Zomato's slim ad-spend sets marketing benchmark for firms seeking to list

Food delivery company Zomato has managed to ride on Dalal Street by spending just 0.1 per cent of its initial public offering (IPO) proceeds of Rs 9,375 crore. According to the final prospectus, the company has spent just Rs 9 crore on “printing and stationery expenses, advertising and marketing expenses for the offer and fees payable to the legal counsels". Of this, the total advertising spend could be just Rs 5 crore, say industry participants.

In percentage terms, this is among the lowest-ever. To put the number in context, Kalyan Jewellers, which came out with an IPO earlier this year, spent Rs 22.5 crore, or 1.9 per cent of its IPO proceeds.

Other IPOs from the food space, such as Burger King and Mrs Bector's, spent about a per cent — 10x that of Zomato's in percentage terms. Last year, SBI Cards, for instance, spent Rs 25.4 crore (0.25 per cent of its IPO size of Rs 10,340 crore) solely on advertising and marketing, according to its prospectus.

Despite the frugal ad spends, Zomato’s IPO managed to generate bids worth Rs 2.1 trillion —among the highest for IPOs — and its stock nearly doubled on debut.

“Zomato has become one of the most ubiquitous brands in the country. Its delivery partners give it strong visibility. As a result, Zomato didn’t really have to spend much on advertising at the time of its IPO like the others had to,” said an investment banker.

“This certainly is sad news for advertising companies and the media. Traditionally, there is a huge build-up before a company comes out with an IPO. But new-age tech-focused companies are changing the paradigm since they already have a direct connection with consumers. Each of these companies will utilise its power of direct consumer connect it has built over the years,” added Harish Bijoor, brand strategy specialist and founder, Harish Bijoor Consults.

Pre-IPO generally has three levels of marketing and communication strategy aimed at sending out the right brand message. The first is on-ground media campaigns, followed by advertisement spends in the media about the brand, and finally full-page ads related to the IPO.

Brand experts also point out that Zomato used social media to create awareness around the IPO. Zomato, famous for its witty one-liners on social media platforms, created the perfect 'moment marketing' opportunity for several brands as it went for listing.

Moment marketing is the ability to take advantage of ongoing events and create communication and marketing collateral around such events. This is used by brands to insert themselves in the ongoing conversations, bringing relevance to how they market.

When Zomato’s Twitter handle read, Mereko toh aisa dhak dhak horela hai, expressing the company’s nervous excitement around the IPO, several brands built up on it. Brands, such as Kotak Securities, Urban Company, Groww, and even rival Swiggy, used it to promote their brand.

N Chandramouli, chief executive officer, TRA Research, a brand intelligence and data insights company, however, sounds a note of caution to those who may want to follow Zomato’s example.

“It’s about taking risks. Zomato took a risk, and it was hugely successful. Will others be equally successful? Tough to say. For instance, the lead managers of Zomato made 300 calls to investors across the globe to understand the perception of the brand and also talk about its business to investors,” he said.

Chandramouli also points out the one aspect of the Zomato listing which allowed these low marketing spends. “This company is constantly in the news. Its communication channels are always working and connected. Take for instance, the other IPO that came after Zomato's. How many knew about Tatva Chintan? Only the bravest may follow Zomato,” he added.