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Table of Contents
Introduction............................................................................................................... 2
History and Transition from Foodiebay to Zomato...............................................................2
Competitor Analysis.................................................................................................... 3
Zomatos financials.................................................................................................. 3
Swiggy Financials.................................................................................................... 4
Foodpanda Financials............................................................................................... 4
The Essentials of Business Model....................................................................................4
Revenue Sources..................................................................................................... 5
Online Advertising................................................................................................ 5
Subscription........................................................................................................ 5
Delivery Services................................................................................................. 6
Funding Rounds of Zomato........................................................................................... 6
Acquisitions by Zomato................................................................................................ 7
Zomatos Food-Ordering Unit Economics..........................................................................9
Sustainability.......................................................................................................... 9
Inference and Notes.................................................................................................. 9
Zomato Current Snapshot......................................................................................... 10
Marketing Through The Years...................................................................................... 11
Zomato customer channels....................................................................................... 13
Network effects..................................................................................................... 13
Analytics In Play................................................................................................... 13
Key Factors............................................................................................................. 14
Success............................................................................................................... 14
Caveats and Challenges faced....................................................................................14
The Way Forward...................................................................................................... 15
References.............................................................................................................. 16

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Introduction
Zomato was one of the early birds in the Indian start-up scene and one of the lucky few
companies to weather the many storms that have come its way. Established in 2008, the
company now has expanded its presence to 23 countries including India, Europe, North and
South America. The service is also now present in 9 different languages. One thing that has
differentiated CEO Deepinder Goyals strategy from other start-ups has been his dedication
to his content. The platform specialises in providing in-depth details along with reviews and
independent ratings. From the beginning the platform differentiated itself from its
competitors by providing a wide array of listings, giving useful information like opening
times and giving interesting features like focusing on different kinds of dishes, etc. The
company has been consistently able to raise money from the markets. It has raised about
$225 million since it was set up despite having stiff competition. The company has grown
both organically in India from 4000 restaurants in 2008 to around 1.4 million restaurants by
2015. It has also grown inorganically abroad by acquiring existing food portals like
Urbanspoon in Seattle, among others.
Amidst growing concerns about the business models of most Indian startups, Zomato
has also become the only unicorn from India to break even which is no mean feat. Various
factors like being the first mover in the space, focus on employee efficiency, reliable rating
systems and skill in acquiring funding has helped the company achieve this success. But what
sets it apart is its twin focus on providing the right content and monetisation. This has helped
keep the companys costs minimum. Unlike other start-ups they spend less on marketing and
customer acquisition. Due to their focus on content they have also been able to increase their
ad income significantly. The low spend on customer acquisition means that unlike other food
delivery startups Zomato already breaks even when the customer places the first order.
The company also promptly pulled the plug on its non-profit making endeavours like
its Cashless business. The company is also using acquisitions to improve efficiency of its
operations as can be seen by the acquisition of Sparse Labs to use real time GPS updates to
help its logistics partners. According to its CEO Zomato has taken the approach of focusing
on high value orders, avoiding deep discounting and putting emphasis on great customer
service. Moving forward this focus will help Zomato hold its own in the Indian food start-up
space which is hotting up with entrants like Swiggy and Freshmenu but cooling down in
terms of investor appetite with foodtech space raising lower and lower deals over the past
year. However unlike other players in this space struggling with massive lay-offs, high
customer acquisition costs and inability to turn viable in smaller cities, Zomato is sitting
pretty by being the no.1 player in 18 of its 23 markets and finally breaking even. Now the
start-up is looking for the next round of funds to the tune of $200 million to further expand its
food delivery. Looks like Zomato may Never have a bad meal after all.

History and Transition from Foodiebay to Zomato

Page 2 of 18
Foodiebay.com, a website hosting menu cards along with user ratings, officially started in
2008, and was developed by IIT graduate and Bain and Co. consultant Deepinder Goyal and
his friend1s. It had a list of 1200 restaurants in the Delhi NCR region and soon expanded to
include Kolkata and Mumbai regions as well. The startup gained a lot of accolades, even
featuring in the Top 25 Promising internet Companies by SmartTechie magazine. Soon
enough, Info Edge, an online classifields company (owns Naukri.com, jeevansathi.com etc.),
invested $ 1 mn (INR 4.7 cr) in the business. Besides, Foodiebay was re-branded to Zomato
in late 2010 and by 2011, its coverage encompassed Chennai, Hyderabad and Ahmedabad.

