Journey of Zomato since Inception

Co-author : Bhargav Kundem, IIM Udaipur

What is Zomato?

Zomato is an online portal which lists the information on restaurants, cafes and nightclubs also including information on home-delivery options and other dine-out choices. Zomato was originally started by Deepinder Goyal, IIT Delhi to help out his colleagues in search for menus of restaurants. It started as a small database of restaurants’ menus which Deepinder circulated among his colleagues to help them save time while ordering food. The activity took off very-well and Deepinder took it to an official level, naming the website Foodiebay.com. Officially launched in July, 2008, the website started by listing over 1200 restaurants in Delhi-NCR region and by the end of 2008, it had already crossed the mark of 2000+ restaurant listings. In the next 6 months, Foodiebay expanded to Kolkata and Mumbai. Deepinder knew that local knowledge of the city is more advantageous while assigning the job, hence, he carefully chose his executives.

Capital Investment

Zomato received an initial investment of Rs.4.7 crore from Info-Edge India in August, 2010. Due to high growth rate of the company, they witnessed an increase in capital fund investment by Info-Edge. Info-Edge subsequently invested Rs. 13.5 crore in September, 2011 followed by a $2.5million and $10million investment in year 2012 and 2013 respectively. By the end of this period, Info Edge almost had 57% share in the company. With its plan of expansion to different countries and other cities of India, Zomato was blessed by a whopping $37million investment from Sequoia Capital and Info Edge in November, 2013.

Business Model

Zomato follows a simple business model. While starting afresh in the new city, one person is assigned in each city to collect data about the restaurants and clubs around the city. There is a centralized team based out of NCR which processes and cross-checks the data to confirm the validity. The data is then processed to be put up on the website. There is a separate team for advertising, which sells the website to the restaurant owners and attracts them to advertise with Zomato. 95% of the revenues are earned from advertisements from the local restaurants, while the rest can be attributed to event ticketing and restaurant booking.

Financial Analysis

Even though the company grew at a tremendous rate during its initial years, it witnessed an exponential growth after rebranding itself with the new name. It is now a source of 600-odd jobs. The website observed a response from 8 million unique visitors by the end of 2012.  The metros were the highest revenue earners and the company saw the EBITDA break even in December, 2012.

The company generates its revenue from hyper-local advertising. It saw a remarkable amount of revenue amounting to USD 2 million at the fiscal year ending March 31,2013. They now witness monthly revenues close to USD0.5 million.

Adapting with Demands

Zomato revamped its website to adapt itself to the changing requirements of the users. The revamped website had a more focused approach on human opinions. The features of the new website are a better search feature with additional filters as per user requirements, a more organized form of presenting the data, easy upload of photos. They also re-modified the presentation of the reviews and added a personalization layer to the whole website. Zomato is now viewed more as a social-network of foodies. 

Marketing Strategies of Zomato

Zomato started with direct marketing techniques like SMS and Direct mailers. Through direct SMS, Zomato targeted six lakh unique customers as a first stage. Irrespective of users’ responses Zomata blasted them with 6 SMS per day for one month. Zomato believes it increased their reach with this technique. Next is direct email, where they effectively reached corporates in bulk and hence reached the professional employees which are their primary target. The mailers were designed in such a way that they are difficult to classify as spam mails until and unless user opens the mail. And few users liked reading them during breaks during office hours. Also using direct emails, they were sending Monthly newsletters to the subscribers. Because of the nature of the email, but the average time user spent on this email was only 0.2 seconds. They distributed pamphlets in specific areas. The pamphlets were very specific to their business. They were attractive, colourful and of good quality to customers.

Right now Zomato promotes itself as Food Network. On Social Media, they follow simple strategies of always be there for your customer and only best content needs to be sent to customers. They treat Facebook and Twitter as two different platforms. Even though content is similar, as twitter is more real-time they run contests frequently like Foodie Friday, Yummy Yatra, etc. Twitter is more used for interaction and conversations and Facebook is primarily used to push their content and to reach more people.

Once a user logs into Zomato with the help of Facebook or Google account, his/her friends will be automatically identified on the site and they can easily follow their friends. As the friends’ ratings are more trusted by users when compared to Zomato’s, influencing factor is much higher with the help of social media. The review count per day has gone up by 75% while the number of ratings per day has increased by 100%.

Reasons for success

Zomato is very high product focused. They ensure their customer gets the best products and they are happy. This increased the brand loyalty among the users and they are happy to return to the website. Strategically, Zomato has first mover advantage in the business they are in. Even though the business model is not inimitable, with the kind of evolution Zomato is undergoing they are well set for future.

Effective use of analytical tools like Tweetdeck to gauge the interaction Zomato is able to extract from Twitter, to track what’s happening in the network and respond quickly to loyal customers. They have been using Sproutsocial tool as well to ease up responding to customers and monitor performance on social media.

Competitor Analysis

Just like Zomato, Google Maps started showcasing restaurants, different businesses etc. Even though it can be considered as a competition because of similar business model, Zomato has a first mover advantage and has already occupied large cities and fan base. In the Google maps model, only one thing which can be drawback for Zomato is the accessibility. Many users use Google maps for navigation and Google has integrated maps with this data base which reduces the intention to use Zomato in users. Zomato considers websites such as Justeat.in as substitutes which have equal potential to eat up the market share of Zomato. Burrp is another website which has a similar business model as Zomato. But Zomato also has a differentiator over other websites. While all websites just lists the restaurants’ names and their ratings, Zomato takes a step further and gives the user, menu of the restaurant which is updated every 90 days.

There are a lot of competitors in the market which give a tough competition. Some of the big names include Burrp!, Yelp and Google. In addition to that, they also face a lot of challenges due to varying market demands in different countries and different cities. They also see varying user behavior in different countries which poses a challenge to design the market strategy for each market.

Future

With current valuation close Rs. 1000 Crore, Zomato is aiming to become a global internet brand. They have a plan to use latest funding round to reach 22 more countries within next two years. Another goal they have set for themselves is that in next three years they want to get enlisted on public exchange. Apart from India and UAE while other countries are a tough nut to crack, Zomato is still working on globalising their business model and strategy to set better future.