Not everyone gets it! - CRED's Ad Spend

Is Kunal Shah a visionary whose vision "Not everyone gets" OR is he just burning a ridiculous amount of cash because he can? Let's analyze CRED's ad spend in detail!

27th April 2022
4 min read

In a nutshell

CRED is used to pay credit card bills instantly which earns users “CRED coins”. They can use these coins to claim rewards and benefits.

But, that’s not it. Only users with a high credit score are allowed to access CRED, which helps CRED build a network of financially trustworthy individuals.

What next? CRED can lay different business models on top of this network like rent payments & peer-to-peer lending.

So IPL ads are a way for CRED to acquire users at scale, to build this trusted network.

But these ads cost CRED a whopping INR 216 Crores! That's INR 1271 to acquire a new user!

Over a lifetime, if 5% of users generate revenue, each user will have to generate INR 25,420 to make CRED money.

"Indira Nagar ka Gunda hoon main!"

Boy o boy, that animated ad by Dravid was a killer — it was even adjudged the most viral ad of IPL 2021.

Now, virality doesn't necessarily mean a smart spend by a company. You see, IPL Ads are painfully costly. But what is that to a "healthily"-funded company like CRED - it spent ~50-60% of its total expenses on marketing and continues to make huge losses.

So, is Kunal Shah a visionary whose vision "Not everyone gets" OR is he just burning a ridiculous amount of cash because he can?

Well, let's see if we are able to answer this question better at the end article 😛

CRED - firstly, what the hell is it even trying to do?

If you have used the app, you possibly used it to pay your credit card bills and earning "CRED coins" in return. Those coins can be used as currency to claim rewards, travel benefits, etc. So, it is a deals/coupons app?

Nah, that would be boring - where's the "visionary" move in that?

So, what is it?

The cashbacks are basically a mouse trap to attract customers. The catch is that the app is only accessible to people with a credit score greater than 750.

Why? Well, the goal is to create a network of financially trustworthy individuals and then use that network to drive various business models. The way to identify such trustworthy individuals is through their credit score and hence the cut-off.

General trivia: Highest score possible is 900.

Great, so how's a "trusted network" supposed to help?

The premise is that trustworthy customers’ are a goldmine for any business. Getting them together on a single platform allows CRED to overlay many different businesses on top of that network.

As the founder, Kunal Shah says, "We are not a FinTech company, we are a lifestyle company".

So, what businesses? P2P lending, rent payments or even helping users invest in real estate in a fractional manner. Well, they already offer the first two services!

Not just this, the fact that CRED has specific financial information about its users, can also help other businesses like financial institutions access the right users better.

For example, in 2020, CRED launched a service that allows its members to borrow up to Rs 5,00,000. What's more, it does not require any forms, phone calls, or physical visits. Just 3 steps to get the money in your account.

Got to accept that there is an element of novelty here. This seems to be motivating VCs to pour millions into CRED to grow its user base. Smart move? Not sure, what do you think?


Now that we agree that CRED's main goal is to grow its user base, we can get to IPL Ads! We all saw Dravid beat the sh*t out of a few cars - very entertaining. Now, let's see if those ads made economic sense or not.

IPL Customer acquisition cost calculation

  1. For this year’s IPL season, Star Sports hiked the ad rates by around 15%.

    • So, it was INR 13 lakh for 10 seconds last year. Now, it will cost upto INR 15 lakh.
  2. Now, the CRED ads are about ~30 seconds long. That’s INR 45 lakhs each time the ad is shown.

  3. The tournament had a total of 74 matches, each with 20 * 2 = 40 overs.

    • So, in an entire season, that is 74 * 40 = 2960 overs => 2960 opportunities to show ads.
  4. Let us assume that the CRED ad is shown 30% of the times (my conservative assumption). That’s 30% of 2960 = 888 times.

  5. So, the total IPL Ad Spend by CRED = (Point 2) * (Point 4) = 888 x INR 45 lakhs = INR ~400 Crores.

  6. CRED has 7.5 million users over ~4 years. Assuming linear growth, that is => avg. 156k/ month new users.

  7. In 2020, CRED’s investor, Shailendra Singh of Sequoia Capital commented that these ads have increased the daily signups by 6 to 7 times. Let’s assume the same for 2021 too at 6 times.

