Ad spend to revenue: how to read a D2C brand's marketing costs

It is advertising and promotion cost divided by revenue, shown as a percentage. If a brand spends ₹30 crore on ads and earns ₹150 crore, the ratio is 20%. It tells a reader how many paise of every rupee of sales go to buying attention.

D2C brands rely on paid search, social media, influencers and marketplace ads because they have no shop shelf. As of November 2026 there is no standard figure that is right for all brands. The ratio depends on category, age and growth plans. The live case on StopDown is Wellbeing Nutrition: its FY26 revenue rose to ₹244 Cr from ₹118 Cr while its loss grew 2.4 times to ₹92 Cr, with heavy ad spend among the causes the story names.

There is no fixed rule. Schedule III of the Companies Act, 2013 does not require a separate line for advertising, so most companies place it in other expenses, or in a line called advertising and sales promotion. Where the amount is material, the notes to the accounts or the DRHP of a company filing for an IPO usually give a split.

This is why a reader must go into the notes. A results story may say that expenses rose, while the real cause is a jump in ad spend. A note in the filing may also mix advertising with discounts, influencer fees and commissions paid to platforms.

It varies widely. Early brands in beauty, personal care and nutrition often spend a large share of revenue on ads, sometimes a fifth or more, while mature brands with repeat customers spend less. Ratios from filings and results stories are the only reliable guide, since the range is too wide for a single benchmark.

When revenue and spend rise together, as in the Wellbeing Nutrition case, growth has been bought rather than earned for free. Whether that is wise depends on how many of the new buyers come back.

Advertising is paid when the ad runs, but the sale it creates may come over months. A brand spending more to reach new buyers records the cost at once. The returns arrive as repeat orders later, if buyers come back.

That is why a quarter of heavy spend can show a bigger loss even when the strategy is sound. Compare the ad cost per new customer with the profit that customer brings over time. This link is explained in the guide on customer acquisition cost and lifetime value.

It can mean two things. A good sign is that more sales come from repeat buyers, word of mouth, stores and marketplaces, so each rupee of ads goes further. A weak sign is that the brand cut spend to save cash and growth has slowed.

The way to tell is to read the ratio beside revenue growth and the share of repeat customers. A falling ratio with steady growth is healthy. A falling ratio with falling sales is a pause rather than an improvement.

Customer acquisition cost (CAC) divides marketing spend by the number of new customers. The ad spend ratio divides it by revenue, which includes sales to repeat buyers. A brand with many loyal customers can have a high CAC but a low ratio, because old customers add revenue without more ads.

Neither number is complete alone. The ratio is easy to compute from public accounts. CAC needs customer counts that are often shared only in investor decks or IPO filings.

Many D2C brands begin on their own website and then move to marketplaces, quick-commerce apps and shops. Marketplace listings carry their own fees and sponsored ads, which may appear as commissions or advertising depending on the contract. A brand that grows through stores may see its ad ratio fall because shoppers find it on the shelf.

This makes comparisons across brands tricky. Two companies with the same ratio may spend in different ways, and one may book platform fees in a separate line. Always read the notes on how expenses are grouped.

Look at three things together. The first is revenue growth against ad spend growth. The second is gross margin, because a brand with a thin product margin cannot afford a large ad bill. The third is the share of repeat customers, which shows whether the spend is building a base or renting attention month by month.

IPO filings of consumer brands often disclose advertising cost for three or more years, along with key performance indicators. Those tables are where the trend is easiest to see. A ratio that falls year after year while revenue rises usually signals a maturing brand, while one that stays high may mean growth depends on constant paid reach.

The money spent is a normal business expense, and GST applies to advertising services. The content is regulated: the Consumer Protection Act, 2019 allows the Central Consumer Protection Authority to act on misleading advertisements, and the ASCI code sets self-regulatory norms. Health claims in supplements and cosmetics are a common area of complaints.

Not by itself. A high ratio in the early years is common because a new brand must be seen before it can sell. The test is whether the ratio falls as the brand ages and repeat buyers grow. A high ratio with high gross margins and strong repeat rates can be a good investment in customers. A high ratio with thin margins and low repeat rates is a business that stops growing when the ad budget stops.

Look for the cause when a loss widens: ads, materials, staff or one-off items. Check whether the company breaks out advertising. Compare revenue growth with the increase in ad cost. If ads rose faster than sales, the cost of growth is climbing. This is general information and not investment advice. Read it as a trend over several periods.

A last habit is to check the period. Annual ratios hide quarters of heavy spending around festivals and launches, so quarterly figures, where a listed company gives them, give a sharper view of how the budget moves with the calendar.