The notion of an online aggregator of restaurants had its genesis in a mall where the founders
deliberated upon the idea of availability of restaurant names and menus to people on the
move. Over time, Foodiebay metamorphosed into Zomato (rhymes with tomato), along with
an application being launched for all Operating Systems (Android, iOS and Blackberry and
Microsoft).
Over the coming years, it expanded its operations overseas, first starting in Dubai and later to
Sri Lanka, Qatar, Philippines, New Zealand, Australia, US etc. to name a few. As of now, it
has its operations in 14 countries out of the 23 it had previously run is operations in. This was
because of managements decision to invest resources (money and management bandwidth)
in areas having lucrative unit economics and where it sees an opportunity of being market
leader. Moreover, it has also expanded into other Value added services pertaining to the
business- Zomato Base, a point of sale (SaaS) product for restaurants (MaplePOS), Zomato
Book for table reservation system for restaurant owners and Zomato White label which
creates and deploys applications for restaurants along with associated analytics/reporting.

Competitor Analysis
Zomatos Financials (2014-15)1

Sales Loss Burn Rate Employee Net Worth Cash

(per month) Cost Reserve
(% of Sales)
INR 7883.5 INR INR 5.45 cr 61% $ 1 bn per INR
lakh + INR 7185.54 last round 1303.34

1 https://yourstory.com/2016/05/swiggy-foodpanda-zomato-financials/

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1614 lakh add. lakh of funding lakh
income
Avg. Days Receivables: 41 days
Avg. days Payable: 48 days
Swiggy Financials22
Founded in December 2013, this online food-orderin/delivery marketplace is owned and
operated by Bundl Tech. Private Ltd and has presence in eight cities as of 2016 and has a
restaurant listing of over 5000.

Sales Loss Burn Rate Employee Net Worth Cash

(per month) Cost Reserve
(% of Sales)
7.41 lakh + INR 212 INR 1.7 cr 57% INR INR 345.14
4.18 lakh lakhs 386.25 lakh
additional lakh
income

Avg. Days Receivables: 6.32 days

Avg. days Payable: 23.59 days
Inference
Swiggy has Negative working capital and also with its current cash reserves and burnout
ratio, it will not run out of cash for another year or so
Foodpanda Financials3
A Rocket Internet incubate, the company was launched in 2012 and operates in 40 countries.
Its target as of 2015 is to have a network of 12000 restaurants spanning both Tier-II and Tier-
II cities.

Sales Loss Burn Rate Employee Net Worth Cash

(per month) Cost Reserve
(% of Sales)
INR 459.84 INR 3600 INR 2.96 cr 16% Unavailabl INR 801.21
lakhs lakhs e lakh

Avg. Days Receivables: 26.97 days

Avg. days Payable: 41.65 days
Inference

2 https://yourstory.com/2016/05/swiggy-foodpanda-zomato-financials/
3
https://yourstory.com/2016/05/swiggy-foodpanda-zomato-financials/

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Negative working capital but too high days receivables and payables which might lead to loss
of vendor confidence. Also it has high burn ratio compared to its peers

The Essentials of Business Model

Zomato is an app providing millions of users with information on restaurants across the
world essentially making it a food and place discovery app. The information on the app has a
structure which makes it easy for a user to navigate through and absorb information as
dissipated. There are defined categories under which the restaurants are classified. For
example, the broad categories for classification is restaurants, cafes & pubs. There is further
classification which is based on what kind of service a specific outlet is providing based on
cuisine, working hours, reservation required or not, buffet, happy hours etc.
This sort of details classification and categorization has enabled Zomatos customers
to have their ads placed under specific categories thus enabling in better discovery of the
outlet. The sponsored advertisements are also placed based on the user location. With this
sort of advertisement, the outlet will be able to capture more attention in a particular target
area where it is operating. Sometimes there are restaurant in obscure places and only a
handful of people know about it. The only way other people can know about the same place
is through word of mouth. But with Zomato it became possible for restaurants to advertise
themselves under not just one but three categories namely hidden gems, browse nearby
places and the specific category under which the restaurant falls. There is a specific use case
for all the advertisements and that is the basis of Zomatos revenue model. The classification
and categorization has played a crucial role in Zomatos growth through these years as it gets
users to log on to Zomato for any kind of food or venue discovery. Today there are more than
11 million visitors on Zomato in India alone who use the app to lookup information. The
huge base of customers is what makes Zomato the exclusive choice for the restaurant owners
to publish their advertisements. To summarize, revenue making part is made up of streams
present below

