BYJU'S is eyeing profitability in the next quarter!
Their BIG plan?
Stop giving away ~Rs 900 crores in advertising and promotional expenses to ICC, BCCI and FIFA!
Given their marketing spent was ~ Rs 2000 crore, will this effort push BYJU'S to profitability?
Let's find out π§΅
Their BIG plan?
Stop giving away ~Rs 900 crores in advertising and promotional expenses to ICC, BCCI and FIFA!
Given their marketing spent was ~ Rs 2000 crore, will this effort push BYJU'S to profitability?
Let's find out π§΅
Structure:
1. How is BYJU'S doing financially?
2. How does BYJU'S plan to reduce the cash burn?
3. But, will this help?
1. How is BYJU'S doing financially?
2. How does BYJU'S plan to reduce the cash burn?
3. But, will this help?
1/ How is BYJU'S doing financially?
BYJU'S is famous for being the most valued ed-tech in the world. So, far it has raised $5.8B and reached a valuation of $22B!
In the last 11 years, BYJU'S evolved from being a simple K-12 learning platform to a multi-level mammoth.
(contd.)
BYJU'S is famous for being the most valued ed-tech in the world. So, far it has raised $5.8B and reached a valuation of $22B!
In the last 11 years, BYJU'S evolved from being a simple K-12 learning platform to a multi-level mammoth.
(contd.)
BYJU'S makes money by selling its edutech products, loaning funds, selling online courses and through its streaming product.
It has spent billions acquiring startups and today it handles not one but many loss-making companies.
Let's quickly look at their financials.
(contd.)
It has spent billions acquiring startups and today it handles not one but many loss-making companies.
Let's quickly look at their financials.
(contd.)
FY20
Revenue β Rs. 2189 Cr
Profit/Loss β (-) Rs. 305 Cr
Expenses β Rs. 2873 Cr
FY21
Revenue β Rs. 2280 Cr
Profit/Loss β (-) Rs. 4564 Cr
Expenses β Rs. 7027 Cr
So, BYJU's revenue increased by a mere 4% while its losses went up by ~15x. But, this was 2 years ago.
(contd)
Revenue β Rs. 2189 Cr
Profit/Loss β (-) Rs. 305 Cr
Expenses β Rs. 2873 Cr
FY21
Revenue β Rs. 2280 Cr
Profit/Loss β (-) Rs. 4564 Cr
Expenses β Rs. 7027 Cr
So, BYJU's revenue increased by a mere 4% while its losses went up by ~15x. But, this was 2 years ago.
(contd)
In FY22, BYJU'S apparently posted gross revenue of Rs 10,000 Cr.
Now, if we were to take FY21 as an example 2 things are clear:
1. BYJU'S main revenue source β Edutech Product Sales
2. BYJU'S main expense β Advertising and promotional expenses
(contd.)
Now, if we were to take FY21 as an example 2 things are clear:
1. BYJU'S main revenue source β Edutech Product Sales
2. BYJU'S main expense β Advertising and promotional expenses
(contd.)
BYJU'S generated Rs 1848 Cr through the sale of its edutech products. That's 81% of its total revenue.
And, it spent a whopping Rs. 1943 Cr on ads, which is 32% of their total expense.
So, let's focus mainly on these 2 areas.
And, it spent a whopping Rs. 1943 Cr on ads, which is 32% of their total expense.
So, let's focus mainly on these 2 areas.
2/ The BIG Decision: How does BYJU'S plan to reduce the burn?
Among the ads & promotions expenses, BYJU'S most significantly spends money on sports brand partnerships.
1. ICC β Rs 130 Cr
2. BCCI β Rs 454 Cr
3. FIFA β Rs 330 Cr
That's a total of ~Rs 900 Cr!
(contd.)
Among the ads & promotions expenses, BYJU'S most significantly spends money on sports brand partnerships.
1. ICC β Rs 130 Cr
2. BCCI β Rs 454 Cr
3. FIFA β Rs 330 Cr
That's a total of ~Rs 900 Cr!
(contd.)
Recently, since the funding winter kicked in and BYJU'S has decided to cut costs and aim for profitability.
BYJU'S CEO even said that they would reach profitability by Q1 of FY24.
Following this, it has decided to not renew its partnership with ICC, BCCI and FIFA!
(contd.)
BYJU'S CEO even said that they would reach profitability by Q1 of FY24.
Following this, it has decided to not renew its partnership with ICC, BCCI and FIFA!
(contd.)
But, the question is will it positively or negatively impact BYJU'S business?
To understand that we will have to figure out how significantly these sponsorships contribute to BYJU'S main business, which is the sale of edutech products.
(contd.)
To understand that we will have to figure out how significantly these sponsorships contribute to BYJU'S main business, which is the sale of edutech products.
