fintech ad revenue: Fintech’s Paytm, PhonePe, Google Pay eye ad revenue from D2C brands

Fintech and payment platforms, including Paytm, Walmart-owned PhonePe and Google Pay, are increasingly gaining traction among direct-to-consumer (D2C) brands as advertising destinations and customer acquisition engines, industry executives told ET.

The interest from D2C brands to advertise on these fintech apps comes as these platforms have amassed a large captive user base and are witnessing high daily user engagement with use cases such as digital payments.

For example, Paytm, which was one of the first payment finance technology platforms to bring large-scale advertising revenue into its fold, claims to have 89 million monthly transaction users on its platform. Rival PhonePe claims it has 440 million customers in total.

Other reasons why brands continue to run offers on these platforms include lower cost per conversion as the price of ads increases on platforms like Google and Meta-owned Facebook with higher brand demand and limited ad inventory, at least three founders and executives in the D2C segment ET spoke to so.

The average cost per mile, a marketing term used to denote the price spent for 1,000 ad impressions, for fintech apps including PhonePe and Paytm is in the Rs 70-150 range for customers on a daily basis, an industry executive who works with these brands said, requests anonymity. Furthermore, 60-65% of the total ad spend coming to platforms is through direct brand partnerships, with no media buying agencies involved.

About 75-80% of advertisers on these payment platforms are emerging D2C brands, an executive working in the advertising division of these fintech brands told ET, requesting anonymity.

“We spend about 8-10% of our total digital advertising budgets on platforms like PhonePe and Paytm,” said Deepak Gupta, co-founder and CEO of Bombay Shaving Company, a D2C personal care brand. “Facebook and Google make up about 80% of the spend, followed by programmatic sites like Criteria and MiQ, which will be another 10-12% and then the fintech apps, which are 8-10%.” D2C and consumer brands have been actively advertising through the rewards and coupons offered by the fintech apps to users.

Within rewards and coupons, brands can either choose to have a distribution partnership, which includes the total number of users the rewards are shown to, or a performance-based sales-conversion model. In the latter, fintechs take a small cut of the value of the transaction made by the user for these brands.

“The conversion rate for Google and Facebook will be around 2.0-2.5%, while that for fintech platforms will be around 4%,” Gupta said.

Paytm did not respond to ET’s queries till press time on Thursday. PhonePe and Cred declined to comment.

Cheaper customer acquisition cost

According to Ashutosh Valani, co-founder of Renee Cosmetics, approximately 15-20% of total digital advertising budgets for a D2C brand today go to affiliate platforms that include fintech apps. Other platforms include Alphabet (including Google and YouTube), social media and content platforms, which take a large part of the budgets.

“Affiliate is now one of the largest networks for D2C brands to sell in the market. It comes at a much cheaper price, because the CAC (customer acquisition cost) from these networks is much lower than Meta and Alphabet,” said Valani. He previously founded men’s grooming startups Beardo and Villain Life, selling them to Marico and Mensa Brands respectively.

Valani said rewards and coupons on these affiliated fintech platforms contribute to a brand’s direct sales promotion to customers, which excludes revenue from marketplaces such as Flipkart or Amazon India.

“Fintechs like Cred and Paytm will contribute 10-15% of the total direct sales coming from a D2C’s website or apps and affiliates. Almost 60-70% of sales for a D2C still come from marketplaces (like Amazon or Flipkart), with the rest from direct or affiliate channels. But 60-70% D2C customers coming from fintech platforms are also first-time buyers,” said Valani.

What further helps brands advertise on fintech platforms is proper targeting of digital users based on user payments and consumption data, several executives at D2C brands told ET.

“It’s not just the captive audience, but the right filtering in terms of age, spending habits and spending potential that these fintech platforms offer,” said Girish Dwibhashyam, CEO at DocuBay, a documentary screening platform.

Rewards only content for fintechs?

As brands seem to be winning, for fintechs, advertising is a value-added service to brands and merchants. This comes at a time when both Paytm and PhonePe, for whom advertising was once an important source of revenue, are now pushing the pedal on payments and distribution of financial services.

As a result, contributions come from post-paid advertising revenue and financial services, such as lending and insurance, for these fintechs.

“For fintechs, these brand offerings (and launches) can be seen as new content to keep users engaged and coming back to the platform, and not as the biggest long-term revenue generators,” said a fintech executive familiar with the strategy of these firms.

This can be seen in the strategies of new-age fintechs such as Cred, which has focused on discovering new D2C launches for users and waived commissions or listing fees last year for brands listed on its trading platform.

Ambarish Kenghe, VP, product, Google Pay, said merchant coupons, which appear as rewards when users transact, are one of the ways the platform brings novelty, in addition to opening up additional discovery and trial opportunities for merchant products and offers. “These vouchers have not only helped new D2C brands find new paying customers, but also helped existing category-leading brands re-engage their customers and build loyalty,” he said.

Small scale

But while advertising on fintech platforms can capture advertisers’ attention, D2C brands warn that it only serves as an engine to add incremental sales and that scalability remains a challenge.

“Advertising through these fintech apps is cheaper, but it doesn’t give you scale. You may get a certain percentage of business from these platforms, you cannot completely rely on them,” said Gupta of Bombay Shaving Company.

Valani of Renee Cosmetics agreed: “You can’t completely rely on these because they can’t meet the entire sales target. They can add a percentage of it.”

Sujata Dwibedy, chief investment officer, Amplifi, Dentsu International, said there is a huge demand for connected platforms now compared to about two years ago. “Nevertheless, fintech ad spend will still be 1-2% of total associated marketing spend for the industry. But these channels may pick up in the future,” she said.