Zomato Revenue Split2

Delivery; 4% Royalty; 1%
Subscription; 5%

Advertising; 91%

Source: Economic Times July 2016

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Revenue Sources
Online Advertising: The revenue from advertising forms the largest share of revenue for
Zomato. There are two main streams which contribute towards the online advertisement
revenue. The first one being the advertisements of restaurants placed under different
categories of restaurants. A new caf in the city can place an advertisement under the Caf
category for more visibility. The other kind of advertisement is done for events such as a food
festival or happy hours.
Subscription: The subscription model is targeted towards restaurant owners. Zomato provides
a subscription app with which the restaurant owners can manage their own page on Zomato
and update offers, discounts deals etc. to the customers. This subscription model is available
to owners at the rate of $50 per month per outlet.
Delivery Services: The online delivery channel contributed around 4% of the total revenue
earned in the fiscal year 2015-16. Online delivery is the latest service offering by Zomato.
This has come into existence after partnering with delivery platforms such as Delhivery &
Grab.

REVENUE GROWTH2 ( CRORES)

200
169
150
96
100

50
0.64 8.4
0
Online Advertising Subscription
FY '15 FY '16

Source: Tech Economic Times 2016

Apart from these three consolidated segments of revenue streams Zomato also has a suite of
products and services which are getting the attention of restaurant owners. The Zomato
Whitelabel, Zomato Book and Zomato Base are some of the new product offerings. The
Whitelabel platform allows restaurant owners to make their own native applications specific
to the restaurant. This falls under the subscription model as described under key revenue
streams. Zomato Book is the new feature introduced in the app where users can book table in
listed restaurants. With this Zomato is able to take a slice out of the revenue made by the
restaurants. The idea behind these strategic decisions is towards defining a more streamlined
and wholesome user experience where the customer can browse, book and bill using one
single application. The requirement of browse and book are already fulfilled by the app and
the recently added booking option in the same app. The bill aspect of the customer journey is
also getting fulfilled by Zomato Book. It is essentially a point of sale solution for the
restaurants. With this system in place Zomato will have access to what the customers are
Page 6 of 18
ordering in the restaurants. The POS system offers many more services such menu
management, customer relationship management for personalization, use of real time
analytics to track restaurant performance and dive deeper into the generated data to gather
relevant insights and streamlined electronic transactions for a hassle free cashless business
experience.

Funding Rounds of Zomato4

In 2015 investments in the food-service, delivery, logistics segment accounted for around
22.5% of all investments made by top 10 investors of 2015. Over time Zomato has raised
significant investments amounting to $ 223.8 mn over 8 rounds of funding, with its primary
investors being Info Edge (holds 47% stake in Zomato), Temasek Holdings, Vy Capital and
Sequoia Capital.
The break-up of these investments along with the investors and invested capital is given as
below

Source: https://www.crunchbase.com/organization/zomato#/entity

When compared to its competitors,

Foodpanda has raised $318 mn (6 rounds)

Primary Investors: Rocket Internet, Falcon Capital, Goldman Sachs, Phenomenon
Ventures
Swiggy has raised $ 75.5 mn (5 rounds)
Primary Investors: SAIF Partners, Accel Partners, Norwest Venture Partners etc.
TinyOwl has raised $ 27.67 mn (4 partners)
Primary Investors: Matrix Partners, Matrix Partners India, Sequoia Capital etc.

