Lyft will start serving ads to customers on its app for the first time this week.

Adverts will appear while consumers wait for their taxi, when they are matched with a driver, and for the duration of the journey.

The company is also planning to roll out video ads on the app later this year in addition to exploring other ad products such as in-car screens.

How it works. Targeted ads will be served to Lyft customers using data collected via payment methods, ride histories and lifestyle segments. Users will have the option to opt out of targeted advertising, however, they will not be able to opt out of being served ads.

Why we care. It’s important to be open to testing new ad formats and to diversify as much as possible because relying too heavily on one platform or channel can have a devastating financial impact. However, there is a risk of potentially annoying customers if they are bombarded with ads. The targeted ads may also raise privacy concerns, which would not be a good look for advertisers.

Why now? The move comes after Lyft said that ad revenue had exceeded expectations and grown significantly in recent months. So it’s understandable that the company is continuing to invest in this area.

Notably, Lyft’s rival, Uber, launched in-app video ads last month. When the company announced its Q2 earnings last week, it said that advertising revenue exceeded expectations at over $650 million. Given the success Uber has experienced, it makes sense for Lyft to also trial in-app video ads.

What has Lyft said? Lyft’s Chief Business Officer, Zach Greenberger, told the Wall Street Journal:

• “We’re going to continue to invest in our omnichannel strategy that we believe does create differentiation from our competition because we can hit a user on every kind of step and part of their transportation journey, which also includes our massive bike network.”

Deep dive. Visit Lyft’s advertising help centre for more information on its ad product offering.