zomato new business plan

Unlocking Success: Understanding Zomato's Business Model and Revenue Strategies

PV Vyshnavi , Apoorva Bajj

Zomato is an Indian restaurant search, discovery, and online food delivery service . The food tech unicorn was founded by Deepinder Goyal and Pankaj Chaddah in 2008. Zomato is well known throughout the country and has also managed to venture into many international markets over the years. It currently operates in 10,000 cities in 24 countries, including the USA, India, Australia, Brazil, New Zealand, Singapore, the United States and in the Middle East Qatar.

Today, Zomato focuses on online food ordering, restaurant reservations, loyalty programs, consultant services, and a lot more. Zomato is also a food search engine that works the same as Google's search engine but explores a wide range of food and restaurants. The company has grown from a home project to one of the world's largest food aggregators. Zomato not only connects people to food in every context but also works closely with restaurants to enable a sustainable ecosystem.

With its unique and sustainable business and revenue model , as well as a well-defined organizational structure of Zomato, the company has managed to remain a top player in the market. Zomato has become successful because of factors such as affordability, easy accessibility, and assortment, which have built trust among people from the years of service. Zomato continues to work on finding innovative ways to serve its customers.

Zomato - History Zomato - Business Model Zomato - Revenue Model Zomato - Value Proposition

Zomato - History

Zomato, which was earlier known as Foodiebay , was established in July 2008 by two IIT graduates, Deepinder Goyal and Pankaj Chaddah. The idea first struck Deepinder when his colleagues consistently had a demand for paper menu leaflets from different restaurants to order food. That is when he thought of converting the restaurants' paper menus to a digital app, which is far more accessible and easier to use.

In a matter of 9 months, the company grew to become the largest restaurant directory in Delhi and later expanded to other cities due to its success. By 2012, Zomato had started expanding internationally to countries like the UK, South Africa, Qatar, Sri Lanka, South Africa, New Zealand, Brazil, etc. During this course, the company had to change its name since its last four letters of ‘Foodiebay’ coincided with ‘eBay’ ; the company name was changed to Zomato in 2010 to avoid any legal issues.

In 2015, the company forayed into the food delivery business and went on to launch Gold in India, which was a subscription product under which subscribers would get access to complimentary food and drinks. Zomato also launched Hyperpure , which directly works with Farmers to improve the quality of food produce and supply fresh produce to restaurants. The company now views its business as a combination of three key large pillars: Delivery , Dining Out, and Sustainability.

Zomato - Business Model

During the initial phase of the company, Zomato used to scan the menu of the restaurants and keep it on the site, and the menu was received by people. It still follows the same formula but has also added other services to its operation. The business model of Zomato is quite different from that of other food delivery such as Swiggy and Foodpanda . The key partners of Zomato are Uber and London & Partners, which could launch Zomato in the UK within the expected timeline.

While the company's key resource is its large database of restaurants across 10,000 cities in 24 different countries , the business model is based on providing local restaurant search services, collecting data on food menu contacts, and providing relevant information to their customers. The main channels for Zomato are mobile applications and its website. The target audience of the company is the users who try to find local restaurants of various cuisines and restaurants who want their name to reach a large number of people.

Zomato also caters to customers who prefer home delivery; it helps out database and market research of companies . At the same time, the online service is built with a mandatory rating mechanism. Zomato's business model has revolutionized the food industry by incorporating various restaurants and making it convenient for people to find restaurants, provide feedback, and food business industries by incorporating various listings and availability according to their choice of cuisine.

How is Zomato Profitable when Swiggy and Dunzo are Burning Money

Zomato - Expansion & Impact

• Zomato employs over 5,000 individuals, spanning diverse roles and compensation levels.
• The monthly user base is 80 million users.
• Zomato continually expands its platform, adding a new restaurant every 30 seconds.
• Presence established in 24 countries.
• Available in multiple languages, including Turkish, Portuguese, Indonesian, English, Hindi, and some regional Indian languages.

Zomato - Revenue Model

Zomato, in itself, does not offer the products to customers, but the revenue model of Zomato is massive. Zomato is not just a food business ; it is also in the advertising business . Zomato's business has two parts: one is the delivery business, and two is the advertising business. Today, Zomato has multiple revenue streams besides online ordering, which most consumers would be familiar with.

Restaurant Listings and Advertising

Zomato first started as a restaurant search and rating service. This brought in the advertising revenues from restaurants who joined the platform. They further extended this feature to food delivery and restaurant reservations; for this, Zomato charges commissions from restaurants that want to be placed on the feed. Advertising is Zomato's major source of revenue . The restaurants can promote their banner on the site in order to get better visibility and appeal to a large section of the audience via Zomato.