  8. So, in a 2-month period, that is: (Point 6) * (Point 7) * 2 months = 156k * 6 * 2 = 1.8 million OR 18 lakh new users.

  9. The cost of acquisition per user is: (Point 5) / (Point 8) = 400 crores / 18 lakh = INR 2222 or ~$29.2 per user (at 1 USD = ~INR 76).

So, that’s the cost to acquire a new user => INR 2222 or ~$29.2

So, what's the verdict?

Honestly, the cost of acquisition seems super high to me. You see, most of these people will possibly not be engaged users, let alone revenue-generating users.

If we consider 5% of them to be revenue generating, then each user will have to generate INR 2222 / 5% = INR 44,440 in their lifetime for CRED to even start making money off them.

Then again, some of the monetization models of CRED are based on pure volume of users - that's what is going to attract other companies, initially.

Ultimately though, even those companies would want quality to achieve a positive outcome with their investments. That requires an engaged audience and not just volume.

Will CRED be able to do it?


Once the money tap shuts, will engagement also disappear?


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Everything is becoming an ad network!

Amazon's ads business has done tremendously well. Now following suit, Walmart is also aiming for a bigger piece of ad revenue. In 2021, Walmart made ~1.5bn surpassing Twitter & Snapchat and doubling its ad business vs 2020.

But the winds are changing in the digital ads market as more & more people are moving towards privacy.

Now with Apple’s privacy policy change, 62% users have opted out of tracking which cost $10bn in revenue for YouTube, Facebook, Twitter & Snapchat in just 6 months 🤯

This works in favour of Amazon and Walmart. All of the data that Amazon & Walmart collect when you shop on their website is completely owned by them. So no privacy change will ever take the data away from these companies.

The data these companies "own" has just become more valuable for ads! So now any company that attracts you to their website and collects your data has the potential to be an ad network.

Ultimately, everything is becoming an advertising network.

Unacademy IPL Ads Spend - Was the 40 Cr ads spent worth it?

Unacademy started out as a simple college hobby for a co-founder, Gaurav Munjal. In 5 years, it was built into the actual company with a free tier and a subscription model.

Being the 2nd largest ed-tech startup in India, Unacademy enjoys a lot of attention from VCs.

Its current valuation is $3.44B, after it raised a $440M funding round in 2021. Much like any other VC-funded startup with deep pockets, Unacademy naturally spends a huge amount on growing its user base.

Given the wild popularity of IPL in India and that most of their target audience tunes in to watch IPL, Unacademy spends a ton on IPL ads.

1) Overall, in 2022, Unacademy spent Rs 40 Cr on IPL ads in 2022.

2) Their target audience accounts for over 40% of IPL’s total 20 Cr viewership, which is 8 Cr target audience.

3) Unacademy's paying user conversion rate = paying users/net users = 350K/30M *100 = 1.1%.

4) Traditionally, the TV ad conversion rate is 0.7%. So, net net the paying users = 8 Cr x 0.7% x 1% = 5600 users.

5) We finally get the customer acquisition cost (cac) = Rs 40 Cr/5600 users = Rs 72K/user

6) If we say that on average the course fee is around 10K. Unacademy still is burning ~60K per user acquired.

Bootstrapped startup Zerodha beat VC-backed Upstox to become the largest stock broker in India!

Upstox and Zerodha are very similar businesses on the surface:
- Both were started by brothers
- They both were launched after the 2008 crisis
- They also follow the same pricing structure & the ZERO brokerage fee model.

But, although these businesses are so similar, the results they produce are extremely different! Zerodha makes Rs. 1122 Cr profits while Upstox makes INR 72 Cr in losses. This is when their no. of users is very close, 5.5M for Upstox and 6.2M for Zerodha!

This is because of Upstox massive marketing spend. It spent INR ~49Cr on IPL ads this year and they approximately get a return of INR ~9.8 Cr. So they are approximately burning INR 787 to get ONE user!

But, that's not it - 70% of Upstox's users are first time traders who buy stocks and sell them when their price increases. These equity investments only account for 1% of all transactions. So, they are mostly not reliable.

On the other hand, Zerodha has completely focused on getting serious intraday traders who account for the rest 99% of transactions. That's the main reason why Zerodha's revenue is SEVEN times that of Upstox, while their active users are almost the same.