wordpress blog stats
Connect with us

Hi, what are you looking for?

On Zomato’s change in focus to transactions and countries that matter

Zomato-Chile

By Sneha Johari and Nikhil Pahwa

Zomato has laid off around 300 employees – around 10% of its work-force of 3000 – most of them in the US content teams, reports TechCrunch. The employees, according to the report, were people who collected data from restaurants.

Why is Zomato doing this?

The layoffs in content point towards a shift in focus, which Zomato founder and CEO Deepinder Goyal elaborates on in the memo, also published here. The statement “The time has come for us to focus deeply on transactions in countries where it matters,” explains it:

1. Zomato needs to focus on markets that matter, and India is key: While the companys expansion into 22 countries brought great PR, especially its acquisitions, of these 22 countries, which of Zomato’s markets are really going to bring it growth (volume, revenues, valuation)? Things probably weren’t as messy as, say, Airtel in Africa, but for a significantly smaller company, especially one that has had issues retaining senior leadership (read this, this and this), management bandwidth was fairly stretched. The re-prioritization helps, Goyal’s memo indicates the creation of two clusters:

– The high priority markets (called Full Stack) include India, the Middle East, South East Asia (the Philippines and Indonesia), and ANZ (Australia and New Zealand). In these markets, Zomato has high traffic, and will focus on both ad sales and transaction businesses.

– The other markets (called Enterprise) are where Zomato either doesn’t have high traffic or a dominant position, where it will focus on its transaction business.

The other markets are going to be audience led, and will require fewer ‘feet-on-street’, and will have less on-ground community building and marketing. What’s surprising here is the inclusion of the US, where Zomato made a big acquisition in Urbanspoon.

Given that market leader Yelp isn’t doing well in the US meant that Zomato had to decide between moving in for the kill, or deciding that the investment isn’t worth it for now. Or maybe it has chosen a wait-and-watch approach.

2. Zomato needs to make up ground on transactions: Transactions was not a business that Zomato wanted to do for many years, and said so. In the process, it ceded ground to upstart food ordering apps in India (which accounts for 29% of its traffic).

The shift to transactions is indicated by the fact that Zomato raised $60 million recently to focus on online ordering, table reservations, point of sales, and its whitelabel platform. Not that the incumbents are doing particularly well – FoodPanda has had issues, TinyOwl has also struggled – but Zomato was ideally positioned to leverage its relationships with restaurants for this.

Goyal points towards the focus on ordering in the memo, and the opportunity, saying “92% of our users who use Zomato to search for restaurants that deliver haven’t even started ordering online on Zomato as yet. Our ticket sizes are more than double our competitors’ – because our users are not using us for the discounts”…

The other reason for a focus on transactions? Zomato will eventually compete for advertising money with Google, just as Yelp is, in the US. Growth will only come from directly helping restaurants make money, and developing close relationships with clients, and the diversified revenue stream will help.

Other key developments

– Rethinking the content focus: The memo says that 40% of the restaurants on Zomato account for 92% of its traffic, and the company plans to focus on data updates in multiples for the top 40% of restaurants, while pushing for business owners to list on the app.

Shutting down cashless in Dubai: Zomato’s cashless payment system is being rolled back in Dubai, six months after it launched, because of ‘lack of a product-market fit’. Goyal pointed towards the change in mindset required from users, the cost of providing an iPad to a restaurant, and the high cost of education. The cost of running cashless was higher than the commissions it was generating, and that is not surprising. Cashless would probably be a better fit for ordering, because it would increase the likelihood of deliveries being accepted. Mint’s FoodPanda story is a great read on issues with food ordering.

Note that Zomato had plans to launch Cashless in India in June.

Our Zomato coverage here.

You May Also Like

News

The Federation of All India Vyapar Mandal (FAIVM), a pan-India body of traders and retailers, has recommended that the government impose a tax of...

News

Zomato clocked in 60% and 35% higher gross merchandise value (GMV) on New Year’s Eve and Christmas in 2020 respectively, compared to the previous...

News

The Department for Promotion of Industry and Internal Trade (DPIIT) has forwarded complaints against Amazon and Flipkart, made by traders body Confederation of All...

News

The Competition Commission of India has sought information from sellers body AIOVA on the alleged preferential treatment that Amazon gives to certain large sellers,...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to Daily Newsletter

    © 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