Food Delivery

Through the food delivery business, Zomato charges a commission to the restaurants based on orders . The company earns through restaurants that pay a commission for each delivery, which is then split among the delivery partners and the company. Zomato imposes a commission ranging from 20% to 25% on each order made at a specific restaurant, with potential variations in commission rates from 5% to 7% in certain regions. However, online food delivery only contributes a low percentage of income compared to other revenue streams because of the huge competition and the need to provide deep discounts .

Subscription Programs

The next major source of revenue for Zomato is a subscription fee. Restaurants pay a certain fee monthly; in return, Zomato offers them the analytical tools . Zomato has a huge number of databases that know what a customer wants to eat, where he/she wants to eat, and what the consumers are searching for, and it is given to restaurants, which helps them know about all this information through the cookies. It has a tool called Zomato Order which is given to restaurants, which tells them about consumers' interests. The restaurants then use this tool to flash their discount offers on food.

Live Events

Zomato has forayed into the events space by partnering with restaurants and creating limited events. By which they made a sale through the price of the tickets. Zomato recently introduced Zomaland and entered the live event market in 2019 . Zomato charges users an entry fee to attend Zomaland, where, besides food, they can witness live musical performances and other acts. Zomato also organized an entertainment carnival in 2018 in Delhi, Pune and Bengaluru , where more than 100 thousand people showed up.

White Label Access

The next source of revenue is app development. Zomato launched a service called Zomato Whitelabel, under which they give offers to restaurants to develop customized food delivery apps . It also works with cloud kitchens and restaurants for consultancy services . Zomato works with selected restaurant operators to help in identifying locations for expansions at a minimal fixed cost but with increased options for the user. It provides the requisite licenses and operational enablement for such restaurant partners.

Zomato Kitchens

Zomato also provides kitchen infrastructure services to select restaurant operators; it works with entrepreneurs to set up and operate Zomato kitchens under various other labels. This helps entrepreneurs fund restaurants in the right location with an investment of INR 35 lakhs. It also claims to offer returns in the range of INR 2 lakh to INR 4 lakh per month to investors and has so far completed more than 180 affiliated kitchens.

Zomato Gold

Zomato Gold is a premium subscription service offered by Zomato, providing members with exclusive dining benefits. Subscribers enjoy complimentary dishes or drinks at partner restaurants, making dining out a more rewarding experience. The service aims to enhance the dining lifestyle by offering special privileges and discounts at a wide range of top-rated eateries. Zomato Gold caters to food enthusiasts seeking unique culinary experiences while enjoying cost-effective perks. It has become a popular choice for those who appreciate both quality dining and savings.

Zomato - Value Proposition

Zomato Revenue Breakdown

The total revenue generated by Zomato in FY 22 was INR 4192 crore whereas its turnover in FY 2023 was INR 7079 crore.

The business model of Zomato offers a variety of value to its customers , while Zomato's revenue model focus has been on creating something new and extra that the customers cannot get anywhere else. Zomato is a one-stop shop for dinners and offers a way for restaurants to differentiate themselves. Restaurants have an option to create differentiation by keeping the listing updated, responding to criticism positively, and also by being accountable for their action.

Zomato's business plan believes in creating value for its customers to sustain its business operations. The company endeavors to bridge the gap between customers and restaurants by providing efficient technology applications, which, as outlined in the business plan, has played a crucial role in reducing delivery times and enhancing overall service quality.

What is Zomato?

Zomato is an online platform that offers food delivery and helps users discover restaurants with various dining options available.

What is the business model of Zomato?

Zomato operates on a commission-based model, charging restaurants a percentage fee for orders through its platform. Revenue is generated via subscription services, including Zomato Gold, which grants exclusive dining benefits.

What is the revenue of Zomato?

Zomato's revenue is ₹7079 Crores (2023).

How to contact Zomato for business?

You can contact Zomato through email to start a business with them.

What is Zomato for business apps?

The Zomato for Business app is for business owners. It is an interface with powerful features to get the most out of your Zomato listing.

Zomato operates in how many countries?

Zomato operates in 10,000 cities in 24 countries, including the USA, India, Australia, Brazil, New Zealand, Singapore, the United States, and in the Middle East Qatar.

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Zomato Business Model: Everything you need to know

In July’21,  Zomato’s IPO raised Rs 9,375 crore . It was one of the most talked-about events as it became the first Indian startup to go public, that too after COVID when many things became uncertain. This means that Zomato was doing something right, and I decided to read more about its business model, which eventually made me write this article.

View this post on Instagram A post shared by Zomato (@zomato)

Earlier I used to think that Zomato was just about food delivery and restaurant listing. But, I forgot it’s a “FoodTech,” which means it has access to a large amount of data that it has been using in exciting ways and will continue to do so.

In this article, I will try to give a bird’ eye view of Zomato and cover a bit of everything about its business model to its future business plans, how does Zomato make money, and its mind-blowing marketing strategies.

