In recent times, quick commerce platforms like Blinkit, Zepto, and Swiggy have seen a remarkable increase in their advertising revenues. This sector, known for its rapid delivery services, is carving out a significant niche in the advertising market, with predictions indicating revenues surpassing the Rs 1,000 crore mark this financial year. This explosive growth is driven by an expanding user base and the critical need for brands to differentiate themselves amid intense competition.
Market leaders in this segment, such as Blinkit, have reported astonishing increases in advertising revenue, nearly quadrupling to over Rs 400 crore for the 2023-24 fiscal year. Their trajectory indicates that they are on track to exceed Rs 1,000 crore in ad revenue for the current financial year, a testament to the effectiveness and growing reliance on these platforms by brands seeking visibility. Zepto is similarly positioned, boasting a revenue run-rate that also approaches the Rs 1,000 crore milestone.
But what factors are fueling this surge? A quick commerce executive, seeking anonymity, highlighted that one compelling reason brands prioritize advertising on these platforms is the significant growth in their user base. Blinkit, for instance, has seen its monthly transacting customers nearly double to 8.9 million during the recent July to September quarter, compared to 4.7 million the previous year. This burgeoning user engagement creates a fertile ground for effective advertising.
In quick commerce, the immediacy of service inherently compels brands to invest in advertising. Delivering products rapidly requires brands to ensure their visibility. “To achieve inventory offtake quickly, brands tend to spend on ads to stand out for their consumers,” the executive elaborated, while also noting the investments made by platforms to enhance advertising technologies, enabling more impactful marketing campaigns.
Interestingly, the scale of ad revenue generated by quick commerce firms is outpacing traditional e-commerce giants like Flipkart and Amazon. Together, these marketplaces reported Rs 11,621 crore in advertising revenue for the 2023-24 year, while emerging players in quick commerce are swiftly bridging the gap. This swift growth illustrates the sector’s potential to outperform mature platforms.
Companies like Meesho are also noticing similar trends, deriving a significant portion of their operational revenue from advertising, which offers better margins compared to logistics services. Blinkit, for example, reports an annual gross sales run rate approaching $3 billion, while Zepto is tracking $2 billion. Furthermore, Swiggy Instamart boasts a run rate of around $1.3 billion as of June 30.
Another key takeaway is the profitability advertising brings to consumer internet platforms, with reports suggesting that 90-95% of advertising income contributes directly to profit margins. Zepto’s founder and CEO Aadit Palicha stated, “Today we are at an Rs 1,000 crore annualised revenue run-rate (from advertising)… it’s a meaningful driver of the bottom line.”
Both Zomato, which owns Blinkit, and Swiggy are capitalizing on this trend, adapting their strategies to enhance the contribution of advertising to their revenue streams. Recent reports indicate that advertising revenue, previously accounting for 10-12% of total revenue for food and grocery delivery services, has now risen to approximately 15-20%.
Swiggy articulated its commitment to increasing advertising revenue, stating in its initial public offering prospectus a plan to enhance its advertising tools. This strategy aims to empower partners to run unique and customized advertising campaigns driven by in-depth analytics and insights.
Furthermore, Zomato reported significant growth in advertising revenue, particularly outpacing its gross order value, emphasizing the evolving landscape of online food delivery where advertising is increasingly pivotal.
However, for quick commerce firms to remain competitive, continuous improvement in technology is vital for delivering data to brands concerning ad performance. Many smaller brands, which may not have extensive advertising budgets, are particularly focused on specific outcomes. A digital marketing executive remarked, “Smaller brands which don’t advertise on a larger scale look for very specific outcomes…that is a prerequisite for them to allocate their ad dollars to any channel.”
The introduction of programs like Blinkit’s Seller Hub – designed to onboard brands similar to Amazon’s Fulfillment program – demonstrates the platform’s push to provide brands with valuable sales insights and advertising tools. This strategic move is expected to amplify revenue intake from advertising.
Looking ahead, as the competition in quick commerce intensifies, advertising revenues are projected to play a crucial role in firms improving their take rates. Analysts suggest that, while quick commerce platforms are investing heavily in expansion, they also face challenges associated with discounting practices.
“A category like groceries has slim margins,” noted a Mumbai-based analyst. He emphasized that while sourcing directly from brands could aid in margins, advertising revenues will be essential to ensure sustained profitability.
The rapid growth and evolving marketing strategies within quick commerce illustrate a shifting paradigm, where advertising becomes not just supplementary but a cornerstone of a profitable business model.
