Coinbase and Roblox take a page from Google keeping marketing costs way

Cryptocurrency exchange Coinbase and gaming app Roblox are both getting set to go public through a direct listing of their shares. They have something else in common that's likely to prove very attractive to investors: Brand awareness. Both companies spend less than 10% of their net revenue on sales and marketing. Those are savings that allow the companies to focus more on product development and even profit generation. With limited marketing, Coinbase emerged as the most popular crypto exchange for consumers. As prices for bitcoin and ethereum has soared, so has trading on the site. Kids hear about Roblox primarily from their friends and neighbors and then spend hours at a time navigating some the app's millions of games, dressing up their avatar and buying advanced features along the way. Their skimpy marketing spend is a rarity. Most venture-backed tech companies spend heavily on sales and marketing to get customers, bleeding cash so they can gain mass adoption and win market share. Consumer companies often lean on advertising, buying Facebook, Google and TV ads and offering promotions, while enterprise software businesses tend to have big sales teams traveling to conferences for new business. Looking at last year's most high-profile IPOs, Airbnb was spending 22% of revenue on sales and marketing and gaming software vendor Unity was at 25% in the most recently reported periods shown on their IPO filing documents. DoorDash's spend was 32% of revenue and e-commerce app Wish was twice that, at 64%. Snowflake, which held the biggest IPO ever for a U. S. software company, spent 79% of revenue on sales and marketing in the first half of 2020. Palantir spent 42%. Going back further, Twitter, Snap, Uber, Lyft and Pinterest, which all went public from 2013 to 2019, spent between 28% and 37% of their revenue on sales and marketing before their debuts. Both Coinbase and Roblox are in the single digits."For the year ended December 31, 2020, we spent less than 5% of net revenue on sales and marketing, and since inception, over 90% of our retail users had found us organically or through word-of-mouth, reflecting the strength of our brand," Coinbase said in its public market prospectus filed on Thursday. To be exact, Coinbase spent 4.4% of its revenue on sales and marketing costs in 2020, while for Roblox it came to 6.3%. Among the biggest U. S. tech debuts over the past couple decades, only Google was similarly low, at 6% before its 2004 IPO. Facebook, which went public in 2012, was at 12% the prior year. Both companies were household consumer names well before their IPOs, saving them from hefty advertising costs. Coinbase has directly translated its sales and marketing savings into profitability. The company generated $322.3 million in net income last year, swinging from a loss of $30.4 million in 2019. But Roblox is taking a different approach, reinvesting in the developers who make its games and expanding its audience.


All data is taken from the source: http://cnbc.com
Article Link: https://www.cnbc.com/2021/02/28/coinbase-roblox-take-page-from-google-keeping-marketing-costs-down.html


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