How Zomato Is Making Money-Business Review

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Imagine you are hungry and looking for your favorite food. But you are so tired that you couldn’t get out. What if there is an application through which you can order your favorite food from your favorite restaurant. Well bam, you are lucky there is an app called Zomato. You download that app, explore restaurants, see the menu list and order your favorite food. Within no time Zomato food delivery is at your doorstep. How is that feeling?

Zomato first known as foody bay is an Indian online food delivery services founded by Deepinder Goyal and Pankaj Chaddah in 2008. It currently operates in over 10,000 cities and across 24 countries including USA, Canada, India, Australia, and New Zealand.

During the initial years. Zomato used to keep menu of the restaurants on their site and the menu was reviewed by people. Zomato now also does that but with additional services. The business model of Zomato is quite different from that of other food delivery company such as Swiggy and Foodpanda.

Zomato was the first to step into this market- which has its own benefits and challenges. The company has to face huge challenge to create a sustainable business model. Let’s look at Zomato revenue model and find out how much value they generate.

Zomato in itself does not offer the product to customers but the revenue is massive. We all wonder how Zomato manages to bring huge revenue from its business operation. Zomato is not only in the food business. Let’s make it clear just like Google & Facebook they are all into the advertising business. Zomato has two parts, One delivery business and two they are in the advertising business. Let’s find out how Zomato is making millions?

How Zomato makes Money?

Advertising
Subscription
Event Organization
Zomato Whitelabel
Online Food Delivery
Zomato Consultancy
Zomato Gold

Advertising

I know you won’t believe but 72 % of the total revenue of Zomato come from advertising. They started as a restaurant search and rating services. Customer can rate their service experience of restaurants in Zomato. A good rating on Zomato is a must need for almost every restaurant.Restaurants can pay to have their events or offers promoted as well as their overall banner, which brings improved visibility and conversions from Zomato users. It’s like amazon of food delivery service every restaurant just want to sell their product through this platform. So that’s the main reason restaurants are willing to pay a lot of money for that.

Subscription

The 2nd major source of revenue for Zomato is a Subscription fee. Here I’m not talking about Zomato gold, we will look into it later. Restaurants pay a certain amount of monthly fee and in return, Zomato provide them analytical service. Zomato possesses a huge amount of database and a great analytical tool. As I told you in my previous podcast where we discussed about the business model of google pay. We are living in a data centric market. What a customer wants to eat, where he/she wants to eat, what the consumer is searching for and what they are not searching, Zomato knows all this information of consumer through the cookies.

Zomato possesses an analytical tool called Zomato order and the tool is given to the restaurants. Through this tool, restaurants can know about the consumer interest, what consumer want or what they don’t want. Restaurants with the help of this tool can manage what they want to offer to consumer and also, they can flash their discount offers on food.

Another tool the restaurants receives from Zomato is Zomato book. Many of the customers want to reserve the table in a restaurant in advance. Through this tool, the restaurants can manage their staff and know which table is vacant. For these analytical tools of Zomato, the restaurants have to pay a certain amount of subscription fee monthly.

Event Organization

When there are any festivals say for example EID, Zomato partners with restaurants to organize food events. People who come to these food events have to pay the price of tickets. Zomato receives a certain percentage of the ticket price from these events.

The food organizer also looks for opportunities to promote their product and food event of Zomato is the perfect platform for them. To advertise in events, they pay advertisement fee to Zomato. Zomato receives income from the advertisement also.

Imagine you are hungry and looking for your favorite food. But you are so tired that you couldn’t get out. What if there is an application through which you can order your favorite food from your favorite restaurant. Well bam you are lucky there is an app called Zomato. You download that app, explore restaurants, see the menu list and order your favorite food. Within no time Zomato food delivery is at your doorstep. Isn't that amazing?

So, hey guys you are listening to how they earn the exclusive podcast for emerging entrepreneurs like you. I’m your host Ritesh singh and in this Podcast, we try to give you a great insight on Zomato business model & how Zomato is making millions? Here you go.

Music……

"Zomato" known as foody bay is an Indian online food delivery service founded by Deepinder Goyal and Pankaj Chaddah in 2008. It currently operates in over 10,000 cities and across 24 countries including USA, Canada, India, Australia, and New Zealand.