The Growth Story of Zomato

As of 31st March 2021, Zomato is present in 24 countries outside of India. According  to their RHP , the company has decided to focus only on the Indian market going forward, considering the market potential.

Zomato has over 1.4 million listed restaurants and 12,000 restaurant partners. Moreover, it has over 6500 restaurant partners for Zomato Gold. In December 2020, it had around 162,000 active delivery drivers and 3,50,000 active restaurant listings on its platform in India

To fuel its rapid expansion, Zomato acquired several startups around the world. In 2014 itself, it  acquired four startups overseas . It was part of its strategy to enter markets with low competition in this space of restaurant discovery, make money here, and then tap the markets having competition.

What Strategies made people “Swiggy Karo, Fir Jo Chahe Karo”

One of its  most significant acquisitions has been Uber Eats India business , which helped the company get a competitive advantage from its rival Swiggy and one rival less for the company to deal with. Its latest acquisition has been  Fitso, a full-stack sports facilities provider  and discovery startup, which hints at its foray into the nutrition segment.

Business Model Canvas of Zomato

Customer segments: .

Broadly, we can say that there are three customer segments in Zomato’s business model:  

• Local restaurants : Zomato helps restaurants enhance visibility to their target audience, provides opportunities for targeted advertisements, customer service & engagement, as well as track their performance using its analytical tools. 
• Users : Can be divided into two categories for Zomato – one who want food delivered to their homes quickly and others who want to go out (they can look for places according to the distance, budget, cuisines and even reserve a table).
• Reviewers : Also known as content contributors of Zomato, these are the people who help others make their choice by providing ratings and reviewing restaurants basis various parameters.

Key Partners: 

Restaurants, delivery personnel, and food bloggers (by actively providing reviews on Zomato) are the critical partners in Zomato’s business model. It has tied up with various other companies as well that help in various aspects. A few of the notable partners are: 

• London & Partners (helped Zomato in finding the location for office setup, market research, advise on legal matters, assistance in staff and management recruitment, etc.), 
• Uber Taxi (this partnership increases convenience for customers who are eating out by enabling them to book an Uber ride to the restaurant they want to dine at from their app itself) 
• Electronic payment companies like Visa,  PayPal , etc.

In August 2021, a year after the launch of Swiggy Money (a digital wallet that Swiggy made in association with ICICI Bank), Zomato incorporated –  Zomato Payments Private Limited (ZPPL), its wholly-owned subsidiary , to provide payment aggregator services and payment gateway services for its users following the RBI guidelines.

Value Proposition

Zomato follows the QAAA model, which consists of: 

• Improving  the quality  of food:  Through Hyperpure (talked about in detail later) and Food Hygiene rating, it helps its partner restaurants maintain high-quality standards. 
• Boosting  accessibility  for customers:  Starting with metro cities, Zomato has expanded to tier 2 and 3 cities and continues to increase its reach.  
• Focusing on  affordability :  Zomato aims to make food affordable for its consumers without compromising on profits for partner restaurants.
• Driving the force of  assortment :  Zomato wants to help customers make an informed choice by providing a wide array of information in a structured manner.

Revenue Model: How does Zomato make money?

1. delivery charges:  .

Based on the number of orders, Zomato charges the partner restaurants a commission, which is divided between the company and the delivery partners.

In FY 2019, the company made four times more on delivery than it did the previous year. These charges formed around 75% of the total revenue for the company in that year, which makes delivery charges the largest source of income for the company.

According to the company, in India, the number of customers ordering food every month on their platform in FY 2021 touched 6.8 million customers with three times the average frequency. 

Contribution per order rose from -47 Rs/order in Q1 FY20 to +27 Rs/order in Q1FY21 (as shown in the below diagram)

2. Zomato Pro:  

Earlier known by the name Zomato Gold, it was based on a freemium model where customers who paid a certain fee enjoyed premium services while dining at partner restaurants like offers on food and beverages.

We have 1.8mn Zomato Pro members as of today. And one of the most requested features from our customers has been “Unlimited Free Deliveries” (something like Amazon Prime). So… in a few hours, we are launching our Limited Edition *Pro Plus* membership for select customers… pic.twitter.com/RtL4ftDBpt — Deepinder Goyal (@deepigoyal) August 2, 2021

Zomato introduced a new membership service in August, an ‘invite-only upgrade of Zomato Pro’s named Zomato Pro Plus.  CEO Deepinder Goyal assured that Zomato would bear the entire cost  of this service, and delivery partners won’t lose income on the same.

3. Event Organization: 

Zomaland event of Zomato became quite popular before COVID hit, and it’s an excellent opportunity for partner restaurants to get visibility. Here Zomato earns from both customers (entry fee) and restaurants. 

