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 question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr.
Andy Hargraves. Please go ahead, sir.
Thanks, Elaine. Hello, everyone, and welcome to our Q4 2020 earnings call. I'm Andy Hargrave, the VP of Industrial Relations. It's a pleasure to be joined today by DoorDash CEO and Co Founder, Tony Hsu and CFO, Subhira Daka. 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, 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 8, 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 It may be found in our investor letter, which was furnished with our Form 8 ks 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 the call will be available on With that out of the way, I'd like to turn it over to Tony Cole.
Thanks, Andy, and 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 7.5 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 This mission during the most critical 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 20 fourseven 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 was carried into Q4. We prioritized safety by shipping no contact delivery, distributed more than 10,000,000 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 Dasher's health By offering affordable telehealth visits with doctors, ensured financial assistance for those impacted by COVID-nineteen, 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 saw flexible earnings opportunities, especially after furloughs and other forms of job loss.
In Q4 alone, over 1,000,000 dashers Earned over $2,000,000,000 in supplemental income on our platform. We reduced our commissions by half to local merchants, an investment totaling over $100,000,000 While funding national marketing campaigns to drive growth and add instant liquidity, we provided grants to more than nearly 2,000 local restaurants help them adapt to the COVID winter and by the end of Q4 2020, our analysis showed that the odds of surviving during the pandemic We're 8x 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 order 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 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 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 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. And 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 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 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
Praveer. Thanks, Tony, and good afternoon, everyone. Throughout our history, we've been laser focused on our 4 core constituents: Merchants, consumers, dashers and our employees. And today, we are excited to welcome our 5th 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 lifecycle 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 the 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, and we expect this to remain the case for the foreseeable future.
We are the category leader in the U. S. Where 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 percentages. Impact is, 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 through this metric. In our model, revenues and 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 dry volume. We focus intently on inputs in each of these areas that will manage the business to market based GOV and adjusted EBITDA dollars. We provided our guidance for Q1 and 2021 in our investor letter,
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, 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 With that, I'll open it up for questions.
And your first question comes from the line of Doug Anmuth from JPMorgan.
Go ahead, sir.
Thanks for taking the questions. I have 2. First, just on Trends a little bit in 1Q. We've seen some signs of accelerating growth in the quarter from some of your Can you just talk about kind of what you're seeing in the Q1 and how that ties into your guidance for 1Q in terms of GOV? And then 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. So first, in terms of the Q1, We are seeing acceleration in January relative to our order growth in December as well as in Q4. So that answers that question. So our findings are With respect to marketing and competition around that, we continue to acquire more Of the new customers joining the industry in any given period and 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.
And so 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.
And 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 ladder. So on Drive, I think order growth was growing around 700% In mid-twenty 20 and looking at the take rate in the Q4, it might have slowed down a little So is that true and what percent of orders are coming from DRiV at this point and just Any thoughts on the long term outlook for that business? That's it.
Thanks a lot.
So let me take the 2nd part of the question first, which is, I think you were talking about take rate changes going from the Q3 into the Q4. 3rd quarter take rate was 12.1%, which reduced to 11.9% in the 4th quarter and really the two things driving that was incremental Prop 22 costs, non prop 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. So those price controls, I believe we disclosed in the letter, The net impact of revenue from the price control was $36,000,000 or 44 basis points. So if you add that back, You get a cleaner picture of what the actual underlying increase in the take rate was inclusive of the top line to cost. On Drive, we continue to be excited by that business.
Drive continues to grow strongly faster than the core The place on Drive orders grew both quarter on quarter as well as on a year on year basis. The thing that's interesting about Drive is, about a year ago, We were largely concentrated in the restaurant vertical, but 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. So we're continuing to be excited about the growth here. We haven't disclosed exactly what percentage Drive orders, took place in this past quarter, but suffice to say Drive continues to grow strongly both quarter on quarter and year on year and faster than the core
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. And 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. So 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?
And then any sort of insights on DashPass Usage and just frequency of use would be helpful. Thank you.
Hey, Ron. Yes, in terms of Dash Plus, we haven't disclosed the number of But I will say that they have grown sequentially since our disclosure in the S1. We continue to invest behind this because As we had explained in our S1, Dash Power's increased engagement amongst its subscribers Due to the 0 delivery fees, 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.
So 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. And so even when you look at markets like Texas and Georgia and Florida that reopened, those sort of partially opened 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. So let's say that's a promising sign. I suspect your So, heading into a guidance question, so maybe I'll address that right now, which is embedded in our guidance, we're assuming that as vaccine gets fully rolled out and 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. And so you Seeing that embedded in our guidance, there was 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 provided.
