How Zomato plans to become a top player in the world

Zomato, the India-based global restaurant search and discovery business entity, has accelerated plans to get into new products like online food ordering, table reservations, payments and points of sale for restaurants.

Deepinder Goyal, founder & chief executive, explains to Ranju Sarkar the thinking behind these products.

Edited excerpts:

You started as a discovery platform but are now getting into transactions.

Getting into transactions was always the plan. For example, we acquired a table reservation company quite a long time ago (Next Table, this April) and were building the online ordering platform.

We had a lot of competition starting February this year in online ordering (TinyOwl, Swiggy, Foodpanda) that  accelerated our plan — let’s go sooner.

In the long term, getting into all these transactions was always the plan because this is what we are building.

Earlier, the focus was advertising-backed business and we were building the new products on the side.

Now, this has become the focus, as way too many companies have entered this front in a matter of three to six months.

Going forward, will food ordering be the mainstay?

From an execution point of view, yes. We are going to get restaurants and users on board for these products, but from a revenue point of view, we will still focus on advertising because that’s been great for us.

How do you see the revenue mix changing, three to five years down the line?

Advertising will become a third of our revenues three to five years down the line. These new products will bring in two-thirds of our revenues.

The new products include online ordering, delivery, table reservations and payments, and we also have points of sale for restaurants.

We launched our online ordering about 10 weeks ago. Table reservations will be launched a couple of weeks from now, cashless was launched in Dubai in March, point of sales will get launched in November.

What’s the idea behind getting into these new businesses?

Not new businesses, it’s the same business. It’s the same user and the same restaurant, right?

We are only helping this user connect to the restaurant. Until now, in the US, there are five different firms helping the user connect to a restaurant in five different ways: For search, for reviews, table reservations or online ordering. But, the same user and the same restaurant.

So, all the channels of communications between the two should be part of the same product.

Will this entail a change in your strategy — of going global and not focusing on discovery?

That’s not true. Discovery will continue to be the mainstay of the business. If we don’t do well there, we will get the short end of the stick.

That’s a traffic we use to get a foothold in all the other products. You should think of countries and products as two different axes of Zomato and we are going to expand on both these fronts.

Different countries will get different products at different points in time and we will keep adding more countries.

In India, will ordering be your main focus area?

Yes, ordering for the next couple of months, then table reservations.

Once we gain leadership on ordering - we have got very good volumes, we are growing 20 per cent week on week, and we be might close to or already the No. 1 player in India - we will come up with table reservations in the next couple of months. Then, points of sale will come in and then payments.

What changes do you need to make internally to launch these products?

We are trying to split a consumer internet company into two parts. The first part will do consumer internet, and the second part will do enterprise software - all the products we are making for restaurant owners. That’s the biggest change for us.

How do you see yourself in the food ordering space? What’s your USP?

The biggest unfair advantage we have over anybody else is that we don’t have to acquire customers to use our products.

We already have 11 million unique visitors in India every month. It’s just as easy as giving them a button to order food.

Our unit economics are very good and we are almost going to hit profitability in our online food ordering business next month.

That’s the biggest advantage we have. We can invest in marketing way beyond anybody else can because our unit economics are very good.

All the other guys, they spend Rs  1,000 to acquire a customer and they make 50 bucks off that customer and the person never comes back to use that product again. They are running a huge loss on everything. I don’t know for how long that can continue.

Isn’t the business different from collecting menus and putting these online to executing orders?

We have done this in the past. That was my first start-up, back in 2005, foodlet.com — I started the first online food ordering company in India, ever. It did not work; 2005 was way too early.

What happens to the discovery part of the business? How will you go on it from here?

The discovery part is still the mainstay. That is where people enter. The biggest problem users in the US face is that they first have to look for a review on Yelp, and then they go to Open Table, to book a table.

We are just integrating both of these things and saying these are all the reviews; this is the discovery part.

Once you narrow down to a restaurant, here you go — you want to order, you want to book a table, you want to pay; here is what you can do.  

Are you open to acquisitions in table reservations or other products you are launching?

Not really; we already have traffic. All the acquisitions we have done so far has been to acquire customers of those companies.

We already have customers in the lots of markets we are in. We are leaders in 18 of the 22 mar-kets we are in. So, there’s no logic in acquiring those companies.

How are the new businesses fundamentally different from the discovery business?

It’s pretty much the same. In discovery, we used to ask for advertising money, and that used to be for the leads we brought in. This is also a lead-gen (generation) business.

Where do you see Zomato three or five years down the line?

Five years down the line, maybe we want to see Zomato in 100 countries, and all these countries should have the full suite of all our products.

The capital you raised in the latest round will keep you going for how many months?

We easily have 24 months of runaway with this one (the latest funding round).