4. Restaurant Advertising: 

With  90 billion monthly visits  and 1.4 million restaurant listings, Zomato sure is the go-to place for people who want to find where to eat/order from next.

So, to stand out on the platform, the restaurants have to pay a certain sum of money so that their restaurant gets noticed by people visiting the platform. Zomato charges a certain amount of money from restaurants for advertising. 

By charging a monthly subscription fee, it even provides restaurants with analytical tools like Zomato order (with the help of which restaurants can manage their offerings to consumers and give discounts accordingly) and Zomato book (managing table reservations more efficiently). 

5. Zomato Kitchens: 

Here, Zomato will connect  kitchen partners   (a partner who will construct the kitchen according to the design and specifications and in turn Zomato will pay money to operate this place)  with restaurant partners  (partners who will operate their restaurants in the space which Zomato had asked kitchen partners to construct).  

The role of Zomato is to act as an aggregator bringing together both kitchen and restaurant partners. Since it has access to a large amount of data, it knows which location would be optimum for the construction of  cloud kitchens .

It might start its cloud kitchens in the future and develop an in-house brand that competes with other restaurants on the platform. This could be a game-changer for Zomato and could turn out to be very profitable for them. 

For more clarity on what is a cloud kitchen and its types (can use any)

6. Hyperpure by Zomato: 

Launched in 2018 to provide good quality ingredients to partner restaurants, under this program, Zomato collaborates directly with farmers, producers, mills, and processors to monitor the source of each of the ingredients being sold to ensure freshness and quality of the produce. According to its RHP, in March 2021, it supplied ingredients to 9,225 restaurant partners across 6 Indian cities.

Zomato aims to bring more efficiency in the supply chain by using a technology-driven end-to-end platform so that fewer people are involved; high-quality ingredients are supplied and reducing food wastage. 

During the first pandemic wave, many restaurants signed up on this platform, but these numbers didn’t grow as such during the second wave. Despite the challenges, investors are optimistic that the platform will increase by ten times in the next 2-3 years. 

Cost structure: 

Expenses incurred by the company can be broadly categorized into: platform development cost, branding and advertisement cost, credit card processing fees, legal and accounting fees, office maintenance cost, and employee salaries. 

Fixing its Unit Economics

Unit economics is the profit made by the company per food order delivered, and positive unit economics is one of the biggest obstacles for any food delivery company in the world. According to its RHP, Zomato has been able to achieve positive unit economics.

This was possible by charging higher delivery charges from customers, decreasing discounts offered on the platform (offering high discounts initially was one of the ways it acquired customers on their platform and made them habituated to use it), decreasing the advertising expenses, and increased commission from restaurants, utilizing its logistics fleet more efficiently and adding new sources of revenue using subscriptions like Zomato Pro.  

Content is the king for Zomato: 

Zomato’s focus on content (content related to restaurants on its application and website) helps them to attract a large number of customers to their platform organically, and even numbers support this: in FY2021, 68% of new customers were acquired organically without any paid advertisements (source: Zomato RHP).

Customers coming to the platform further enhance the richness of this content by adding their ratings, reviews, and photographs of the restaurants and food served there. This creates a virtuous cycle that further feeds into the transaction funnel and creates a strong flywheel effect. 

Marketing Strategy of Zomato

When it comes to its social media presence, Zomato has been very clear about its motive to make such content for its customers, which educates them about the brand and is also very refreshing and fun to watch. This is even evident from the bio company has written for itself on its social media handles, and the company does stand up to its promise of delivering entertainment. It focuses on the emotional benefit part rather than the functional benefits.

Zomato’s social media handles (YouTube, Instagram, Twitter, LinkedIn) are full of exciting campaigns that would be challenging to cover all (honestly, one can even write one complete article on that and we will be writing very soon). Here are some of the campaigns/posts/tweet threads that I enjoyed from Zomato in recent times:

Turning crisis into opportunity:  #zomatoloot  campaign 

Almost a year back, when users criticized Zomato’s butter chicken ad on YouTube, the brand’s marketing team announced the #zomatoloot campaign where users were given a chance to create ads for the brand, and the winner got a sum of 25 lacs. This gave the brand a lot of free publicity and, of course, ads that it could use for the coming weeks.  4113 entries  were received as a part of this contest, and the winning ad was:

Winning consumer’s trust during COVID times: 

Last year, when the COVID wave hit and people were skeptical about ordering from outside, Zomato ensured that the safety of consumers is their priority, and they are taking steps for the same.

‘On-Time or Free’ (OTOF) campaign: 

Taking inspiration from Dominoes, Zomato launched this campaign in December 2019 to guarantee on-time delivery to its  customers on its entire menu and not just one food item  (as used to happen traditionally). 

