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

Unacademy spent over 40 Cr on IPL ads this year. But, with 1000 employees laid off and an ongoing funding crunch, was the spent worth it? Let's find out!

8th June 2022
4 min read

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Tag wise split:

    Stage 100

  • Early stage 25
  • Growth 50
  • Mature 25

  • Topic 100

  • Sales 30
  • Marketing 30
  • Product 15
  • MVP 15
  • Founders 10

  • Content Type 100

  • Startup Analysis 100

In a nutshell

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.


VCs absolutely LOVE ed-tech startups!

In 2021, they became the 3rd largest funded sector with a capital infusion of $4.7B. And the money is showing in form of their massive ad spending.

I am sure you've witnessed Aamir Khan or Shahrukh Khan randomly pop up on your TV, impressed by how smart the kid has gotten after enrolling on the ed-tech platform they endorse.

Of course, who could even forget Unacademy's IPL ad that brilliantly mixes academics and cricket - 2 of India's household obsessions.

During the 2021 IPL season, ed-tech startups have collectively spent upwards of INR 300 Cr on ad slots. In fact, this year Unacademy alone spent INR 40 Cr on IPL ads!

But, with Unacademy laying off employees (1000 so far) and concerns over an 18-month-long funding crunch, was this 40 Cr spend worth it?

Well, we did some math to see if we can figure this out! Let's get into it 🚀

First, let's trace Unacademy's journey over the years

Unacademy started out as a simple college hobby for co-founder, Gaurav Munjal. He initially launched a YouTube channel and began teaching Java coding classes as an engineering student at NMIMS Mumbai in 2010.

Gaurav was doing very well with the channel and he was also quite famous on Quora. So, naturally, he thought of expanding the venture further.

After having a go at another small startup called Flatchat, Gaurav and his co-founders Hemesh Singh and Roman Saini officially registered the company Unacademy in 2015. The core offering was of course their educational content around Indian competitive exams.

But, unlike the YouTube channel which was directly monetizable, how was the trio planning to make money from the platform?

Well, in 2019, Unacademy officially launched its subscription service which generates most of its revenue. The pricing structure works something like this:

  1. Free Tier — Registered non-subscribed users can access all the recorded educational content for free
  2. Subscription Tier — Subscribed users can access the "Live Classes" by Unacademy educators

Today, Unacademy has reached over 800K paying users, which generates 95% of their operating revenue.

It's fascinating that Unacademy first started as a simple YouTube channel and was then built into a platform. Plus, Gaurav already had a sizeable audience on YouTube and Quora that he built from scratch.

So, we can learn 2 things here:

  1. Dream big, but start small. Begin by solving a problem you & people around you face.
  2. Buildd your audience, before building your product.

Covid induced lockdowns gives a boost to ed-tech!

Back in the old days (that's 2015 for us :p) when ed-tech startups were in their primitive phase, most of them were considered disrupters of the traditional education system. No surprise there because academics was always an offline affair in India.

So, Unacademy and the other ed-tech startups had most of their problems around the adoption and retention of users.

There needed to be a paradigm shift that would effectively bring online learning into the mainstream. And, the lockdowns due to COVID-19 did exactly that for ed-tech.

With students of all ages stuck at home, online learning medium didn't just become acceptable but also the norm.

Naturally, ed-tech startups saw the results of this shift immediately in their numbers. Unacademy's growth ballooned by multiple times during the pandemic!

Let's compare Unacademy's numbers for the last 2 years:

FY20

  1. Total revenue — Rs 103 Cr
  2. Expenses — Rs 452 Cr
  3. Losses — Rs 329 Cr

FY21

  1. Total revenue — Rs 464 Cr
  2. Expenses — Rs 2029 Cr
  3. Losses — Rs 1565 Cr

So, Unacademy's total income increased by 350%! Of course, its expenses also increased multifold, and so did its losses.

But, the pandemic came to an end. With things going back to normal and students to their offline classes, a decline was inevitable.

For Unacademy and ed-tech in general, the COVID party seems to be over!

Unacademy's spend on IPL Ads

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. They are in fact one of IPL's title sponsors.

But, is all of that ad spend worth it for Unacademy? Well, let's do some math to figure it out!

Let's calculate Unacademy's IPL spend

  1. Unacademy's IPL budget according to sources[1] for 2022 = Rs 40 Cr (120 Cr/3 years)
  2. Their target group (TG):
    • High School & Post K-12 students => Age 15-25 years
    • High School student's parents => Age 31-40 years
  3. In 2022, overall IPL viewership was = 20 Cr
  4. The percentage of IPL viewers that come under the age group 15-25 & 31-45 = 40%
  5. So, we have a total target audience of = 8 Cr
  6. Unacademy's paying user conversion rate = paying users/net users = 350K/30M *100 = 1.1%
  7. Traditionally, the TV ad conversion rate is 0.7%. So, net net the paying users = 8 Cr x 0.7% x 1% = 5600 users.
  8. We finally get the customer acquisition cost (cac) = Rs 40 Cr/5600 users = Rs 72K/user

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

So, what's the verdict?

Clearly, burning Rs 60K to acquire a single user doesn't seem sustainable.

On top of this, with the ongoing downturn, Unacademy is under great pressure to cut costs and focus on extending its runway.

Considering the grave situation, CEO, Gaurav Munjal, sent a memo emphasized on cutting costs and focusing on a profitable angle to survive this downturn. They even had to lay off over 1000 employees, since payroll accounts for the majority of their total expenses.

All in all, the coming months will be a major test for this startup. We will have to see if Unacademy crumbles under pressure or will problem-solve to fly higher than before.

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