(contd.)
Now, BYJU'S uses a hybrid sales strategy to sell its products.
They do door-to-door sales and they also get users online. So, exposure to BYJU'S ads on TV and online can help get these new customers.
Let's do some math to understand how big this exposure is.
(contd.)
They do door-to-door sales and they also get users online. So, exposure to BYJU'S ads on TV and online can help get these new customers.
Let's do some math to understand how big this exposure is.
(contd.)
1) BYJU'S target demographic is between the age groups of 15 to 40-year-olds.
2) Let's consider the most significant tournaments that took place last year.
A) ICC T20 World Cup
1. Viewership in India = ~229M people (in the first week)
(contd.)
2) Let's consider the most significant tournaments that took place last year.
A) ICC T20 World Cup
1. Viewership in India = ~229M people (in the first week)
(contd.)
2. If we consider IPL, ~40% of the total viewers fall in BYJU'S target age group
40% of 229M = 91.6M or ~92M
So, BYJU misses exposure to ~92M viewers in just the first week.
3. Considering a TV ads conversion rate of 0.7%,
BYJU'S misses 0.7% x 92M = 644K conversions
(contd.)
40% of 229M = 91.6M or ~92M
So, BYJU misses exposure to ~92M viewers in just the first week.
3. Considering a TV ads conversion rate of 0.7%,
BYJU'S misses 0.7% x 92M = 644K conversions
(contd.)
4. BYJU'S paying user conversion rate = paying users/ total users= 6.5M/100M x 100 = 6.5%
So, 6.5% x 644K = 41,860 users
5. Considering the ICC partnership spend of Rs 130 Cr their customer acquisition cost is = Rs 130 Cr /Β 41860 = Rs 31,055/user
ICC CAC = Rs 31K/user
(contd)
So, 6.5% x 644K = 41,860 users
5. Considering the ICC partnership spend of Rs 130 Cr their customer acquisition cost is = Rs 130 Cr /Β 41860 = Rs 31,055/user
ICC CAC = Rs 31K/user
(contd)
B) FIFA World Cup
1. Fifa World Cup Finals India viewership = 32 M
Let's say, the finals saw the highest views from India. So, BYJU'S reached 32M people via FIFA.
2. Now 75% of all viewers were college students. Let's say ~90% fall in BYJU's target segment.
(contd.)
1. Fifa World Cup Finals India viewership = 32 M
Let's say, the finals saw the highest views from India. So, BYJU'S reached 32M people via FIFA.
2. Now 75% of all viewers were college students. Let's say ~90% fall in BYJU's target segment.
(contd.)
That's a total of = 90% of 32M = 28.8M unique viewers.
3. Conversion rate = 0.7%
Paying users rate = 6.5%
So, paying users = 0.7% x 6.5% x 28.8M = 13104 users.
4. Finally, considering a total spend of Rs 330 Cr, their CAC stands at => Rs 330 Cr / 13104 => Rs. 2,51,831/user!
3. Conversion rate = 0.7%
Paying users rate = 6.5%
So, paying users = 0.7% x 6.5% x 28.8M = 13104 users.
4. Finally, considering a total spend of Rs 330 Cr, their CAC stands at => Rs 330 Cr / 13104 => Rs. 2,51,831/user!
3/ But, will this help?
So, BYJU'S misses exposure to millions of users and maybe multiple crores of potential revenue.
But, spending tens of thousands of rupees to acquire a single customer doesn't seem lucrative for BYJU'S in the long term, especially given its financials.
So, BYJU'S misses exposure to millions of users and maybe multiple crores of potential revenue.
But, spending tens of thousands of rupees to acquire a single customer doesn't seem lucrative for BYJU'S in the long term, especially given its financials.
Plus, BYJU'S product costs range from Rs 3k to 1 lakh+, so only very high-intent individuals would end up buying them.
So, stopping these partnerships would no doubt make BYJU'S balance sheet lighter.
And, even though the exposure suffers, their CEO is not worried.
(contd.)
So, stopping these partnerships would no doubt make BYJU'S balance sheet lighter.
And, even though the exposure suffers, their CEO is not worried.
(contd.)
He believes that BYJU'S has already achieved brand awareness and no longer needs such high exposure.
Now, cutting costs definitely seems like the right step towards profitability.
But, the hype created by innovative branding dies down quickly in fast-paced economies.
(contd)
Now, cutting costs definitely seems like the right step towards profitability.
But, the hype created by innovative branding dies down quickly in fast-paced economies.
(contd)
It's difficult to quantify exactly how many people will forget about BYJU'S if they don't see its name repeated in every match, on jerseys, and on the pitch.
But, for BYJU'S sake, we hope it's not much!
But, for BYJU'S sake, we hope it's not much!
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