D2C unicorns making way into India’s top advertisers' list: What lies ahead?

One thing that is common among brands like Dream11, Byju’s, Swiggy, Netflix, PhonePe, CRED, and Coin Switch is their advertising blitzkrieg. These new-age, tech-based companies, which became unicorns within years riding on India's digital growth, have secured spots in India’s top 50 advertisers list because of their high advertising spends.

According to the latest Pitch Madison Annual report, more than 15 start-ups have made their way into India’s top 50 advertisers' list in 2021, a coveted list usually dominated by FMCG brands. Dream11 (3rd) and Byju’s (5th), were among the top five advertisers in the country by spending huge in running spectacular campaigns.

Phone Pe, Upstox, My11Circle and CRED secured 12th, 13th and 14th and 17th ranks on the list respectively. Unacademy, WhiteHat Junior, Swiggy, and Netflix were on the 31st, 32nd, 34th and 35th positions respectively. Crypto firms CoinSwitch Kuber and CoinDCX are India’s 49th and 50th largest advertisers. Dream11 has been among the top five in 2019 but slipped to 14th rank only to bounce back to become the third-largest advertiser in India, only after HUL and Amazon. Edtech unicorn BJYU’s was at 27th position in 2019, it jumped to 9th rank in 2020 and now it has become the fifth-largest advertiser in India. 

Top 50 advertisers account for more than one-third (38%) of India’s Adex which has touched Rs 74,000 crore recently. Television and Digital continue to be their preferred mediums accounting for 88% of their total spends.

D2C Unicorns riding on VC funds

Most of these brands, such as BYJU’s and Coin Switch, have grown to an extent of sponsoring global events like Cricket World Cup, IPL and Olympics. However, BYJU’s and Coin Switch refused to comment on their ad expenditure. 

Rahul Vengalil, Managing Partner of Isobar, a dentsu Group company, says, “Most of these startups are D2C unicorns riding on venture capital funds. For them, spending heavily on advertisements is the only way to get customer acquisitions and prompt them for transactions. Their AdEx is often much higher than their total revenue. For instance, CRED spends nearly Rs. 200 crores in advertising while its revenue is merely Rs 89 crores.” Traditional brands can’t do that. On average, traditional brands spend 10-15% of their revenue on ad campaigns. D2C unicorns spend 40-50%, adds Vengalil.

Jyothirmayee JT, Founder and CEO, HiveMinds, a Madison World company, agrees with Vengalil. Although, she feels that the fast adoption of digital has accelerated the growth of all tech-based companies. “We are riding on a massive digital wave in India. It is a land grab moment on consumer adoption to digital and hence the massive ad spends especially when the companies are investor funded there is pressure to perform and show aggressive growth. This year, we have seen an increase in ad spends from e-commerce companies (Rs. 5,987 Cr), EdTech (Rs. 4,263 Cr) and select Fintech companies,” Jyothirmayee explains.

Shradha Agarwal, COO & Strategy Head, Grapes, an integrated Marketing Agency, said, “Tech-based firms are looking forward to capturing the growing youth market and creating a brand position. Another stark visible fact we can see is that despite elders being responsible for finances in the Indian households, it's the younger generations making transactional decisions these days.”

Is it the Pandemic effect?

Many traditional brands, including the high-spending FMCG brands, had cut down on their ad budgets during the pandemic. To overcome losses, many media houses have reduced their ad costs. Could these be the reasons why so many start-ups make their way into the top 50 list?

“Many traditional brands were not confident of spending high in ads during the pandemic. As far as startups are concerned, they are led by the digital wave which on the other hand benefited from Covid. The absolute spending from these startups is large, in their own accord many would have still made it to the top even if traditional brands had ad spends of pre-pandemic levels,” Jyothirmayee says.

Agarwal says, “Pandemic truly turned the market upside down. The sales dipped indifferently and traditional brands chopped their advertising budget which resulted in various competitors' brands making their way easily to the consumers. Meanwhile, several startup unicorns increase their presence utilizing economical, pandemic-hit advertising space.”

What lies in the future?

The speed and scale of the new-age brands have left ad industry wondering whether start-ups will outsmart the traditional brands in the advertising domain. “It is no longer test and scale decisions for startups especially when they have venture capitalists behind them. Traditional brands might have a hard time surviving in the future unless they have a very strong hold in the tech space. To compete in the ever-changing market, brands must bring about the confluence of their reach and USP with technology,” notes Jyothirmayee.

She further added that the new-age companies are able to spend and invest in customer acquisition and marketing. Industries might not be fixed though, for instance, edtech can be replaced by health tech or something new tomorrow, but new-age companies shall continue to invest in ad spending.

Vengalil too feels that more unicorns will find their way into the list of top 50 advertisers in the coming years. “Next year, there might be 20 unicorns in the top 50, but many of them would be new entrants. Today’s unicorns might reduce their AdEx in the next few years when they will be questioned by investors about their expenditure and profitability,” notes Vengalil. 

“We have seen Amazon, Myntra and Flipkart dominating the list earlier. They were investing heavily in advertising for consumer acquisition and retention. Now, we see CRED, BYJU’s, WhiteHat Junior, etc., joining the bandwagon,” Vengalil points out.