Over the past few years, Performance Marketing on digital media platforms emerged as a pivotal tool for Direct-to-Consumers (D2C) brands looking to scale and grow their business as it helps in quick customer acquisition and monetisation. Top Indian D2C brands like Mamaearth, Nykaa and SUGAR allocated most of their advertising budgets to digital advertising platforms where they could track the effectiveness of marketing campaigns in real time.

D2C brands are now shifting gears and started investing a significant chunk of their ad budgets toward brand building even as they pruned their overall marketing spends following prolonged funding winters, as per initial trends observed by industry executives. 

Anil Solanki, Senior Director, Media Lead, dentsuX, told e4m, “There’s a noticeable trend of D2C startups increasing allocations towards Television, Print, and other traditional media in comparison to digital platforms. While exact figures vary from category to category, an increasing percentage of ad spending is likely moving towards TV and Print, potentially signalling a significant shift from digital channels.”

If the trend continues this year, TV and Print are likely to gain, while Google and Meta could experience further declines in ad and search revenue in the coming years, as evidenced by their already slowing growth in India, Solanki noted. 

Vishal Chinchankar, CEO, Madison Digital and Madison Media Alpha, has observed a similar trend, “D2C brands contribution to traditional media has been marginal so far, mostly single digit, compared to other categories. Now, we are witnessing that brands are having a higher mix on TV compared to Digital.”

Deleise Ross Senior Vice President & Business Head, MudraMax, DDB Group agrees with Chinchankar and Solanki. 

Notably, brand building through Television, Print and OOH media has been an integral part of legacy brands marketing strategy for years which is believed to have helped them grow albeit slowly and sustain market pressures over decades. 

In contrast, D2C startups have largely focussed their campaigns and marketing plans on Social Media, OTT and Connected TV to quickly monetize their marketing efforts so much so that their sales and valuation grew many fold within a few years of inception.  Advertising and promotion budgets of top D2C brands ran into crores, sometimes more than their revenue. Unicorns and decacorns have had annual ad budgets in the range of Rs 500 Cr to Rs 2,000 Cr till a couple of years ago. Many of them even bagged a place among India’s top 50 advertisers list in 2020 and 2021. 

Not anymore. The valuation bubble burst later with several poster boys of the Indian startup ecosystem left with marked down valuation and reported heavy losses. Less spending by startups is also being viewed as the primary reason behind a drop in India’s digital Adex growth in FY23. 

“In 2023 despite GDP having grown at 7.3%, AdEx seems to have grown at only 10%, which is the lowest growth Indian AdEx has seen in the last six years, except the year impacted due to Covid,” stated the recently launched annual e4m Pitch Madison Advertising Report. 

Apart from citing inflation and Russia-Ukraine war among prime reasons behind this drop, the report also blames startups for the slowdown in the ad industry. “The startup funding winter continued leading to many startups completely abandoning their advertising plans, including substantial reduction on spends in Performance Marketing.”\

Saturation or Maturity?

India’s D2C market is expected to achieve a gross merchandise value of $30 billion to $35 billion by 2027, according to a report by Redseer Strategy Consultants. This represents a compound annual growth rate of around 40 per cent for 2022-27, over three times that of the broader retail market and 1.6 times that of the e-commerce market for the same duration, the report stated. 

Such a huge market is now moving towards stabilization. Marketing strategies are being revised accordingly, experts say.

“The shift in advertising strategy makes sense for D2C brands as they mature. In the early stages, focusing on performance marketing helps drive quick sales and establish a customer base. However, as these brands become more established, investing in brand building becomes crucial for sustaining long-term growth and differentiation in a competitive market,” Deleise Ross opines. 

She added that while digital channels have been dominant in recent years due to their targeted approach and measurable results, they might reach a saturation point for certain brands or industries. Additionally, rising digital ad costs and concerns about data privacy could also contribute to a slowdown in digital ad spend growth.

TV and other traditional media channels offer wide reach and can effectively build brand awareness and credibility, which are essential for D2C brands looking to expand their market share and penetrate new segments, Ross says. 

Chinchankar echoes the sentiments. “D2C brands in their early growth stage, predominantly focus on customer acquisition through performance marketing on digital media. To a large extent, these brands also use digital platforms like Connected TV and OTT to build their brand awareness. They usually move their investments on TV once their offline distribution is scaled.”