 "Deepinder Goyal")
Days before President Barack Obama and Prime Minister Narendra Modi talked about the benefits both their countries could share with deeper economic interaction, an Indian was making headlines in the United States. Deepinder Goyal, co-founder of online restaurant search service Zomato, had acquired US-based restaurant search guide Urbanspoon for $52 million in an all-cash deal.
The January 12 acquisition was Zomato's sixth in the past six months, and the search service is now present in 22 countries. Acquisitions like Urbanspoon have helped the company enter new territories. Other recent buys include MenuMania in New Zealand, Lunchtime in the Czech Republic, Obedovat in Slovakia and Gastronauci in Poland.
After this blistering pace, Goyal wants to catch his breath. "No more acquisitions on the cards for now," says Goyal. "There's no new geography in mind. We will focus on the existing geographies and strengthen our presence there." In the days to come, Zomato will focus on the US, Australia and Canada. It will need to spend a substantial amount of money in these countries on manpower, technology and marketing. Goyal looks unperturbed. "We are well funded for now and investments in the immediate future will come from internal accruals," adds Goyal.
Zomato, currently valued at $660 million, is backed by private equity investors, including Sequoia Capital and Info Edge India. It had raised $60 million in November 2014, the infusion led by Info Edge and Vy Capital, with participation from Sequoia Capital. Goyal says that there is "no time frame in mind" for further fund raising because "there is nothing on the plate" in the immediate future, though there are reports that in the coming months, Zomato will raise $80-100 million in a fresh round of funding.
American odyssey
Urbanspoon gives Zomato an entry into two new markets: the US and Australia. The acquisition brings around one million restaurants on Zomato's menu. In the US, Zomato's biggest competitor is Yelp, the San Francisco-based company that is dominant in the entire North American landscape. Having locked horns with Yelp in Canada since October 2014, Zomato now hopes that Urbanspoon will aid it in taking on Yelp in the continent and help tilt the balance in the Indian company's favour. Yelp recorded around 139 million unique monthly visitors in the third quarter of 2014, when Zomato had just 35 million. Zomato now believes it will reach a count of 80 million with the Urbanspoon acquisition.
Analysts, however, are not so optimistic about the immediate gains. "Urbanspoon is a big acquisition and it will take time to digest," says an analyst who tracks Info Edge and Zomato but does not wish to be named. In the long run, of course, business watchers feel it is the right step for Zomato. "Urbanspoon is also a leader in Australia and Canada, so that will rub off well on Zomato, which is already doing very well in India and the United Arab Emirates," says the analyst. "Markets like South Asia, Australia and the Philippines augur well for Zomato."
There is still some streamlining to be done because while Yelp is a platform for user-generated reviews of restaurants, Zomato has both user reviews as well as its own content. Yelp's ratings and recommendations are driven by automated software, quite a contrast from Zomato, which checks and edits out fake reviews. It has a strong content team and a "feet-on-the-street" approach where its own team collects data and analyses before feeding those into the system.
Search for profits
Zomato is currently logging profits only in India and UAE. But Goyal says the company hopes to break even in countries like South Africa, New Zealand, Indonesia and the Philippines within the next few months. In the other bigger international markets, it will take longer to make the revenue and cost curves meet.
Today, around 75 per cent of Zomato's revenue is generated in India and UAE, with close to 45 per cent of online visitors use their mobile devices to access the online company. According to its filings with the Registrar of Companies, Zomato had revenues of Rs 36.11 crore in 2013-14, a threefold rise from Rs 12.29 crore in the previous financial year.
At the moment, the company banks on hyper-local advertisement for revenues, but it is likely that its cashless mobile payment service will soon start contributing to the earnings. The cashless payment service, which Zomato will be launching in Dubai next month, will allow the company to earn a commission for each transaction a diner makes at a restaurant using the app.
The six-year-old Indian company, however, faces a hurdle at home, where it can't launch the mobile payment service anytime soon because of the stringent credit card payment guidelines of the Reserve Bank of India (RBI) . US-based taxi aggregator Uber too came across the same roadblock when it entered India last year. "We'll start with Dubai, and see how it goes. We may look at India for this service at a later stage depending on how things develop," says Goyal.
Uber started services in India in November last year after partnering with mobile payment solution provider Paytm. A customer could preload money on a mobile wallet, and use it for transactions. But the authentication protocol for credit cards put the taxi aggregator on the wrong side of RBI's regulations.
Zomato's mobile app already has the "payment" option that allows users to pay their restaurant bills without cash transactions. However, the pay feature is still inactive in the app, which gets around 12 million visitors a month. In India, Zomato lists more than 60,000 restaurants across 36 cities.
RBI guidelines mandate a two-step authentication for payments made with credit cards. The new guidelines came in force in August 2014. While it ensures better security for consumers, it is considered cumbersome by the business community. However, there are mobile payment service companies such as iKaaz that are launching cashless mobile payment services in India in partnership with banks. This should give some hope to Zomato in its effort to give its services a new edge.