Page 7 of 18
 Funds Raised (in mn $)
120
100
80
60
40
20
0
Series A Series B Series C Series D Series E Series F Series G
Swiggy Foodpanda Zomato TinyOwl

Source: https://www.crunchbase.com/

Acquisitions by Zomato
Zomato created waves when it acquired UrbanSpoon for $ 52 mn 5 in an all cash deal. This
was done to increase its presence world-wide (22 countries), increase restaurant coverage,
user visits/month, more reviewers in the system etc. However, in 2016, it wrote off INR 104
cr of the acquisition and also cut down physical presence in 9 countries, because of the high
burn rates needed to follow its Hyperlocal Advertising & Feet on the Street model in many
of these countries
Besides, Zomato also acquired a lot of other companies to meet its strategic end. In some, it
pushed for vertical integration through the acquisition of Sparse Labs, a logistics tech startup.
In other cases, it acquired companies to add new features to its repertoire- MapleGraph for
its MaplePOS (a cloud based POS software) which was launched as Zomato Base, Nex
Table, Inc. to foray into table reservation management solutions for merchants through
Zomato Book.

5
Source: https://yourstory.com/2015/01/zomato-acquires-urbanspoon/

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The following table63 shows important acquisitions made by Zomato to further its expansion
plans (Vertical Integration) and include new product features (Horizontal integration). In
addition to the following, it has also made 5 more acquisitions in 2014 which are mainly
restaurant search services and restaurant guides in different countries like New Zealand,
Poland, Czech Republic, Slovakia etc.

Date Acquired Amount Remark

Sep 26 2016 Sparse Labs Pvt.Ltd Unknown Foray into Logistics to
support/enhance its food
delivery experience
Apr 22, 2015 NexTable Inc Cash and Launch of Zomato Book for
stock table/reservation mgmt.
Apr 14, 2015 MapleGraph Unknown Launch of Zomato Base:
Cloud based POS product
Offeres menu and inventory
mgmt. and payment solutions
Jan 29, 2015 Mekanist (Turkey) $ 2mn Increase Zomatos restaurant
search coverage to around
50k from then 7.5 k
Jan 12, 2015 UrbanSpoon (USA) $52 mn Acquisition for entry into
Australian, US, UK and New
Zealand market and increase
its visits per month to 80 mn4

Zomatos Food-Ordering Unit Economics7

Sustainability
Zomato is primarily a content-centric business. Besides, the order volumes vary significantly
during the weak and the time of orders. (More during weekends and during dinner). The
diagram below shows an illustrative graph of how demand varies per week and depending
upon time of ordering.

3
6
https://www.crunchbase.com/organization/zomato#/entity

4
7
https://yourstory.com/2016/06/zomato-order-unit-economics/

Page 9 of 18
 Source: https://www.yourstory.com

The above figure shows that there is a peak of order volume during dinner on Sunday, which
might manifest a very good unit economics. However, the demand follows a discernible trend
and thus calls for looking at unit economics in average time period
In May 2016, Zomato received 750,000 order requests, out of which 80% (Order type A)
were catered to by restaurants themselves whereas 20% was fulfilled by Zomatos last-mile
delivery partners (Order type B).

Order type A (INR) Order type B (INR)

Average Order Value 480 375
Take Rate (Commission) 8.2% 8.2%
Delivery NA 10%
Gross Revenue 39.4 68.3
(AOV X Take rate+ delivery)
Delivery Fee paid to partners 0 50
Processing/ Support Cost 18.4 27.4
Net Revenue/ Order 21 -9.1

Inference and Notes

Average Order Value is post-discounting- 2% of orders discounted by Zomato compared to
27% by those of restaurants. This is what is transacted on the platform i.e.
Transaction Amount = Avg. AOV X # orders
Take Rate/Commission charged by Zomato is 8.2% (avg.) and is variable - inversely
proportional to customer experience Incentivization to focus on customer experience
Delivery cost that is paid to delivery partners viz. Delhivery and Grab is loaded i.e it includes
salary, fuel and administrative costs etc.
It should also be noted that these costs are partly variable (from Zomatos POV) and will
not subside unless economies of scale is achieved in terms of decreased idle time, wages
for deliverymen decrease or there are significant technological advancements
Support Cost: Though automated, point of sale inefficieny occurs, thus decreasing the degree
of automation and adding to costs. Also online payments (35% of total transaction)
decrease costs and prevent pilferage.
For Order type A Two agents in the process: Customer and restaurant