Zomato in itself does not offer the product to customers but the revenue is massive. We all wonder how Zomato manages to bring huge revenue from its business operation.

They are not only in the food delivery business. just like Google & Facebook. Zomato has two parts, One delivery business and other is advertising business. Let’s find out how Zomato is making millions?

How Zomato makes Money?

Advertising
Subscription
Event Organization
Zomato Whitelabel
Online Food Delivery
Zomato Consultancy
Zomato Gold

Advertising

I know you won’t believe but 72 % of the total revenue of Zomato come from advertising. They started as a restaurant search and rating services. Customer can rate their service experience of restaurants in Zomato. A good rating on Zomato is a must need for almost every restaurant. Restaurants can pay to have their events or offers promoted as well as their overall banner, which brings improved visibility and conversions from Zomato users. It’s like amazon of food delivery service every restaurant just want to sell their product through this platform.

So that’s the main reason restaurants are willing to pay a lot of money for that.

Subscription

Event Organization

In festivals Zomato partners with restaurants to organize different food events. People who come to these food events have to pay the price of tickets. Zomato receives a certain percentage of the ticket price from these events.

Zomato Whitelabel

The next source of revenue of Zomato comes from app development. Zomato launched the service called Zomato Whitelabel under which they give offers to the restaurants to develop customize the app.

With this customize app restaurants can connect to its customer and they don’ even need Zomato to attract customers to them. Isn’t that great?

Online Food Delivery

The market for online food delivery was on the rapid rise in India. Still online food delivery contributes to a low percentage of income compared to other revenue streams.Zomato charges 20–25% in commission from the restaurant for every order. In some cities where there is stiff competition, the commission can vary but it’s not less than 15%. They also charge for food delivery from customer.

Zomato Consultancy

As you already know that Zomato has a great analytical tool and a huge amount of database. Zomato knows the preference of food in certain areas, If you want to build a restaurant in that area, then you can go to Zomato for help.

Zomato helps the newcomer in the market with the data and charges a fixed amount for the consultancy services. Restaurants can go to Zomato to know the consumer’s preference, wants, desire and Zomato has the consumer data to help them. In return, all they have to pay is a consulting fee.

Zomato Gold

Zomato gold is a premium subscription-based service offered by Zomato. It has been started since April 2018. It is a paid service that allows customers with Gold membership gets complimentary food and drinks at the time of ordering from partner restaurants and bars.

Gold service is available for both dine-in orders and for deliveries. Make sure you can use Zomato Gold only once at each partner restaurant in a day. However, you can visit each restaurant as many times as you like during your membership duration.

How does Zomato Gold work?

Zomato Gold offers either 1+1 on food or 2+2 on drinks or percentage discounts depends on the restaurant, but its only when you visit their partner restaurants.

For delivery they gave only percentage discounts as for now depends on when you were listening to this podcast, some data may change with time.

Food (1+1)

For instance, when you go to a restaurant which offers 1+1 of food i.e. when you order 1 item, you get the second one at free of cost. So if you order dishes like a burger or something else from a gold partner restaurant, you will get the second dish for free (of the same value of 1st dish or lesser). It means you are able to save the cost of 1 dish.

Drinks (2+2)

In this scenario, when you dine at a partner restaurant of Zomato and order 2 drinks . you get 2 drinks of the same cost or less value for free. For instance, if you buy 2 beers you get 2 beers free. So for a total 4 beers, you pay only for 2. So, here again, you are able to save the cost of 2 drinks.

Even with a attractive buisness model Zomato is in a huge loss but the revenue and growth is massive. Thats the main reason so many big investers are interested in Zomato.

While Zomato’s revenue grew from $68 Million in FY18 to $206M in FY19, losses also grew from $12M in FY18 to $294M in FY19.

Most of the losses were due to the food delivery segment, which grew strongly in FY19 with the introduction of food delivery services in many new Indian cities, where Zomato was first-to-market.

We hope now you have quiet a good understanding of a million dollar business Zomato is running.

Note: All financial numbers mentioned in the podcast were taken from Zomato’s FY19 report.

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