Is a start-up spring in the offing after an ad spending winter?

Mid-2022 saw start-ups dropping their ad spends due to the continuing funding winters. 2023 also turned out to be a dry year for the Indian start-up ecosystem. But are start-ups back in the advertising game?

Start-ups have reached a stage where their financial records are more or less pristine. Their focus has shifted from the initial pursuit of acquiring customers at any cost to sustaining their existing clientele. Instead of investing heavily in customer acquisition strategies that may not yield immediate profitability, they are now prioritizing efforts to nurture and retain their current customer base. This shift in advertising strategy reflects their commitment to long-term sustainability and profitability.

In a recent interview to e4m, Ashwin Padmanabhan, President - Investments, Trading and Partnerships, GroupM India, spoke about start-ups making a comeback after being off the advertising grid for nearly 18 months. “They have reached a stage where their books are more or less clean. Now their advertising is about sustenance and not about the unprofitable acquisition of customers,” he explained.

The recently released Pitch Madison Advertising Report (PMAR) 2024 also substantiates this, with just one start-up in the list of top 50 advertisers as compared to 9 in 2022.

Padmanabhan also pointed out that the percentage of ad spends may not be higher or similar compared to earlier times, but it still will be a significant amount and that will add to the AdEx growth in 2024. 

According to PMAR 2024, the funding winter led to many companies completely abandoning their advertising plans, including a substantial reduction on spends on performance marketing.

Dream11 was the only start-up that maintained its position among the top 10 advertisers, despite a fall in its rank to No. 10 from being at No. 4 last year. In 2023, the company spent Rs 700-800 crore on advertising. 

Many start-ups, which previously concentrated solely on top-line growth due to the ease of access to funds at inflated valuations, are now struggling to attract further investments to keep their businesses alive. Meanwhile, many start-ups, such as those in the edu tech sector, have halted large-scale investments. “Real money gaming has (also) crippled because of the government’s 28% GST imposition, while cryptocurrencies are not considered legitimate,” the PMAR 2024 said. 

It has also been noticed that while start-ups may not have spent significantly in 2023 they did spend on large-format shows on TV. 

Ajit Varghese Head – Network Advertising Sales, Disney Star, also told e4m a while ago that start-ups were looking to make a comeback and tell their story better. “Now a lot of start-ups are looking to come back and want to tell their stories in a different way.”

However, a senior media planner said there hasn’t been a significant uptick in spends from start-ups yet but added that the second half of the year was likely to see an improvement on that front. “Our analysis is that the ad spends will start only in the second half of the year,” he mentioned.

While it is difficult to anticipate how much start-up advertising will contribute to the overall AdEx growth, the industry is confident that their return will help the industry thrive. Also, with the first half of the year packed with events such as the IPL, general elections and the T20 World Cup, the industry is likely to see some more spends coming from the sector. Two start-ups, Dream11 and MyCircle11, are among the nine companies that have secured slots for the IPL tender document for associate and special partners.