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 For Order type B the last-mile partner gets added into the mix thus increasing support
cost.
With increasing AOV and total number of orders in Order type B, the fixed costs (part of
5
delivery and whole of supporting costs) will be spread over a larger base of orders, thus
leading to a positive contribution margin
Note: CAC for Zomato is negligible: Total marketing spend was around $25,000

Zomato Current Snapshot8

Doesnt follow Everything is my turf kind of strategy

70,000 listing in India with paid listings close to 6%
Revenue Split: 45% India, 20% UAE; rest from other markets with 2% decline every month
due to increased revenue growth in other countries
Serves 90 million customers and has an overall repertoire of 1.4 mn restaurants
Over 8.5 million monthly active users and 2.5% have started ordering on app
Needs 40,000 orders per day to break even; Currently hovering around 26000 orders
Feet and Street model to collect information: Data collectors moving around the city based on
territorial allocation to collect raw first-hand data from restaurants, cafes etc. Because of
this, hyperlocal information is updated every 90 days
Belief in organic sales rather than sales through marketing 25,000 $ per month in
Marketing costs (primarily Customer Acquisition Cost) very low compared to peers
Review segregation through inculcation of reviews by seasoned connoisseurs - like Metacrtic
for movies
Delivery based services in only India, UAE and Philippines
Metric for determining market size for international expansion: #restaurnats x Avg. ticket
size
Monetize once critical mass of consumer cohorts reached in operating countries
Optimum usage of resources viz. money and management bandwidth
Market share is measured in terms of (a) Online Restaurant discovery, (b) Driving restaurant
traffic (footfall Believed to be > 75% vis--vis based on anecdotal enquiries to
restaurant owners)

Follows ad-monetization strategy with ad-business growing 11% YoY (banner ads)

Leverages its customer reach/base in terms of ratings on its site so that restaurants prioritize
Zomato's order first.

Cash balance as of May 2016 is $ 35 mn and burn rate is around $ 1.7 mn

5
8
Zomato Conference Call Transcript, May 2016: http://www.infoedge.in/ir-
financial-zct.asp

Page 11 of 18
 Focus on increasing product features rather than making up for poor product through
increased spend on marketing Better customer retention and lower CAC

Follows BTL marketing rather than ATL marketing which increases costs significantly

Lead time for order acceptance (Order Type A) is 30 seconds and average delivery time is 38
minutes.

4-5% call support and the trend is decreasing because of better service resolution and
automation in order handling

The financials (Operating Revenue vs. Operating EBITDA) are summarized as given
below9,106

All figures in crores

300
185
200
96.73
100 30.6-41.39
2.04 -7.22 11.38
-10.03
0
FY 12 FY 13 FY 14 FY 15 FY 16
-100
-200 -136 224%

-300
-400
-500 -440.96

Operating Revenue Operating EBITDA

As the figure shows, though revenue has increased 91.25 %, the losses have increased 224%
which is worrying signs for Zomato. However, analysts have predicted a bullish outlook for
Zomato in the years to come.

Marketing Through The Years

The marketing strategy of Zomato was a major factor that drove its growth among
other strategies. The underlying vision for Zomatos marketing strategy is to service

6
9
http://www.medianama.com/2016/05/223-zomato-earnings-march-2016/
10
InfoEdge Balance Sheet and Zomato Analyst Conference Call Transcripts, 2015-
2016