Super helpful and you read my mind. Thank you.
And 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 experiments. It's probably more than an experiment, but the work that you're doing in general merchandise, The relationship with Macy's, Bloomingdale's and others, what kind of progress you're seeing so far? And to the That we just came out of the holiday season where companies like Nike were being told by 3rd party delivery networks that they couldn't ship 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, 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 that we saw during the past year. And for us, we really were seeing that on both sides of our business as a marketplace as well as Platform, on the marketplace front, we launched our 2nd category of convenience item deliveries about a year ago when we announced partnerships 711, CVS, Walgreens and many others.
And 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. And 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 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 4 years And Praveer 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 Pet or pharmacy with Sam's Club. And so I think what you're seeing is every business recognizes that omnichannel is a great thing. Every business is trying to figure out how to redo their supply chain to really meet a post pandemic omnichannel presence, which They expect to grow, and we'll be there with them, both with our marketplace as well as our platform. Great. Thank you very much.
And 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 Building businesses globally or acquiring businesses globally and sort of puts and takes of both organic and inorganic growth outside your core markets? Thank you.
Yes. Hey, Eric. I'll take that one. Look, the goal on 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 marketplace multi category marketplace.
We're adding products on our platform in addition to Drive and Storefront. And the 4th area is international. So our perspective on international opportunities is really taking a very long term view and Becoming a global company over the long run. And 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, in terms of just how underpenetrated 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.
And I'll just add to Tony's point. I mean, 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. So there's a lot of runway for growth, just in food delivery alone. Now you're back onto that New verticals such as convenience and grocery and that further adds to our addressable market, we are a tiny, 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 to growth and we're relatively early in those opportunities. Thanks so much.
And your next question is from Alex Potter from Piper Sandler.
Thanks guys. Just a question maybe follow on this The previous discussion we were just having there, but 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 Yes, I'll take that. Look, certainly we have a full plate and it's a broad surface area. I mean, the goal It was always over many decades to build both a marketplace and a platform in which we can transform every brick and mortar business. So that aperture is was wide even 7.5 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 than 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? And as Praveer 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. And 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. So It's not like, I guess, 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.
And then Maybe another question kind of on, 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 Prop 22 type Fight, 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. And for us, that always starts with what it is that Dashers wants. And I think what you saw in Proposition 22 was that both politics and policies Sided with the Dasher, both sides of the aisle in California came together to support Dasher's desire to keep The flexibility that frankly doesn't exist in any other type of work opportunity and it pairs that flexibility with greater security.
And wherever there are opportunities to have discussions about how can we maintain this 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. I mean, if you just look at some of the outcomes that have been achieved with Prop 22, I mean, you see a 50% increase in net promoter scores for Dashers post Prop 22 in the state of California. So 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.
And your next question comes from Lloyd Wim Fried from Deutsche Bank.
Thanks. Two questions if I can. First, can you just give us an update on How you're approaching the incremental Prop 22 costs? How are they coming in versus your estimates? How are you passing along Or not passing this along to consumers.
And what are you seeing in the competitive environment that may inform what you do? And then 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 Yes, more mature contribution margins or regional EBITDA margins, anything you could share there would be great. Thanks.
Hey, Lloyd. Maybe I'll take that. So first, in terms of the Prop 22 costs, we're absorbing the vast majority of the Prop 22 costs. We are passing them along in certain instances, but for the vast majority of the costs in California, we're absorbing in our P and L. And If you think about why we're doing it, it's 1st and foremost in order to benefit merchants because if we keep prices low 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 prop donated 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. And the reason for that is because active efficiency is once simply a product of the traffic that's on the streets or the waiting time at There's a ton of product work that goes into dispatching your dasher appropriately, ensuring batches are Prepared was ensuring wasted time at the restaurant is eliminated and so on. So we've not found the ceiling yet And I feel good about the fact that there's continued improvements in active efficiency where possible, but we don't have at least a view in terms of where it looks at you at this point.
All right. Thank you.
And your next question comes from Jason Phil Stein from Oppenheimer.
Thanks. I'll ask 2. 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 back end. And so maybe just talk about how you drive that adoption?
Is there certain pricing mechanisms you're using or other ways to get that out there? And secondly, just maybe talk a bit more about kind of the caps and some of the pushback. I mean, number 1, Any information you could care about how non chain restaurants are kind of increasing prices Online prices offset fees and just in general that behavior and the awareness that that's kind of a pretty healthy way to kind of manage. And then can you see any way that permanent jurisdictional price caps are legal? Thanks.