Never late to the party: 

Zomato seldomly misses an opportunity whenever a significant event occurs, be it related to sports, politics, or business. 

iPhone 12 vs iPhone 13 pic.twitter.com/V3hzWb0eSQ — zomato (@zomato) September 14, 2021

Platform-specific content: 

Zomato adapts its content according to the platform. For example, one can find memes related to office and colleagues on LinkedIn, reels made on ongoing trends on Instagram, replying to other brands on a constant thread in their context on Twitter, Food challenges, and Celebrity Brunches on YouTube, etc.

Zomato’s Twitter account regularly engages with the audience and keeps posting excellent content, which made  Twitter award Zomato for the Best brand voice in 2020 . Deepinder Goyal, its founder, makes sure that he makes important announcements related to its activities on Twitter.

Over the last few days, one of the most requested features on @zomato has been – a selection of home style food for people battling poor health. We just launched home style mini-menus along with thousands of restaurants across the country. #RestaurantsAgainstCOVID (1/3) pic.twitter.com/2JDqqtic5Y — Deepinder Goyal (@deepigoyal) April 27, 2021

OOH campaigns: 

Before social media became so popular,   brands used to spend heavily on billboard advertisements, and so did Zomato. Minimalistic, mostly text, but always grabs attention and brings a smile to your face.

Hey guys, we at @Zomato (me mostly, I'm a great team player) have been working on some outdoor ads. If you spot one in your city, please share a picture with us (me). Thanks! 😇 ☺️ pic.twitter.com/sxl5qYpAuk — Akshar (@AksharPathak) November 29, 2017

Zomato also uses push notifications in mobile apps, email marketing, SEO, and paid advertisements to gain top-of-the-mind recall for consumers.

Future of Zomato: 

In India, with the coming of COVID,  the food delivery market saw a growth  in the number of orders as people who used to go out to eat preferred to eat at their homes safely. This trend will most probably continue in the future as well.

One of the biggest challenges for any food delivery company is making unit economics per order favorable, which Zomato has achieved recently. Increased demand for food delivery and positive unit economics per order means that Zomato’s profitability is likely to grow.

Apart from food delivery, Hyperpure has been one of the focus areas for the company. Whether Zomato will be able to scale this up and reap profits out of it, is something to watch out for. Recently,  cloud kitchens have been gaining traction .

How Rebel Foods business model is taking Kitchen to the clouds

After  REBEL foods recently became a unicorn , it will be interesting to see how Zomato scales up its cloud kitchen venture: Zomato kitchens, in its multidimensional business model. Given the enormous access to data that Zomato has, it should try to compete in this segment.

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Curiosity and eagerness to learn about new things have made me learn more about the start-up ecosystem, public policy, and brand management. An alumnus of IIM Kozhikode, I’m starting my corporate career again as a Management Trainee. I like reading non-fiction books, listening to podcasts, playing board and card games, sketch and paint.

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How Zomato Works, Zomato Business and Revenue Model Explained

Chances are, you have used Zomato at least once. But do you know how this popular restaurant discovery and food delivery platform works behind the scenes? This blog post will deeply dive into the Zomato Business Model , revenue streams, and operations. From its humble beginnings as an online menu card to its current status as one of India’s most successful startups with global reach, we’ll explore everything that makes Zomato tick! So sit back, relax, and get ready to learn all about How Zomato Business Works ! It currently operates in 24 countries. The company provides menus, user reviews, and restaurant contact information.

What is Zomato & How Did Zomato Start?

Zomato is an Indian multinational restaurant aggregator and food delivery company. It was founded by Deepinder Goyal and Pankaj Chaddah in 2008.

In July 2008, Deepinder Goyal and Pankaj Chaddah, both graduates of the prestigious Indian Institutes of Technology (IIT), joined forces to establish Zomato, initially known as Foodiebay. The inception of Zomato stemmed from Deepinder’s observation that his colleagues often struggled with paper menus while ordering food from various restaurants. Recognizing the need for a more convenient and accessible solution, they embarked on transforming restaurant menus into a user-friendly digital platform.

Within a mere nine months, Zomato emerged as Delhi’s premier dining directory, swiftly expanding its reach to other cities fueled by its initial success. By 2012, Zomato embarked on an ambitious international expansion, venturing into countries such as the United Kingdom, South Africa, Sri Lanka, New Zealand, Brazil, among others. However, to avoid potential legal conflicts arising from the resemblance of its former name ‘Foodiebay’ to ‘eBay,’ the company underwent a rebranding in 2010, officially adopting the name ‘Zomato.’

In 2015, Zomato diversified its portfolio by venturing into the food supply business and introducing Gold in India, a subscription-based product offering complimentary food and beverage items to subscribers. Additionally, Zomato launched HyperPure, a venture aimed at collaborating directly with farmers to enhance the quality of food products supplied to restaurants, ensuring freshness and sustainability.

