The journey from being just a "DAU/MAU farm" to building a sustainable revenue engine is perhaps the most crucial transition for consumer internet companies in India. In a fireside chat at the recent Elevation Kickstarter on 'New Era of Consumer Monetization', ShareChat founder Ankush Sachdeva shared candid insights with Amit Aggarwal (Principal, Elevation Capital) from his experience of building and monetizing one of India's largest social media platforms. His journey offers valuable guidance for founders building consumer businesses in India. Read below for detailed takeaways.

Key Highlights

1. Test monetization potential early - the Silicon Valley playbook of "get users first, monetize later" doesn't work in India
2. Build multiple revenue streams - ShareChat achieved a 50-50 split between advertising and microtransactions
3. Scale is crucial for advertising - you need at least one-third of Meta's reach in your target segment for brand advertising
4. Every city, including tier 2-3, has a top 1-2% of power users willing to spend significantly
5. For digital products, let algorithms optimize for events rather than constraining by geography
6. Data-driven decision-making is crucial - all product changes must demonstrate positive contribution margin through A/B testing
7. Cost optimization doesn't mean cutting off non-monetizable users - find creative ways to serve them efficiently
8. FMCG emerged as a bigger advertising spender than e-commerce, defying initial assumptions
9. AI will dramatically reduce content production costs, enabling new business models and creator opportunities
10. Building advertiser trust through verified metrics is as important as building user trust

The Evolution of Indian Consumer Behavior

The landscape of digital consumption in India has transformed dramatically since ShareChat's inception in 2015. From a pre-Jio era with limited internet penetration to today's thriving digital ecosystem enabled by Jio and UPI, Indian consumers have come a long way. While early skepticism about Indians' willingness to pay persists, ShareChat's journey demonstrates that sustainable monetization is possible with the right approach.

Why the Silicon Valley Playbook Falls Short

The conventional Silicon Valley approach of "get users first, monetize later" doesn't translate well to India. This reality check came early for ShareChat when they realized advertising alone wouldn't sustain the business. While engagement and retention remain crucial, founders need to simultaneously validate monetization potential. This means testing monetization waters before going all-in, being skeptical about ARPU potential, and considering multiple revenue streams instead of relying on just one path to monetization.

Building a Dual Revenue Engine

ShareChat successfully built a hybrid monetization model with roughly equal revenue from advertising and microtransactions. This diversification proved crucial for sustainability. For advertising to work, scale matters significantly - ShareChat learned that you need reach comparable to at least one-third of Meta's in your target segment to be considered for brand advertising. Interestingly, while e-commerce seemed the natural fit for ad revenues, FMCG emerged as the bigger spender. Building advertiser trust through verified metrics and consistent delivery became crucial. Running an ad business essentially meant becoming a B2B company, requiring enterprise sales capabilities they hadn't initially anticipated.

The Rise of Microtransactions

ShareChat's microtransactions success began with chat rooms during the pandemic. They started with an earned coins system before introducing purchased coins, discovering that in social settings, payments can actually enhance rather than add friction to the user experience. A crucial insight emerged: every city, including tier 2-3, has a top 1-2% of users willing to spend significantly. This created a substantial revenue stream that complemented their advertising business.

Mastering Product Trade-offs

With limited feed real estate, balancing organic content with monetization widgets requires careful optimization. ShareChat established a dedicated "feed marketplace team" to manage these trade-offs systematically. For instance, inserting too many chat room widgets in the feed could reduce views per DAU and overall attention metrics. However, these widgets were crucial for monetization. To resolve such conflicts, ShareChat developed a robust "maker-checker" system where their decision science team acts as a neutral arbiter.

The company instituted a rigorous evaluation framework centered on six-month contribution margin projections. Any proposed change, no matter how small, must demonstrate positive contribution margin through A/B testing. This analysis includes a comprehensive P&L assessment factoring in revenue uplift, server costs, and other operational expenses. For example, when ShareChat introduced lives in Moj, they closely monitored the impact and subsequently scaled back based on the data. This systematic approach ensures that short-term monetization gains don't compromise long-term user engagement and platform health.

A Nuanced Approach to User Cohorts

Instead of cutting off non-monetizable users, ShareChat adopted a sophisticated approach to cost optimization. They identified that approximately 5% of users had significantly lower ad fill rates, either from first-party or third-party networks, indicating lower monetization potential. However, these users often demonstrated high engagement, consuming substantial content without seeing ads due to low fill rates.

Rather than excluding this segment, ShareChat optimized their infrastructure costs. For most users, content recommendations involve a two-stage process: a recall stage followed by a deep learning ranker. For low-monetization users, they eliminated the costly deep learning ranking stage, effectively halving the inference costs while maintaining basic content discovery. This technical optimization made serving these users economically viable while preserving their contribution to the platform's vitality through content sharing and providing valuable machine learning training data.

The infrastructure cost management extended beyond just recommendation systems. ShareChat's team constantly evaluates server costs against revenue potential. In fact, as they achieved greater efficiency in their content-serving infrastructure, they actually scaled back ad load in some cases where the previous balance of ads versus user experience was calibrated for higher server costs.

The AI Revolution in Content Economics

Looking ahead, Ankush believes AI will significantly impact content economics. Content production costs will decrease dramatically, enabling more creators to enter the ecosystem. While the power law of creator success will persist, the barriers to entry will lower substantially. This could enable new business models, particularly in areas where traditional media faces cost constraints.

Strategic Imperatives for Founders

The path to monetization in India requires a careful balance of growth and revenue. For digital products, Ankush advises letting marketing algorithms optimize for events rather than constraining by geography. User behavior data proves far more valuable than demographic or device information for optimization. Most importantly, founders need to validate monetization potential before scaling, as advertising-based models require significant scale to succeed.

These insights from ShareChat's journey underscore a crucial reality: building sustainable consumer businesses in India requires a unique playbook. While Western models offer valuable lessons, success lies in building sustainable, multi-stream revenue models while maintaining user experience and engagement. As India's digital ecosystem continues to evolve, the opportunities for innovative monetization strategies will only grow, but they must be built on a foundation of deep user understanding and careful economic consideration.