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customers all across the globe. To enable this strategy, it banked on the penetration of the
internet and the increased use of mobile which was on the rise around the time of its launch
in 2008. Zomatos user friendly website is one of the major reasons or its success. Along
with it they use a variety of online and offline tools. It has invested significantly in SEOs and
SMOs and gives importance to enhancing the user experience when they engage with
Zomato. It has set clear goals to achieve a continuous growth and increase the traffic to its
website and app. They also rely on television advertising during festivals or Holidays when
they expect a larger number of customers than usual to use their services. Zomato has an app
for most operating systems and it is available globally. They also use this app for advertising
after its usage increased.
In the process of entering different markets across the world, Zomato has opted to
acquire its competitors in different countries. It immediately became the market leader in
Australia and Canada after the acquisition which costed $52 Million to Zomato. According to
the CEO Deepinder Goyal, Zomato now has a presence in about 23 countries (currently 14 as
of 2016).
It has considerably improved its rating and review system and made it simpler as well as
more relevant. The customer is easily able to decide if he wants to order from a restaurant or
not due to the more elaborate and curated information available to him. Its customer care
centre engages with its customers through phone calls and emails too.
Mr. Pramod Rao, VP of Marketing has said that through it marketing strategies,
Zomato hopes to create a dedicated community or fans. Zomato has its presence on a large
number of social media platforms. For example, Zomato uses Twitter to interact with their
patrons in real time in the form of responding to their questions or recommending options
according to their tastes. They also run publicity campaigns and contests successfully on
twitter as most users respond immediately to their twitter posts. And while Twitter gives them
more of a platform of interacting with their customers, Facebook is used generally for
updates or to share related media. And apart from these two, it relies on Pinterest to get
people interested in the foodie lifestyle. Pinterest is used as a platform to please these people
visually. Zomato has close to 1.3 million followers on Facebook and 486 thousand on Twitter.
Rules of Engagement with customers

They always make it a point to respond to their customers or provide a timely and suitable
solution to their problems.
They have always focused on the domain of food and nightlife and have not strayed from
it to avoid confusion. They only post on these topics in addition to their new product
launches and refrain from using these platforms to advertise their clients. Their objective
is to connect the user to the food and the experience of enjoying that food.
They are particular about the relevance of the content they post and do not disengage users
by spamming them.
Beyond providing timely responses, they also make it a point to initiate friendly
conversations with their users and make them feel comfortable. This communication

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 establishes a personal relation of the brand with the users. With time, it has not let its
customer focus take a backseat.

Zomato customer channels

There are multiple ways Zomato can deliver to its customers. The orders can be booked at
food delivery e-commerce website or through an application for iOS and Android devices.
The app allows mobile device users to make direct orders from the list of hundreds of
restaurants.
Zomato has also launched its take-away and pre-order features online, allowing customers to
order food two days in advance or pre-order to collect their food at restaurants. Customers
can make reservations for dining at restaurants on Zomatos website or over the phone.
Zomato provide a free customizable widget to restaurants website and give the customers an
easy way to find and interact with restaurants Zomato page links. Customers can also order
through the restaurants website or app; Orders can also be made through Facebook

Network effects
Any service can positively benefit from the network effect among its consumers, if more
usage by any user adds value to the service which benefits other users (or all users). More
number of times a customer uses the Zomato app and provides his/her ratings, feedback and
comments, more informed the subsequent users will be. The informed customer will be more
confident and comfortable while using the product and this will help him/her in meeting
his/her expectations, and thus the value he/she gets from the app in term of quality of service
and product will increase significantly after each subsequent use. This is the direct network
effect. However, Zomato also has two-way network effect. Directly adding a lot of customers
to the platform may not improve services directly but can effectively attract lot of
sellers/restaurants to the platform which increases its revenue and also its operation
effectiveness.
However, the microstructure of underlying network of connections in Zomato has effect in a
limited area only, and can influence that region only. This means that the value addition done
by an input from user of a particular region or locality can benefit the customers in that
region only. This can be referred to as local network effects.
The advantage of network effect for Zomato is that its value increases exponentially, but cost
increases linearly (Ray Stern). This doesnt require much of maintenance from Zomato and it
provide efficiencies to both its buyers and sellers using the platform.

Analytics In Play
Zomato can use Big data to generate capacity planning algorithms to predict how many
delivery personnel need to be on duty on a given day to fulfil the demand. As on-demand
marketplace is growing, they need to analyse the demand patterns, food preparation time,
delivery routes and more in order to optimize their services. Restaurants and food delivery
businesses that are not using big data analytics will miss out on the opportunity to increase
their ROI and gain customer satisfaction.

