Zomato currently operates in 23 countries, of which it is traffic leader in 18. However, traffic levels have reached the critical level in only 12 countries, while other markets are still evolving. The company plans to monetize through a full-stack model, i.e., both B2B (primarily advertisements and table booking) and B2C (food ordering) in these 12 countries where traffic levels are adequately high. In the other markets, the company intends to start monetizing through the enterprise model, i.e., focusing on the B2B2C (business to business to consumer) model, i.e., monetizing the B2B market currently and continuing to build a consumer base/traffic. In the 12 markets where traffic levels are high, the company focuses primarily on 23 cities. These 23 cities are 42 times the size of the Delhi NCR (national capital region) market (which is almost one-fourth of the total India market).
Mr. Deepinder Goyal founder CEO of Zomato suggests that there is potential to generate annual revenues of US$30mn in Delhi, i.e., the total revenue potential across the 12 countries is ~US$1.3bn. This is quite large considering that Zomato generated less than US$15mn in revenues in FY15.
Zomato’s enterprise offerings (primarily table booking) are not as dependent (as advertisements) on large traffic. In markets where Zomato does not have critical traffic currently, it intends to monetize through its enterprise offerings (such as table booking and white label). Assuming the company makes meaningful penetration in table booking product, it will likely boost traffic, as well, even without significant sales & marketing investments.
Zomato started food ordering just about six months ago, while other players had already launched food ordering platforms. Mr. Goyal suggests that the company waited for the maturity of this market before venturing into it. The new entrants (such as Foodpanda and Tinyowl) have done a good job in educating consumers and restaurants about food ordering; however, their subscriber acquisition costs are high. Mr. Goyal asserts that Zomato’s daily traffic is perhaps 10x the total traffic of all food ordering platforms combined, which provides the company a key competitive advantage. Zomato might already be close to the largest player, if not largest player itself. Mr. Goyal also suggests that this revenue stream is growing 50% month on month. On the supply side, Zomato currently has 12,000 restaurants listed for food ordering and is adding ~500 restaurants every week. Zomato has a three year exclusivity clause with 40% of its restaurants – another advantage.
In June, Zomato shifted all the traffic from Urbanspoon to the Zomato platform. Mr. Goyal acknowledges that there was
modest customer attrition due to the shift (from Urbanspoon to Zomato) initially, but it has been arrested and reversed.