Funding History:

Zomato has garnered a staggering $909.6 million from various investors throughout its journey. Notably, the leading investor is Info Edge, with significant contributions from Ant Financial, Delivery Hero, Shunwei Capital, Vy Capital, and several others, contributing to Zomato’s global prominence.

Let’s delve into some key milestones in Zomato’s funding history:

• November 2013: Secured $37 million from Sequoia Capital and Info Edge India.
• November 2014: Raised $600 million from Vy Capital, Info Edge, and Sequoia Capital.
• September 2015: Raised $60 million from Temasek and Vy Capital.
• October 2018: Received $250 million investment from Chinese company Alibaba.
• Additional funding of approximately $150 million was raised from Ant Financial in 2018.
• Operational Insights:

Zomato boasts a workforce of over 5,000 employees across various roles and pay scales. Monthly user base: 80 million users. Availability in multiple languages including Spanish, Czech, Turkish, Italian, and Vietnamese. Presence in 24 countries. Remarkably, Zomato adds a new restaurant to its platform every 30 seconds. Zomato’s relentless innovation and strategic expansion have solidified its position as a global leader in the food technology industry, catering to millions of users worldwide with unparalleled convenience and efficiency.

Types of Zomato Business Models

Zomato operates using several business models to serve its diverse customer base and meet various needs within the food industry. Here are the key types of Zomato business models:

Aggregator Model:

Zomato acts as an aggregator platform, partnering with restaurants, cafes, and eateries to list their menus, prices, location details, and customer reviews. Users can browse these listings, place orders for delivery or pickup, and make payments through the Zomato app or website. Zomato earns revenue through commissions from restaurants for facilitating orders and transactions.

Delivery as a Service Model:

In addition to aggregation, Zomato provides delivery services to partner restaurants through its logistics network. This model involves managing the entire delivery process, from order fulfillment to doorstep delivery. Zomato charges delivery fees to restaurants for using its delivery services, offering a seamless end-to-end solution for food delivery.

Zomato Gold Subscription Model:

Zomato Gold is a subscription-based program that offers exclusive deals, discounts, and complimentary items at partner restaurants to subscribers. Users pay a subscription fee to access these benefits, while restaurants benefit from increased customer traffic and loyalty.

HyperPure by Zomato:

HyperPure is Zomato’s venture into the food supply chain business. It works directly with farmers and food producers to source high-quality ingredients and supplies them to restaurants. This ensures fresh and premium food products for Zomato’s partner restaurants, enhancing the overall dining experience for customers.

Advertising and Promotions Model:

Zomato also generates revenue through advertising and promotional services for restaurants. It offers marketing tools, sponsored listings, targeted advertisements, and promotional campaigns to help restaurants increase visibility, attract customers, and boost sales.

These diverse business models collectively contribute to Zomato’s success as a comprehensive food technology platform, catering to both consumers and businesses in the food industry.

A Step-by-Step Guide: How Zomato Works for Restaurants and Customers

1 Search for Restaurants: Zomato’s home page allows users to search for restaurants in their area by entering their location, cuisine preferences, or restaurant names. Users can also browse through popular restaurants in their area, top-rated restaurants, or restaurants offering discounts or deals.

2 View Restaurant Details: Zomato provides users with detailed information about the restaurant once a restaurant is selected. Users can view the restaurant’s menu, pricing, photos, location, and user reviews. The platform also provides information about the restaurant’s operating hours, contact details, and delivery options.

3 Place an Order: If a user wishes to order food from the restaurant, they can do so directly through Zomato. The platform allows users to select items from the restaurant’s menu and add them to their cart. Users can customize their orders by specifying additional requirements, such as dietary preferences or allergy concerns.

4 Payment: After placing the order, users can proceed to payment. Zomato supports various payment methods, including credit and debit cards, net banking, and digital wallets. Users can also opt for cash on delivery in some cases.

5 Delivery: Once the payment is confirmed, the restaurant prepares the order and sends it to the user’s address. Zomato’s delivery partners then pick up the order from the restaurant and deliver it to the user. Users can track their order status in real-time through Zomato’s app or website.

6 Review: Users can provide feedback about their experience with Online Food Delivery Apps in India . Zomato encourages users to rate the restaurant and leave detailed reviews to help other users make informed decisions.

Besides Online Food Ordering , Zomato also offers a restaurant discovery platform where users can browse and review restaurants in their area. The platform also provides restaurant owners with tools to manage their business listings, menu, and customer reviews.

Understanding the Zomato Business Model: How Does It Work?

Zomato’s business model is based on providing a comprehensive and convenient online platform for users to search for restaurants, view menus, read reviews, and make reservations. The company earns revenue through advertising and subscription fees from restaurants.

