Market leader Blinkit, which reported a nearly fourfold jump in ad revenue to more than Rs 400 crore for 2023-24, is on track to earn more than Rs 1,000 crore from ads in this financial year.
Zepto is also on a Rs 1,000 crore revenue run-rate from advertisement services, which offer higher margins to companies than other revenue lines.
Swiggy, which went public earlier this month, said it is making efforts to increase the contribution of advertising revenue to its overall revenue.
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“One of the obvious reasons why brands want to advertise on quick commerce increasingly is that the user base on platforms such as Blinkit, Zepto and Instamart is expanding at a rapid pace,” said a quick commerce executive, who did not wish to be identified.
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ETtechBlinkit’s monthly transacting customers nearly doubled to 8.9 million in the July-September quarter, compared to 4.7 million a year ago.
“The nature of quick commerce is also such that to achieve inventory offtake quickly, brands tend to spend on ads to stand out for their consumers,” the executive said, adding that platforms have been investing in technologies for advertising to be more effective for brands.
The scale of ad revenue for quick commerce firms is also being achieved faster than ecommerce marketplaces such as Flipkart and Amazon, which together reported Rs 11,621 crore in ad revenue for 2023-24. SoftBank-backed ecommerce marketplace Meesho also derives a sizable portion of its operating revenue from advertising income. For Meesho, it also comes with fatter margins than its logistics services.
Overall, Blinkit is clocking an annual gross sales run rate of nearly $3 billion, while Zepto is tracking $2 billion. According to its latest public numbers available, as of June 30, Swiggy Instamart was at an annual gross sales run rate of $1.3 billion.
Industry executives also indicated that income from advertising is highly profitable for consumer internet platforms, with 90-95% of it flowing to profit.
“Today we are at an Rs 1,000 crore annualised revenue run-rate (from advertising)… it’s a meaningful driver of the bottomline,” said Zepto founder and CEO Aadit Palicha.
Zomato, which owns Blinkit, and Swiggy did not respond to ET’s queries.
ET reported in January that advertising revenue accounts for 10-12% of the total revenue for online food and grocery delivery platforms such as Zomato and Swiggy, and it has since increased to 15-20%, according to people in the know.
In its initial public offering prospectus, Bengaluru-based Swiggy said, “We plan to increase the contribution of advertising revenue further by enhancing our advertising tools such that our partners can continue to leverage our integrated platform to run unique and customised advertising campaigns, which are backed by rich insights and analytics.”
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It further said, “With 15.99 million average MTUs (monthly transacting users) on our platform in the three months ended June 30, 2024, we believe we offer our partners an opportunity to benefit from superior return on investments by advertising on our platform that has access to a large and growing user base, across multiple offering.”
Zomato also said that in food delivery, its biggest revenue driver, revenue from advertising is growing faster than its gross order value for the business.
Quick commerce firms need to keep improving technology to provide brands with data on outcomes, said industry executives.
“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 dollar to any channel,” said a digital marketing executive, who did not wish to be identified.
In October, Blinkit launched its Seller Hub programme – on the lines of Fulfilled by Amazon – to onboard brands on the marketplace. The Seller Hub platform also allows brands access to sales insights and advertising tools.
Analysts said that income from advertising will become increasingly more important for quick commerce platforms to improve their take rates as competition in the sector increases.
“Quick commerce platforms are spending a lot on expansion but discounting is also prevalent in the sector, not just to compete with each other but also with modern retail,” a Mumbai-based analyst with a global brokerage firm said on condition of anonymity. “But in a category like groceries (the largest contributor to quick commerce gross merchandise value), margins are thin, and while direct sourcing from brands will help, ad revenues will anchor profitability.”