Yes. So Jason, maybe I'll take the first part of the question. So I think the first question was on Storefront. Look, Storefront is very early. It's a little over 6 months old as a product and it has grown extremely, extremely quickly Since launch and you're right, in some sense for merchants, it's a bit of a no brainer because it already integrates with all of their backup house systems that We've had to do on our marketplace.
On the flip side, there's a lot of work to be done making sure that it works With a wide variety of merchants, we serve we're very privileged and proud to serve 100 of thousands of businesses, but that also comes with lots of complexity in terms of their operations, their protocols, their reporting requirements and So on and so forth. And so that's really where we are. We're 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. And so we're just trying to create more and more features such that it can deliver more and more of
And 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. Now, based on all the conversations we've had with city officials, these price gaps are temporary in nature and they're all tied to Emergency orders that are related to in store dining. And so it's our expectation that when in store dining resumes, these price caps will fall away. In the interim, we'll begun implementing incremental consumer fees in order to recoup some of the costs related to price controls.
Remember, in the long term, our knot continue to do some 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. But in Q4, those price caps had an impact of $36,000,000 in terms of revenue or about 44 basis points on our take rate and we We're planning to manage to that similar dollar impact over time. In terms of the reality of permanent price caps, I don't want to comment on a hypothetical, but because based on all the conversations we've had so far, a solution is to be the temporary nature.
And just if there's anything you want to share about maybe proportion of restaurants that are using separate pricing for online versus
Yes, some restaurants are using menu inflation, menu price inflation in order to recoup fees. So far, again, this might be a function of the fact that in store dining shut down and consumer price elasticity, the impact in price elasticity is relatively Minimal, but we're hopeful that as in store dining resumes, merchants will recognize that keeping prices consistent with their in store is
Thank you.
And your next question comes from Ralph Schackart from William Blair.
Good afternoon. Thanks for taking the question. First, just on the annual EBITDA guidance for there that contemplates fairly wide range between $200,000,000 or so. I know you talked about price controls as well as Prop 22, but just can you give us 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.
And 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, so on your first question regarding the guidance, Really the objective there in the guidance is to ensure some level of discipline 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, Typically as it pertains to convenience, as you likely saw, 3rd 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. And so if we start seeing incremental progress and Positive signals from some of these new projects, including storefronts 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 low 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. And then on your second question with respect to the supply side, let me talk about merchants first. And with COVID and the recent pandemic, it became clear to merchants that they need a delivery channel. So merchants that weren't participating in delivery Prior to the pandemic, we needed to get an out delivery platform quickly. And so we saw a massive influx in terms of merchants, Would you like the selection growth and you can see that in the chart that we include in the shareholder letter where the selection is available and the platform has continued to grow.
In terms Our costs required merchants have been relatively stable. The same goes on the Dasher side where you've had sort of a tale of 2 cities. On the one hand, you would 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 Dasher would have been sort of Stable and so within the realm of what we were expecting.
And your next
On the shareholder letter, you guys mentioned that consumer acquisition costs increased in 4Q. So is that the trend we are Expecting or you're expecting going forward? And second thing, how should we think about maybe contract revenue going forward into FY 2021? Is that A rising trend as well. And specifically on advertising, can you talk about maybe what Channels working very well for you.
What channel that you 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 cost. To be clear, we manage our business to payback thresholds. And so the customer acquisition costs, the CPA that we pay in order to acquire customers, simply an output Resulting from a payback period that we're trying to hit. And so to the extent that we continue increasing the LTV of our customer base Through improved profitability, through improved engagement, through levers such as DashPass, it gives us more flexibility to increase our CPA. So 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 attention, Leads to continued market share gains in the future.
So the increase in customer acquisition costs are a choice that we're making to reinvest The profitability in our business. On the question around counter revenue, just looking at 2020 versus 2021, the Again, we don't guide the revenue, but I would point you to the fact that we have an incremental cost resulting from Top 22 that didn't exist in 2020 for the most part. And so You will see a decrement to our take rate in 2021 as a result of that incremental property to cost the vast majority of which we are We're choosing to absorb. And lastly, on the advertising front, again, we don't preference one channel over another necessarily. We're managing the business And so we will flexibly deploy capital across regions, across channels, As long as it fits 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 5 points in the 4th quarter, do you kind of AOB to stay in the negative territory throughout 2021. And 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.
