Is Unacademy a strong business OR is the ed-tech startup's bubble about to burst?
Sure, their IPL ad on the first law of learning went viral, with 16M views on YouTube!
But is the INR 40 Cr marketing spend on IPL ads worth it for Unacademy?
Letβs find outΒ π§΅
Sure, their IPL ad on the first law of learning went viral, with 16M views on YouTube!
But is the INR 40 Cr marketing spend on IPL ads worth it for Unacademy?
Letβs find outΒ π§΅
1/ Let's trace Unacademy's journey over the years
Unacademy started out as a simple college hobby for co-founder Gaurav Munjal.
He initially launched a YouTube channel and began teaching Java coding classes as an engineering student in 2010.
(contd.)
Unacademy started out as a simple college hobby for co-founder Gaurav Munjal.
He initially launched a YouTube channel and began teaching Java coding classes as an engineering student in 2010.
(contd.)
Gaurav was doing very well with the YouTube channel and he was also quite famous on Quora.
So, naturally, he thought of expanding the venture further.
In 2015, Gaurav and his co-founders Hemesh Singh and Roman Saini officially registered the company Unacademy.
(contd.)
So, naturally, he thought of expanding the venture further.
In 2015, Gaurav and his co-founders Hemesh Singh and Roman Saini officially registered the company Unacademy.
(contd.)
The core offering was their educational content around Indian competitive exams.
But, unlike the YouTube channel which was directly monetizable, how was the trio planning to make money from the platform?
Well, in 2019, Unacademy launched its subscription service.
(contd.)
But, unlike the YouTube channel which was directly monetizable, how was the trio planning to make money from the platform?
Well, in 2019, Unacademy launched its subscription service.
(contd.)
The pricing structure works something like this:
1) Free Tier β can access only the recorded content.
2) Subscription Tier β can access the "Live Classes" by educators.
Today, Unacademy has reached over 800K paying users, which generates 95% of their operating revenue.
1) Free Tier β can access only the recorded content.
2) Subscription Tier β can access the "Live Classes" by educators.
Today, Unacademy has reached over 800K paying users, which generates 95% of their operating revenue.
What we can learn?
1) Dream big, but start small. Begin by solving a problem you face.
- It started out as a simple YouTube channel and was built into a platform.
2) Buildd your audience, before your product.
- Gaurav already had built a sizeable audience on YouTube and Quora
1) Dream big, but start small. Begin by solving a problem you face.
- It started out as a simple YouTube channel and was built into a platform.
2) Buildd your audience, before your product.
- Gaurav already had built a sizeable audience on YouTube and Quora
2/ Unacademy's spend on IPL Ads
Now, being the 2nd largest ed-tech startup in India, Unacademy enjoys a lot of attention from VCs.
It's currently worth $3.44B & much like any other VC startup with deep pockets, Unacademy spends a huge amount on growing its user base.
(contd.)
Now, being the 2nd largest ed-tech startup in India, Unacademy enjoys a lot of attention from VCs.
It's currently worth $3.44B & much like any other VC startup with deep pockets, Unacademy spends a huge amount on growing its user base.
(contd.)
Given the wild popularity of IPL in India and that most of their target audience tunes in to watch IPL, Unacademy spends a ton on IPL ads.
They are in fact one of IPL's title sponsors.
But, is that ad spend worth it for Unacademy? Well, let's do some math to figure it out!
They are in fact one of IPL's title sponsors.
But, is that ad spend worth it for Unacademy? Well, let's do some math to figure it out!
The Math:
1) Unacademy's IPL budget for 2022 = Rs 40 Cr (120Cr/3 years)
2) Their Target Group:
- High School & Post K-12 students => Age 15-25 years
- High School student's parents => Age 31-40 years
3) In 2022, IPL viewership stood at = 20 Cr
(contd.)
1) Unacademy's IPL budget for 2022 = Rs 40 Cr (120Cr/3 years)
2) Their Target Group:
- High School & Post K-12 students => Age 15-25 years
- High School student's parents => Age 31-40 years
3) In 2022, IPL viewership stood at = 20 Cr
(contd.)
4) The percentage of IPL viewers that come under the age group 15-25 & 31-45 = 40%
5) So, they have a total target audience = 8 Cr
6) Unacademy's paying user conversion rate = (paying users/net users) = 350K/30M *100 = 1.1%
7) The TV ad conversion rate = 0.7%.
(contd.)
5) So, they have a total target audience = 8 Cr
6) Unacademy's paying user conversion rate = (paying users/net users) = 350K/30M *100 = 1.1%
7) The TV ad conversion rate = 0.7%.
(contd.)
8) So, net net the paying users = 8 Cr x 0.7% x 1% = 5600 users.
9) Finally, the customer acquisition cost (cac) = Rs 40 Cr/5600 users = Rs 72K/user
If we say that on average the course fee is around 10K. Unacademy still is burning ~60K per user acquired.
9) Finally, the customer acquisition cost (cac) = Rs 40 Cr/5600 users = Rs 72K/user
If we say that on average the course fee is around 10K. Unacademy still is burning ~60K per user acquired.
3/ So, what's the verdict?
Clearly, burning Rs 60K to acquire a single user doesn't seem sustainable.
On top of this, with the ongoing downturn, Unacademy is under great pressure to cut costs and focus on extending its runway.
(contd.)
Clearly, burning Rs 60K to acquire a single user doesn't seem sustainable.
On top of this, with the ongoing downturn, Unacademy is under great pressure to cut costs and focus on extending its runway.
(contd.)
Considering the grave situation, CEO, Gaurav Munjal, is emphasizing more on cutting costs and focusing on profitability.
They even had to lay off over 1000 employees, since employee related expenses account for the majority of their total expenses.
(contd.)
They even had to lay off over 1000 employees, since employee related expenses account for the majority of their total expenses.
(contd.)
All in all, the coming months will be a major test for this startup.
We will have to see if Unacademy crumbles under pressure or will it problem-solve to fly higher than before.
We will have to see if Unacademy crumbles under pressure or will it problem-solve to fly higher than before.
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