What went wrong with Zerodha? Yesterday, Nithin Kamath posed an interesting question. He asked how the slowdown in their new user acquisition can be reversed while playing within their self-imposed constraints.
Zerodha has been losing its active user market even as it gains AUM share. The big flippening came in September 2023 when Groww overtook it, a day many had thought would never come.
One could say that a part of this can be attributed to Zerodha’s principled no-advertising stance. Zerodha prides itself on never spending a rupee on ads, an ideology that sets it apart in the industry.
I will sort of disagree with this narrative because a large part of their user acquisition was in fact fuelled by their super successful referral program that came to a screeching halt last year due to new regulations.
Of late, Zerodha has been using its deep pockets to invest heavily in its education-focused media and YouTube strategy. This is however a long-term play that might pay off a few years down the line.
While these may not be classified as traditional advertising or influencer marketing, they are nonetheless marketing/user acquisition expenses. Regardless, they never make a direct appeal for users to come sign up on their platform.
This is my theory: A large majority of incremental new users in the last 5 years started their investing journey with F&O trading. Zerodha absorbed the pandemic demand and hypersclaed but our derivatives boom continued well after Covid ended. Though their product was superior, other platforms, including many new ones, actively attracted this new user group. Zerodha does not encourage trading and indexes on long-term user retention and measured wealth accumulation. Their slowdown also coincided with the F&O boom.
Second, their content strategy focusing on long‑form explainer videos appeal to the already‑curious, not the “zero‑to‑one” audience swayed by 30‑second Reels. In my view, Zerodha didn’t effectively leverage Instagram for acquisition. Competing apps offer a more modern, user-friendly interface, especially for younger investors. Improving Zerodha’s UI/UX and making the app feel more “new age” could help.
Zerodha’s simplicity and integrity are their moats. Diluting these in any form will risk alienating their existing lucrative user base. But it’s a dog-eat-dog world and Zerodha might be sowing the seeds for a shift in marketing strategy with this question.
PS: I love Zerodha. It’s one of my favourite products ever and I’ve been a loyal user of theirs for almost a decade now.