So on the first question with respect to AOV, the first thing
I should clarify is if you take our GOV and divide it by 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 JOV. And so when you see deceleration in JOV, some portion of that deceleration is being caused By an increasing mix of drive orders. So I want to make sure I clarify that. 2nd, as we 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 I am in Q2 and so it's continued normalizing since then, but it's still modestly above pre COVID levels and we expect On your question on seasonality, what it says, 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. And as a result, Starting from Q2 onwards, we're going to see a reversion towards pre COVID behavior within the customer base. That includes reversion in terms of AOVs as well as order frequency and that's compounded by the traditional seasonality you see around the summertime Well, order frequencies are impacted as consumers get out more and go to restaurants a lot more. To the extent the Consumer behavior remains propped up as a result of the delay in the vacuum or other factors. Obviously, we performed to the upside.
Got it. Thanks.
And your next question is from Youssef Squali from Churis.
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 Geovis, 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 Certain thresholds because then it just creates so much friction with client, with consumers, with restaurants Potentially even bring some jurisdictions even harder to pay a harder look at the DNA economics of the business. And then Maybe just look at the business internationally. As you I know the focus is primarily on The U.
S, Australia, Canada, but as you look beyond and there were some press articles about your interest in Japan, etcetera. Can you just flush out what you look at in terms of an attractiveness of a market? I think your main competitor talks about wanting be number 1, number 2 and otherwise they're not in that market. I'm not seeing that many markets where people can still be number 1, number 2. So maybe if you can just flesh That out for us a little bit your strategy around international expansion beyond the 3 the other two markets you're in, that will be great.
Thank you.
Great. Hi, Youssef. So let me take the question on PayTrade first and then Tony can talk about international. I'd say when we think When we call our strategy long term, the idea is to lower commissions and fees on merchants to lower fees on consumers And to increase Dasha earnings. That's the simple sort of equation that we're trying to solve for.
And the way we do that is by On the merchant side, as we unlock greater efficiency in the P and L, whether it's through active efficiency or through eliminating Waste schedules through reducing defect rates that help our customer support costs and so on. We'll invest that both in 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 pay grade. And although our unit take rates declined, they are more than made up for the increase in engagement amongst DashPass consumers. And so If you look at total revenue per MAU for a DashPass user versus somebody that doesn't use DashPass, the total dollars of revenue or total dollars of gross profit For Dash Plus consumer tend to be higher than they do for non Dash Plus consumers.
So we're actively choosing to make that trade off. And so over time, as we unlock these efficiencies in the P and L and as we provide merchants with additional products and services, the idea is to continuously reinvest Those dollars into reducing mission 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 you'll have access to more of the TAM that will ultimately translate into growth over
I touched upon this a little bit earlier, but for us, it's really taking a very long term view. And otherwise, Candidly, we would not have launched in the United States either as we were not the 1st player in 2013 when we founded the company. And so 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. And I mean, 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. So 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.
And our last question comes from the line of Samuel Laurence from Arete.
Hi, thank you for taking the question. 2, please. So firstly, could you maybe talk a little bit about your testing in Dashmarts, how you're thinking about the business model here and if it can bring With order batching and as you add new verticals, how do you envision this becoming more material in the longer term? Thanks.
Yes, I'll take the first question on DashPass. And I think since Prabir talked earlier about active efficiency, I'll let him take the second question on batching. With respect to dashmarts, we're super excited about the Dashmart business. It's again very early days. We're turning into an experiment at the end of 2019 has been something that we've invested into 2020.
And so we're certainly seeing The right input metrics to cross our investment threshold and stage fees for further capital allocation. And really, if you think about the thesis behind Dashboard, 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, in the depth or magnitude that they wish for consumers, it's getting selection that they've never had before. I mean, for example, I mean, if you think about Restaurant tours, they also sell a lot of retail items, as an example, where in places like Chicago, we carry the sauces of Chefs like Stephanie Isard 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 DashMarts. Equivalently, that's also happening in other categories as well where, again, for merchants, this is an extension To bring them beyond their 4 walls wherever they are.
And for consumers, it's giving them selection that they've never had access to before.
Yes, Samuel, on your question on batching, batch rates have been relatively consistent for the last since Q2. And so 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's Several other sources from a product perspective that we made progress on, which is what 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 By the predictions of kitchen prep time to ensure the dash rate doesn't show up at the restaurant earlier than the food might be ready and so on. So Actually, it's obviously an important source for the R and D on resource.
And there are no further questions in queue. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.