Byju’s- one of the biggest start-ups in the country released its financial results earlier this month. The firm has reported consolidated losses soaring up to 19.8x to Rs 4,588.7 crore versus Rs 231.6 crore in FY20. According to their results, the total income fell 3% in FY 21.
On the other hand, Unacademy, another start-up in the EdTech space admitted a funding shortfall a few months ago and decided to cut back on their ad spends among other expenses.
Traditionally categories like FMCG, Automobile have reigned in the adex space in India. However, the ed tech category rose to be one of the biggest marketers last year. We even saw Byju’s becoming the title sponsor of the Indian national cricket team and getting actor Shah Rukh Khan on board as a brand ambassador.
Unacademy too spent Rs 411.2 crore on advertising and promotional expenses in FY21.
However, this period was also filled with a lot of conversations about EdTech as a category. Several stories about undue pressure on employees, as well as dissatisfaction among customers (especially parents), have been doing the rounds connected with players from the category.
During such situations, brands usually rely upon advertising and brand building measures to address the chatter. However, at a time, when these brands are experiencing losses and cash crunch, BestMediaInfo.com reached out to experts to find out how these Edtech players can get out of the slump.
According to Lloyd Mathias, Business Strategist and Angel Investor, Edtech will continue to be big ad spenders as the category still has a lot of potential. “Most funded start-ups are in the growth phase and will spend ahead of the curve to increase their share and grow their customer base. So, it is not surprising that start-ups spend on big marketing properties to make a big splash. Investing in mega events like the IPL or ICC/BCCI events is part of this. I think this is perfectly acceptable so long as these start-ups are able to use these spends effectively to meet their business objectives. I’m certain their investors will keep tabs on this.”
Nisha Sampath, Brand Consultant and Managing Partner at Bright Angels Consulting, said the way forward for the brands is not through the wall of advertising but having honest conversations with the stakeholders. “No brand or business operates in a vacuum, there is a cultural context that they have to be sensitive to. If you look at education in India, people look up to the teachers and schools. So, this is a space where values are very important. You need to keep in mind that you are still operating in the education sector.”
“The education category traditionally does not require advertising but rather revolves around word of mouth and experience. These things have built institutions over time. You should look at the brand building through a different lens as compared to any other FMCG or retail brand. If you understand the category well, you will build the brand through the lens of values, culture, actions etc,” said Sampath.
She also said that just raising money was earlier seen as a sign of success however now people are beginning to question it. She said it's not only about raising money but also about how you spend it.
“Would you rather not have an organisation with a purpose that contributes to education and nation building rather than sponsoring cricket teams and football teams. From the beginning, the premise of brand building in this category has been flawed,” she added.
According to Samit Sinha, Managing Partner, Alchemist Brand Consulting, many new age categories are focusing solely on building valuation. “Many of these categories be it EdTech, HealthTech, and others similar to them follow the model of creating a lot of visibility and do rapid customer acquisition at any cost. However, they don’t look at the bottom line at all. They just acquire customers and push up their acquisition. It's like a gamble, some make it while others do not.”
“The business foundation or fundamentals remain weak, so there comes a point in time where you struggle because you suddenly realise that you are not making profits. That creates an alarm for the people who have invested and they start asking questions. Therefore, I am always in favour of organic growth. I believe that valuation should be the outcome and not the objective. Brand building should be the objective,” said Sinha.