Zomato has become synonymous with restaurant search and anything related with food in the Indian market. Today, it is India's largest online restaurant guide, which was founded in 2008 as Foodiebay.com, which was further rechristened as Zomato in 2010.
In an exclusive interview with Vibhuti Jaitly of Zee Media Corp, Deepinder Goyal, CEO and Founder, Zomato talks about its inception, recent acquisitions, product plans, business model and much more.
Q. What was the idea behind starting Zomato when online food guide business was at a nascent stage unlike now?
When I was working at Bain & Company, I noticed that my colleagues used to queue up to view the stack of menu cards in the cafeteria during lunch hour. There was a rule that we couldn’t take the menus to our desks since people generally ended up losing these menus causing inconvenience for everyone. To save everyone from the trouble, I just scanned these menu cards and put them online for everyone to use. This small office intranet website became popular with peers and we realised that there was potential in the business model around food discovery.
That is how the very early form of Zomato was born.
Q. Tell us about your business model and how did you manage to generate revenue?
So far we’ve relied on hyperlocal advertising on our website which has formed the core of our business model. Taking this a step further, we started advertisements on our mobile apps as well. This was fuelled by the increasing traffic on our mobile apps. With the recently introduced, Zomato for business app, merchants have access to their listings allowing them to share daily deals, discounts, promos, daily or special menus. This also facilitates their interaction with their customers on a real time basis. This is a subscription based model.
Since the past few months, we’ve focused on experimenting with other revenue streams, and with this, we're expecting revenues to triple this fiscal. We introduced a cashless payments system on the mobile app in Dubai. Diners can settle their bill at participating restaurants using the Zomato app on their smartphone rather than paying with cash or swiping their cards. Every time a consumer pays via the Zomato app, the merchant pays us a percentage cut on the overall transaction amount.
We will soon introduce our online ordering service in India wherein we will facilitate the process of online ordering as a tech platform. The logistics of the delivery will still be handled by the restaurants. Zomato will charge restaurants a commission and this too will add a new stream of income. We will eventually roll out this feature in other cities/ regions.
Q. What was the strategy behind your recent acquisition of $52mn all-cash deal of Urbanspoon?
Urbanspoon has built a great product for the local market not only in the US but also in Canada, Australia and the UK. Their vision of building a rich content platform providing in-depth information on restaurants is in line with ours. We acquired them because we believe that the combination of Zomato and Urbanspoon is the best way to cater to every user and merchant needs in this market.
One of our large market entry strategies has been to acquire strong players in the market. Launching in the US was on the cards for a while and Urbanspoon’s market leadership and local content in the US, Australia as well as Canada has given us a strong foundation to build on. The acquisition of Urbanspoon has changed the game for us and strengthened our market share in the three markets where it has a strong foothold.
As of now, we are just a couple of weeks away from transitioning the product and you'll soon see the combined product offering the best of both Urbanspoon and Zomato on a common platform. We're also in the process of scaling our teams in Australia, Canada and the US.
Q. You have already made seven acquisitions across the globe. What are your future plans and next target market?
Our immediate focus is on consolidating our presence in our existing markets as well as building a strong integrated product for the migration of Urbanspoon and Mekanist to Zomato. Our efforts are going to be directed towards building vertical depth within the restaurant space rather than launching in new markets. We will only launch in new markets when we have a solid product base in place and also the bandwidth to expand geographically.
In the long term, our aim will be to help the consumer in whatever he may want to know or do for example searching a good place for dinner, ordering a meal online, using cashless payments system, finding the nearest coffee shop with Wi-Fi etc they should be using Zomato to do it. We’re working towards creating a seamless dining experience for our user base and want to own the communication channel between consumers and merchants.
Q. Zomato has finally arrived in the online food-ordering business. The commission charged is half as compared to other existing players. Is it because of the fact that for Zomato it is an additional revenue stream?
For us, online ordering is a key business point and the lower commission rate is not a reflection of how we are prioritising the business. In fact, our approach to the commission structure is unique where we are placing Zomato consumers first and giving incentives to our partner restaurants to service them better. We charge a lower commission from our partner restaurants if the delivery experience for the consumer is amazing, as measured by the new system of 'delivery rating'. We believe that happy consumers will drive more volumes and consequently more business. Our revenues are likely to double in the next fiscal with this new stream of revenue generation.
Q. How many restaurants will you partner with initially and will this service be pan-India?
We are currently piloting online ordering in India and will soon go live with the feature mid April in Delhi, Bangalore and Mumbai with more cities to follow. The product should hit the market with around 2,000 restaurant partners. Over the next few months, we are aiming to offer this feature with over 10,000 restaurant partners in India.
Q. What is your take on growing competition by other new players in the market?
We are not worried about any of our competitors, especially in markets where we have a strong foothold because we have the advantage of having a strong sales team, exhaustive restaurant database and large customer support base.
Even in mature markets such as the UK and now the US and Australia we're certain that there's no one doing what we do - provide value to the user at each stage of the eating out experience. Also, our competition is very fragmented; there are players that cover online ordering, delivery, local search, table reservations. Zomato on the other hand provides a holistic and seamless restaurant discovery experience.
Q. It is seen that not all startups become success stories. Any words of wisdom for budding entrepreneurs?
I think it's important to deliberate and build a scale at an early stage of the startup. Looking back would be one of the critical learnings in my experience. Focus on what you’ve set out to do and make sure it's something that you’ll be happy thinking about several years down the line. One must also remember that it takes time to build a company, so you’ve got to be patient.
Q. Zomato focuses on restaurant industry. Any plans of venturing into other services/ business verticals?
Our product experience is based around food and restaurants and that differentiates us from our competition. There is no one who has gone into the depth of the restaurant space like we have done in the markets where we are present. For us, it is a product-based decision to stay focused on restaurants and not spread out by moving into too many verticals. We’ve always focused on building vertical depth within the restaurant space.
Q. What does 2015 hold for Zomato? Share your future plans for Indian and overseas market.
Our immediate focus is two pronged - consolidating our current acquisitions and expanding our product offering to both consumers as well as merchants.
Soon a user will be able to search, discover, order online, make a table reservation, pay at the restaurant though the cashless payments option in the app, order a cab (strategic tie up with Uber), share an experience (check-ins, pictures, reviews), asking for a recommendation on the best dishes at a place (comment on existing reviews, direct message to other foodies), share feedback with the restaurant management (reviews), discover the best deals and discounts - all this and more through the ease of a single seamless app.