“What is Zomato’s Revenue?”
If you google this question, the top search result would be a nine-digit number - $280,000.000. But the concern is how a food delivery app sees such a large revenue.
Undoubtedly, food delivery apps and websites are an uptick since the mobility crisis. And all of us are using it for the convenience associated with those. Yet a primary restaurant search and online ordering service seeing the revenue figures are staggering.
How are Dipender Goyal and Pankaj Chaddah able to monetize from known models? Or did we miss some part of the story?
Yes, we missed crucial notes on Zomato’s operations. And we are on to finding those in this blog.
The Business Model of Zomato
Before we head to the topic of concern, we should know what we are talking about. Zomato began as a restaurant search, online ordering, and delivery service but branched out to white label services and event hosts.
Seeing illustrious revenues wasn't easy in nearly 14 years of Zomato's operations. Initially kicking off as a Foodiebay in 2008 and having the largest restaurants directory in Delhi, it fueled a stream of new food tech in India.
But cracking the operational efficiency was hard considering the discount-seeking Indian customers. In 2015, Zomato had bleak chances to thrive, owing to the massive losses or high burn rate. Then it had to ax 10% of its headcount, i.e., 300 employees.
However, with money pumped in, it began focusing on other revenue-making sources and started going hyperlocal. However, that wasn't even a pleasant ride. Zomato faced backlash with Zomato Gold (which we discuss later in the blog), restaurants walked out #logout campaign in mid-2019.
Besides, Zomato had withdrawn some of its operations in the international markets. It, however, managed to do business in over 10,000 cities in 24 countries. And Zomato's primary focus is on offering local restaurant search services, gathering data on food menus, contacts, and presenting users with relevant information. However, its business model reaches far beyond just restaurant search and online ordering; it's now an advertising giant.
Zomato was primarily accessible through a web app before 2013, though that is perhaps true for any digital platform. With the boom in mobile gadgets, it launched its mobile app. (Get to know how to develop an app like Zomato)
So, with the advent of mobile apps, users look for local restaurants of various cuisines and access restaurants that want to reach a wider market. Notably, they are the target audience of Zomato, which includes all of us.
Zomato is equipped with a mandatory rating system, making it easier for customers to locate restaurants, leave comments, check listings, and availability based on their preferred cuisine. Thus users are not guessing around with Zomato. It has transformed the food industry.
Zomato - Revenue Model
Zomato doesn't sell anything to customers, yet it generates a ton of money.
Since the first half of FY21, revenue from Zomato's food delivery segment has been increasing. The Gross Order Value (GOV) grew by 19% QoQ in H1FY22 and 158% YoY to INR 54.1 billion or $721 million.
Its business is divided into two parts: one is the delivery company, and the other is the advertising business. Apart from online ordering, which most customers are accustomed to, Zomato sees revenue from various sources. Here are its revenue-generating sources:
Restaurant Listings and Advertising
Goyal and Chaddah wanted to replace paper menu leaflets with online restaurant directories. But the opportunity struck as restaurant owners wanted a higher or priority listing. Zomato, which began as a search and rating service for restaurants, was able to earn advertising money as a result of this.
They expanded this service to include meal delivery and restaurant bookings, for which Zomato charges those who wish to be included in the feed fees. However, Zomato's primary source of revenue is advertising. Restaurants may use Zomato to advertise their banner on the site to gain more attention and appeal to a larger audience.
Zomato charges eateries a fee based on the number of orders placed through its food delivery service. Restaurants pay a commission for each delivery, which is split between the delivery partners and the company.
Due to the competing nature of the food business and the necessity to provide large discounts, Zomato has wafer-thin margins. So, internet meal delivery represents a small fraction of total revenue compared to other revenue sources.
Zomato is a data warehouse. Zomato has a massive database that knows who wants to eat what, where they want to eat, what they are looking for, heatmaps, and everything through its cookies.
Restaurants pay a monthly subscription, and in exchange, Zomato provides them with analytical tools and customer data. Considering the number of Zomato's partners (1.4 million) means that subscription fees are Zomato's gold mine.
Anyhow through subscriptions programs, it equips restaurants with 'Zomato order', which allows them to learn about their customers' preferences. The eateries then utilize this platform to advertise their meal discounts.
Zomato has walked into the live event industry with its partner restaurants. In 2019, Zomato launched Zomaland, its first venture into the live event space.
Users must pay an admission fee to enter Zomaland, where they may see live musical performances and other events in addition to unlimited food.
In 2018, Zomato held an entertainment carnival in Delhi, Pune, and Bengaluru, which attracted over 100,000 people. Zomato earns revenue on the ticket prices used to attend the carnivals and events.
White Label Access
Zomato has also ventured into the app development industry, an industry that forecasts revenue of $366.34 billion by 2027.
Zomato operates as Zomato Whitelabel in this silo. It proposes businesses design and develop customized delivery apps or revamp existing digital solutions. It also provides consulting services to cloud kitchens and restaurants.
Zomato even collaborates with a small group of restaurant owners to discover potential growth sites at a low fixed cost, but with more possibilities for the user. It supplies these restaurant partners with the necessary licenses and operational infrastructures.
Zomato also collaborates with entrepreneurs to build up and run Zomato kitchens under different other labels, and it provides kitchen infrastructure services to chosen restaurant owners. With an Rs. 35 lakh investment, entrepreneurs may fund eateries in the proper location. It also promises to give monthly profits of Rs. 2 lakh to Rs. 4 lakh to investors and claims to have finished more than 180 affiliated kitchens as yet.
Zomato offers a subscription-based premium service, Zomato Gold (the feature which we mentioned). It allows Gold subscribers to receive complimentary food and drinks when ordering from partner bars or restaurants.
The Gold service is only available for dine-in orders and not for delivery, and it may only be used once per day at each partner restaurant. When customers visit their partner restaurants, Zomato Gold offers either 1+1 on food or 2+2 on drinks.
It began in 2018 however faced criticism in the 2019s as it penetrated the margins of the restaurants.
Zomato - Value Proposition
Zomato is a household name. Once in a while, food delivery is now a party stopper. A business strategically built to provide value to its clients.
Zomato has been emphasizing to provide something unique and special that customers can't obtain anywhere else. Zomato is a one-stop shop for food, a tool for eateries to stand out, and a food delivery ecosystem builder. Restaurants may differentiate themselves by keeping their listings up to date, responding constructively to criticism, and being accountable for their actions.
Zomato wasn't always a success; it always modified itself to cut losses and stream revenues. It has been on and off in certain markets, trembled again and again, but came back each time. Zomato is a real unicorn 'a legendary business'.
AppsRhino is a mobile app development company powering on-demand mobile apps and business apps for entrepreneurs and enterprises.