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Big Data Analysis can also help in analysing the food eating patterns and trends in different
location, and this data can be used to attract restaurant owners. Restaurant can use this
patterns and trends to create menus and recipes to cater to a variety of demands and increase
the choice of items on the menu. This can help them capitalise on growth and gain advantage
over there competitors.
In order to run its business on data/analytics and simultaneously trying out new verticals in
business, Zomato has started a cloud-based point of sale system at restaurant level. This
system is being called as Zomato Base and works on Android based systems. Zomato Base
offers the restaurant owners and other sellers the option of inventory management, menu
management, recipe management, data analytics, customer relationship management, offline
transaction support, electronic receipts and payment gateway integration. The Beer Cafe, is
going to use the Zomato Base system across its 35 outlets in 10 different cities. This platform
allows real-time outlet-level analytics, enabling the company to plan its supply chain better. It
also provides convenience to company owners, as they can manage their operations remotely
and in real time.

Key Factors
Success
Stuck to its core function of online restaurant discovery and content creation for its
restaurants
Gross margins of 75-80% on fully loaded cost of sales in the advertising business
Focus on organic sales and product quality rather than on increased marketing spend
Cash burn reduced to $1.7 mn per month from a high of $9 mn per month in 2015
Optimum use of resources: Focus on top-line as well as bottom-line with an increasing
focus on decreasing costs
Vertical integration into food delivery with contribution margin of INR 21 for 80% of
orders
Zomato Whitelabel, Zomato Book and Zomato Base together encompass an array of
features which addresses merchant needs and leads to better experience for the customer
Decreasing bidding costs for online ad because of a weakening e-commerce ecosystem

Caveats and Challenges faced

Spams and fake reviews posted on platform: Insufficient filters to distinguish fake reviews
from authentic reviews will result in loss neutrality and usefulness to end-users
Thin margins, expensive customer acquisition cost (for the industry) and declining Order
Value (AOV for Order type A decreased to INR 480 from INR 575)
Must be wary of need to scale quickly without focussing on bettering unit economics
Building a database of dishes: Cumbersome due to frequent inventory shortage, frequent
price changes and the need to build structures data
Work culture in Zomato leading to employee dissatisfaction and consequently sales targets
Feet on street model very expensive adding pressure on bottom line
Distribution on latency and bandwidth crucial: All operations of Zomato are carried out
from India expect for hyperlocal sales force. Since there is a direct relationship between

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 latency rate and search response time, Zomato has to optimize infrastructure (server)
distribution to lower server latency.
Increasing competitors and wafer thin margins increase the threshold and consequently
time period of monetization in countries where Zomato is currently operating. This leads
to faster burn rates and more time for Zomato to break even.
High % of salaries to cost of sales: Administrative costs account for 61% of total cost of
sales. If top-line doesnt increase likewise, then huge pressure on bottom line

The Way Forward

Zomato wants to become a global player. It has been largely successful in expanding its reach
and is definitely on track to achieve this objective. The main reason is that Zomato did not let
its attention waiver from the niche market that it aspired to capture working individuals
from the age of 25 to 30 who were foodies as well as into nightlife and who belonged to the
upper middle class with a characteristic yearning for comfort. It has already captured this in
most countries that it has entered. Even in the case of Urbanspoon like its other acquisitions,
Zomato tweaked its products and launched them to reflect this focus. Their acquisitions
already have good business models of their own in most cases and have helped it establish its
stronghold over these niche markets even though they are overseas.
Zomato could achieve a lot through the monetisation of its mobile app since everyone is
getting into apps now. This was already expressed by the CEO and they have already
launched services in this direction such as charging table reservations in countries like UAE.
One more development expected to work in its favour is the fact that users can now interact
with each other on the website and form foodie networks. This will pull more people who are
passionate about food towards it, because while these groups exist on other social networking
platforms, nothing makes it more credible when it is in association with a name like Zomato.
As a result, it was rechristened as a Foodie network where people enjoyed hanging out.
One focus that Zomato will always have in spite of any other changes is to keep entering new
geographical regions and to widen its reach. In most of these countries there are existing
market leaders with robust business models and for the moment, Zomato seems to be
concentrating on acquiring them. And it makes sense in the long run since it as a specific
vision to become a global entity.

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References
1. Info Edge Annual Reports
2. Zomato Call Transcripts
3. Economic Times
4. Business Standard
5. Tech Economic Times
6. Crunchbase

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