India’s ad startups reorient business models around AI after 828 shutdowns between 2023-2025

For decades, India's advertising industry has thrived on a balance of creative intuition and media buying muscle. However, this equilibrium is facing strain amid the development of artificial intelligence technology. The big tech giants, such as OpenAI and Google, have accelerated the rollout of AI-powered image and video generation tools, while Meta is also preparing systems that would allow advertisers to personalise ads in real time, based on geolocation and other factors.

For marketers and agencies, the promise of AI-automated ads has come with unease, as much of the control, once exercised by human planners, now sits inside an opaque algorithm.

"Globally, Meta and Google account for rougly 60% I of the world's advertising budgets," said Lloyd Mathias, angel investor and independent director. "For most brands, the first spend is search on Google, followed by YouTube and then Meta-owned Facebook and Instagram. These platforms have become central to almost every marketing plan".

As AI is now embedded across the ecosystem, advertising firms are finding themselves in a defensive pivot, by investing in proprietary tools and deeper partnerships with the very platform, to retain their relevancy.

Industry executives argued that as automation becomes universal, differentiation will shift away from optimisation alone and towards creative intelligence rooted in context. "Core performance optimisation is fast becoming a baseline," said Man Mohit Malhotra, co-founder and Chief Executive Officer of AdSocial.ai. "The competitive shift is now around how deeply creative assets can be personalised within a specific industry".

Malhotra's company has shifted focus towards training AI systems to understand category-specific nuances. "AI should encode industry intelligence, while humans define strategy, intent, and guardrails," he said.

The churn within the sector underscores the pressure. According to data intelligence platform Tracxn, even as 828 advertising and media startups were shut between 2023 and 2025, over 2,300 new ventures were founded during the same period. Moreover, the sector has raised $5.57 billion since 2020, peaking in 2022 alone at $2.24 billion before entering a sharp funding decline. In 2025, investment fell to $176 million, down more than half from the previous year.

Despite the funding challenges, the sector remains resilient. Tracxn's co-founder, Neha Singh, said that selective bets continued within the sector despite the broader slowdown. AI-led game and development firm Liquidnitro Games raised $5.25 million in early 2024, while GenWise, focused on social engagement for older users, secured $3.5 million in seed funding in 2023.

"The sector is moving from rapid expansion to consolidation," Singh added, "What we are seeing is an adjustment, not a structural collapse".

AT the same time, the nature of advertising itself is evolving. With quick commerce and e-commerce compressing the consumer funnel, branding no longer resides solely in campaigns. "Every piece of creative now has a job: Stopping a scroll, explaining a benefit, reassuring a doubt, or triggering action. Personalisation is not a buzzword anymore, it's a cohort-specific communication," said Divesh Mehta, AVP of planning at Infectious.

For agencies, survival may hinge on what algorithm cannot replicate. Hemal Majithia, founder and chief executive officer of OktoBuzz, said his firm has embedded AI across research, planning, and optimisation, not to replace people, but to sharpen them.

"Platforms sell tools. Agencies sell outcomes, judgment, and responsibility. As automation increases, the agencies that combine human thinking with intelligent systems will remain preferred partners," he added.