Why startups are pulling out of IPL? 🏏
IPL is now equivalent to NFL in the US, which is the most expensive media buy.
Welcome to the 80th edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 94,400+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more
We all remember the nail-bitting IPL 2022 finale.
But, do you remember a single ad you saw during the match? Probably not.
This is the story of why so many startups are pulling out of IPL and the decision framework for brands to take the right call, this IPL season.
Quick back story 🗓
BCCI established IPL in 2007 to capitalise on the insane popularity of the cricket in India. The initial funding to establish India’s first commercial sporting event came from by Zee Entertainment Enterprises. BCCI held its first auction on 24 Jan’08 with the total base prices of the franchises ~$400 million, but they closed the first round at $723.59 million. This would be IPL’s first break into making profit, but things got crazy right after & the rest is history.
How does IPL make money? 🤑
Before we double tap on how much IPL costs brands, let’s fundamentally understand how IPL really makes money. The two core sources of money are - Media rights & sponsorships.
A typical co-sponsor of IPL spends 90 to ~100 Crores.
But things are changing, fast.
BCCI decided to add 2 more IPL teams & cosponsor cost is 40% up.
TV & OTT rights have increased ad costs by 30%
This has shot up the cost to sponsor IPL over 40%
It means brands will have to shell out way more money just to associate with IPL this year and most growth teams are asking “Is it all worth it?”
So is it wise to pull out of IPL?
Let’s critically analyse this piece.
First, is the cost justified?
You could potentially get the same distribution in terms of the kind and volume of audience you could reach during IPL.
If you apply the distribution % to a performance marketing campaign the cost would come out to ~50 to 60 Crores when spent efficiently over a longer period (say 6 months) than a short 2 month period.
Second, what’s con of not doing IPL?
The most important advantage of IPL is it’s compression. When you have 10 different touch point reaching the users using different online and offline medias, two things happen.
First your organic top of the funnel will scale. Second, you will see better conversion/onboarding rates across all of your acquisition channels. Third, your organic baseline changes over the next 2/3 quarters.
So with IPL, brands are really buying compression of distribution that just volume of users. They could potentially get all this distribution other than IPL too, but much slower. Another aspect is borrowing trust from the IPL brand as a byproduct of associating as a sponsor.
So you must be wondering,
Should you do IPL as a brand or refrain? The decision framework is asking your leadership & investors the two questions.
1. Whether distribution speed matters to you more than efficiency of marketing money spent?
2. Your brand & product category borrows trust from IPL as an asset. Is this the right time to build trust with IPL association and will our potential customers pay attention to all this?
That was the IPL <> Startups story.
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