Last month, replying to a tweet on start-up marketing spends coming down, Unacademy’s co-founder and CEO Gaurav Munjal tweeted, “Dropped our performance marketing spends from Rs. 18 crore to Rs. 2 crore per month. No impact on Revenues.”
As we spoke to several other founders and investors in the start-up ecosystem, this seems to be the general trend. Amid an ongoing funding crunch, most have cut down marketing spends, especially digital marketing, on search engines like Google and social media platforms, without seeing much impact on revenue.
Over the past few months, marketing spends of start-ups have reduced by around 30-60 percent. Sectors like fintech, edtech and cryptocurrencies saw the maximum decline, industry players told Moneycontrol.
Start-ups focussed their limited marketing budgets on either retargeting existing customers, or creating niche influencer focussed content on short video apps.
Ajit Varghese, Chief Commercial Officer, ShareChat and Moj, told Moneycontrol, “Last two years have been a great journey for most companies in terms of digital adoption, number of users, revenue growth, and time spent on digital platforms — there was an unprecedented jump in metrics. Thus, everything that was available physically is now available digitally. Will that story continue YoY, with a 50-100 percent jump in adoption? I don’t think we should even expect that.”
“Start-ups have definitely become more cost-conscious. Whether it is the cloud, user acquisition, infrastructure, or people — all costs are getting rationalised because aggressive growth has started stabilising. We have seen start-ups cutting marketing costs by 30-40 percent, or even more. More than cutting costs, they have started focussing on actual performance, either through user acquisition or down-funnel metrics, rather than just branding, awareness and saliency,” he added.
For more established and profitable listed companies, marketing spends are down by 10-15 percent, Varghese said.
Viraj Sheth, an investor, and Co-founder & CEO, Monk Entertainment, a digital marketing company actively working with many leading start-ups, influencers and social media platforms said: “Start-ups have definitely reduced spending. We’re seeing spends go down by 50-60 percent in fintech and edtech. D2C (direct-to-consumer ) brands are still spending well. It’s the crypto, fintech, edtech industries that have taken the biggest hit.”
Fintech, edtech and cryptocurrency sectors were also the most funded in 2021. With the ongoing funding crisis and other macro headwinds, each of these sectors have had their unique set of challenges in the past few months.
While some fintechs are still wrapping their head around the Reserve Bank of India’s new lending norms, the cryptocurrency segment was jinxed not only by the global crash in token prices, but also by new taxes introduced in India, and most recently, an Enforcement Directorate investigation and the freeze on bank assets of one of the top exchanges, WazirX.
Edtech has had a very different trajectory. After a year and a half of large scale hiring, acquisitions, and scaling up on the back of increasing demand and funding, faced with the funding winter, top firms have now started pulling back operations with lay-offs and hiring freezes.
Personalised and retargeted ads
According to Amit Nawka, partner, Deals & Startups Leader, PwC India, marketing spend in start-ups is of three types, one of them is ‘brand marketing’. The other two are more personalised marketing, which involves targeting new customers and retargeting old ones.
“During the boom, start-ups spent a lot on brand marketing through say, spending on IPL, Google search optimisations, and all of that, for brand building. When the money is tight, they tend to cut out brand building and focus on personalised marketing, which is for new customers, or retargeting,” Nawka told Moneycontrol.
“There is a customer, who has purchased from you in the past, and has experienced the brand and the product. Now, can we retarget that customer and get him back on the platform? That should be simpler, right? Because you don't have to spend a lot of money blindly for say, Licious (a frozen meats brand), trying to target me when I'm a vegetarian,” he explains.
Nawka said, "When you look at retargeting, there are several SaaS companies that come into play, because there's a lot of analytics being done. For instance, if you have ordered food online, they would have created a profile of you. They know what kind of meals you have ordered, at what time, at what ticket size etc."
“It totally depends on the start-up. Those that have already executed their performance marketing initiatives may want to attract the masses via influencer marketing. The ones that have already done influencer marketing may want to retarget those customers via new campaigns,” says Monk Entertainment’s Sheth.“Short form content has picked up a lot. Brands have started allocating marketing budgets for content on YouTube Shorts and Instagram Reels,” he added.