1. Restaurant Discovery: Zomato’s platform allows users to discover new restaurants based on location, cuisine preferences, and other criteria. Restaurants can create listings on the platform for free, but they can also pay to have their listings featured more prominently. This is a significant source of revenue for Zomato.

2. Online ordering and delivery: Zomato offers online ordering and delivery services, allowing users to order food from participating restaurants. Zomato charges a commission fee for each order, typically around 10-15% of the total order value. This is another significant source of revenue for Zomato, and the company has been expanding its delivery services in recent years.

3. Advertising: Restaurants can also pay to advertise on Zomato’s platform, which includes banner ads and sponsored listings. Zomato uses targeted advertising to reach specific audiences, such as users interested in a particular cuisine or type of restaurant. This is another important revenue stream for the company.

4. Premium subscription services: Zomato offers premium subscription services to restaurants, which provide additional features and benefits such as enhanced visibility and analytics. Restaurants can pay a monthly or annual fee to access these services. This is a relatively new revenue stream for Zomato, but it has grown in popularity as more restaurants looking to improve their online presence.

5. Data insights: Zomato collects and analyzes user behavior and performance data to provide insights to restaurants and other industry stakeholders. This data is valuable to restaurants as it can help them optimize their menus, pricing, and marketing strategies. Zomato also uses this data to improve its platform and services.

Zomato Business Model generates revenue through multiple channels, including advertising, online ordering and delivery, and premium subscription services. Zomato has become a leading player in the online food industry by providing services to users and restaurants. The company’s focus on technology and data has also helped it stay ahead of the competition and continue to grow its business.

Zomato Business Model Canvas

Zomato’s Revenue Streams: How Does the Food Delivery Giant Make Money?

Zomato’s revenue model is based on multiple streams, including:

• Commission on Online Orders: Zomato earns commissions on every order placed through its platform. This commission is typically around 10-15% of the total order value. This revenue stream has become increasingly important for Zomato as it has expanded its delivery services.
• Premium Subscription Services: Zomato offers premium subscription services to restaurants, which provide additional features and benefits such as enhanced visibility and analytics. Restaurants can pay a monthly or annual fee to access these services. This revenue stream is based on recurring subscription fees.
• Data Insights: Zomato collects and analyzes user behavior and performance data to provide insights to restaurants and other industry stakeholders. This data is valuable to restaurants as it can help them optimize their menus, pricing, and marketing strategies. Zomato also uses this data to improve its platform and services. This revenue stream is based on data licensing fees.
• Events and Reservation Fees: Zomato also earns revenue from hosting events and providing restaurant reservation services. This revenue stream is based on event fees and reservation fees.

Overall, Zomato’s revenue model is based on generating revenue through multiple channels, including online orders, advertising, premium subscription services, data insights, online ordering and delivery fees , and events and reservation fees.

Zomato for Businesses: The Ultimate Guide to Benefits and Opportunities

Here are some benefits of using Zomato for businesses:

Increased Visibility: Zomato has a large user base, and by listing your business on the platform, you can increase your visibility and reach potential customers who may not have heard of your business before.

Increased Foot Traffic: Zomato can help drive traffic to your restaurant by featuring your business in search results and recommendations to users looking for restaurants in your area.

Reviews and Ratings: Zomato allows customers to leave reviews and ratings of your business, which can provide valuable feedback to help you improve your offerings and service. Positive reviews can also help attract new customers.

Targeted Marketing: Zomato offers targeted marketing options, allowing you to reach specific audiences based on location, cuisine, and price range.

Cost-effective Advertising: Advertising on Zomato can be a cost-effective way to reach potential customers, as the platform offers a range of advertising options at different price points.

Analytics and Insights: Zomato provides businesses with analytics and insights to help them track their performance on the platform, including data on page views, user interactions, and customer demographics.

Overall, Zomato can be a valuable tool for businesses in the Online Food Delivery Industry looking to increase their visibility, attract new customers, and improve their offerings and service.

✅ Want to Know? The Cost Estimation for Developing App Similar to Zomato

Navigating the Changing Tides of the Food Delivery Industry: Challenges Faced by Zomato

The platform has faced several challenges over the years. Below are some of the significant challenges faced by Zomato:

