From drop in investments to slashed valuations to governance concerns, and retrospective taxes, the Indian startup ecosystem navigated through a series of challenges in 2023 resulting in layoffs, shutdowns and diminished marketing spends. Experts predict that 2024 could be pivotal for startups and advertisers alike, shaping the future of the media and advertising landscape.

“Theadvertising and media sectoris poised for a potential recalibration, requiring stakeholders to stay vigilant and agile in the face of evolving circumstances,” media planners told e4m, adding that top media agencies experienced a single digit growth in billing in 2023 compared to double-digit growth a year ago.

Agencies catering to startups might experience aslowdownas their clients may further slash theirmarketing spendsto remain profitable, industry leaders admit. The crisis could impact both traditional and digital advertising platforms.

Their concerns are valid. After all, Indian startups secured a mere $10 Bn in funding this year, marking a stark 60% decrease from the impressive $25 Bn raised in 2022. The median ticket size hit its lowest since 2019, plummeting to $2.2 Mn from $4 Mn, as per Inc42’s annual “Indian Tech Startup Funding Report 2023.”

Notably, startups dominated advertising during the pandemic, with 15 new-age firms, including Byju’s and Dream11, making it to the top 50 advertisers list in the 2021 Pitch Madison Annual Report.

However, the landscape has shifted. Byju's, once a poster boy of the Indian startup ecosystem, faces losses worth Rs 8,000 Cr now. Its valuation plummeted by 95%, reaching $1 billion from $22 billion in October 2022. Other edtech startups are also grappling with challenges after the pandemic.

Gaming startups, which sponsored various cricket properties, are at loggerheads with the government over retrospective taxes. Dream11, for instance, is fighting a legal battle against a whopping Rs 40,000 Cr retrospective GST notice.

Crypto firms, once marketing heavyweights, ceased advertising in 2023 due to regulatory issues, while government bans have impacted betting firms.

Shashi Sinha, CEO of IPG Mediabrands India, says, “Startups bought premium and high-impact properties like cricket tournaments and reality shows which have been affected the whole of last year. Hopefully, things will improve this year.”

The fund crunch at startups hampers their ability to invest in advertising, limiting overall industry spending, says Anil Solanki, Senior Director, Media Lead, dentsu X.

According to the Pitch Madison Advertising Report (PMAR) released in February last year, India's total advertising expenditure (adex) was projected to surpass ?1 lakh crore in 2023. The actual outcome of the year will become apparent upon the release of the PMAR 2024 report.

Medium to be affected 

Startups are streamlining operations by closing non-core verticals, reducing overall expenses, and freezing recruitment in response to the challenging phase. This has led to a cutback in advertising expenditure, notes Dr. Somdutta Singh, Founder and CEO of Assiduus Global Inc, Angel Investor, and Core Committee Member of WEP- Niti Aayog.

The fund crunch is expected to lead to reduced spending on marketing and promotional activities by new age firms.

Sajal Gupta, CEO of Kiaos Marketing, foresees traditional channels like TV and Print facing the brunt, while others anticipate challenges for digital media platforms. “This trend was noticed in Television in IPL 2023, where we noticed the new-age startups were missing and there was a comeback of the traditional businesses.”

Ramya Ramachandran, Founder & CEO of Whoppl, agrees with Gupta. She said, “Traditional channels like print and TV are likely to be hit the hardest due to their higher costs. The impact will vary based on factors such as industry and target audience.”

Solanki emphasizes that digital mediums, crucial for tech startups, face significant impact. Yasin Hamidani of Media Care Brand Solutions agrees, projecting potential limitations on India's digital ad spend, slated to reach INR 41,000 crore in 2024.

Mathias has a different point of view. He predicts a rise in digital ad spend, citing tech startups' preference for better visibility and ROI in the digital realm.

Dr Singh also noted that startups are adopting an analytical and data-driven approach to advertising, prioritizing channels and campaigns that demonstrate clear cost-effectiveness and a better return on investment (ROI). He highlights the shift towards more economical marketing approaches, such as digital marketing, content marketing, email marketing, and influencer collaborations, replacing high-budget advertising campaigns.

It's noteworthy that tech giants Google and Meta together reported close to Rs 48,000 cr of ad revenue in India in FY23, about Rs 6,000 Cr up compared to a year ago. Their growth is however credited to small and medium sized businesses (SMBs).

Performance marketing over brand building 

Startups are expected to pivot their advertising budgets towards cost-effective digital platforms to leverage data-driven targeting, personalized messaging, and real-time campaign optimization.

Ambika Sharma, Founder and MD of Pulp Strategy, notes, the fund crunch is steering startups towards prioritizing performance marketing over brand building. This shift emphasizes measurable results, with startups focusing on metrics like conversions, click-through rates, and user engagement to allocate resources effectively and drive trackable growth outcomes.