a Dasher spends in a restaurant. It's better predictions of kitchen prep time to ensure the Dasher doesn't show up at the restaurant earlier than the food might be ready, and so on. Batch rates are obviously an important source, but they aren't the only source.
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Great. Thanks, everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.