• Intense Competition: Zomato operates in a highly competitive market, with several players, including Swiggy, Uber Eats, and Foodpanda. The intense competition puts much pressure on Zomato to keep innovating, offer better services, and keep prices low to retain and attract customers.
• Logistics and Delivery Challenges: One of the primary challenges faced by Zomato is the logistics and delivery of food. The company has to ensure that food is delivered on time and in good condition. Delays and mishandling can lead to dissatisfied customers, negative reviews, and loss of business.
• Managing Quality Standards: Zomato works with numerous restaurant partners, and it can be a challenge to maintain consistent quality standards across all partners. Ensuring food is prepared, served correctly, and adheres to hygiene and safety standards is essential for customer satisfaction and brand reputation.
• Dependence on Third-party Vendors: Zomato relies on third-party vendors for many of its operations, including logistics and payment processing. This dependence can create challenges, including disruptions in the supply chain and increased costs.
• Regulatory Challenges: The food delivery industry is heavily regulated, and Zomato has to comply with various regulations, including food safety standards, taxes, and labor laws. Complying with these regulations can be challenging, time-consuming, and costly.
• Managing Growth: Zomato has experienced rapid growth, expanding into new markets and adding new services, such as online ordering and table reservations. It can be challenging to manage this growth and ensure the company maintains its brand identity and customer base.
• Data Privacy and Security: Zomato collects and stores sensitive customer information, including payment details and personal information. Ensuring this information is kept secure and protected from data breaches is crucial to maintaining customer trust and complying with data protection regulations.

In conclusion, while Zomato has become a household name in the Food Delivery Apps in India & USA and the restaurant discovery industry, it faces various challenges. These challenges require constant attention and innovation to ensure the company stays ahead of its competitors and meets its customers’ needs.

Zomato is a revolutionary food delivery service that has overtaken the world. It has become one of India’s most successful tech companies by leveraging its deep understanding of customers and creating an efficient online platform. Zomato’s Business and Revenue Model is simple yet effective and has enabled them to build the largest food-ordering network in the country. With its continuously expanding reach, Zomato will remain dominant in this space for many years.

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How Zomato Works: Online Food Delivery App Business Model Explained

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“What’s the rating on Zomato?” has turned into the default reply to “Should we go to this restaurant?” in numerous countries worldwide. This change didn’t happened overnight; the team at Zomato is behind it for almost a decade now. Let’s see how their success looks like:

Zomato is an on-demand food delivery platform having a presence in more than 23 countries . It empowers individuals to get food from local eateries and restaurants delivered at their doorstep for a small fee. The platform also provides information about close-by restaurants, their menu cards, average cost, ratings and reviews.

Zomato delivers food with the assistance of their human network. Much the same as Uber drivers, Zomato food delivery guys get an order on their cell phone and GPS is utilized by the organization to coordinate demand and supply in the shortest possible time.

Zomato’s unique business model has gotten a good measure of funding from investors and has helped the organization gain an extensive user base. Zomato was launched in the year 2008 with the name Foodiebay and in a short period , it has turned out as a gigantic success.

Zomato Stats and Facts: Funding and Major Milestones

• Launch Date: July 10, 2008
• Founders: Deepinder Goyal and Pankaj Chaddah
• Funding received by Zomato: $653.8M in funding over 11 rounds
• Annual Revenue: More than $46.6M
• Company Valuation: over USD 2 billion
• Active Users: Serves more than 50M users every month

(136 ratings, average: 3.73 out of 5)

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Humane yet subtle, Naiya is a girl full of ideas about almost everything. After earning a bachelor’s degree in computer science and engineering, she decided to merge her technical knowledge with her passion for writing – to accomplish something interesting with the fusion. Her write-ups are usually based on technology, mobile apps, and mobile development platforms to help people utilize the mobile world in an efficient way. Besides writing, you can find her making dance videos on Bollywood songs in a corner.

Tags: Fast Food Delivery , Food Delivery Apps , Food Delivery Service , Home Delivery Food , Local Food Delivery , Zomato Home Delivery , Zomato Online Delivery , Zomato Order Food Online

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Zomato Business Model | How does Zomato make money?

Company: Zomato Founder & CEO:  Steve Easterbrook Year founded: 2008 Headquarter:  Gurgaon, Haryana, India. Number of Employees (2019):  5000+ Type: Private Monthly Active Users (2019) : 70Million+ Valuation (Oct 2020): $2 Billion Annual Revenue (FY2020): $394 Million Loss |Net income (FY12020): -$293 Million

Products & Services:  Restaurant Directory | Online food guide | Food delivery Competitors: Yelp | Zagat | Open Table | Grub Hub | Swiggy | Uber eats | Qraved | Chope | Redfoodie | DoorDash | EatStreet | Restorando | MenuEgypt | Forkly | Delivery Hero

Table of Contents

Introduction to Zomato

Zomato has proven to be a phenomenal foodie platform, providing a convenient way to review restaurants, feedbacks, listings in (now) over 24 different countries. The platform is even capable of giving insightful analytics for the restaurant to help route their business to exponential growth.

Zomato is a restaurant-café search and discovery service platform, idealized in 2008 by Deepinder Goyal and Pankaj Chaddah . The brand was originally known as Foodiebay till November 2010.

The platform is ideal for both food lovers and restaurant owners. Users can also view pictures and menus for restaurants that do not have a website of their own.

Any restaurant owner who wishes to list a menu can, regardless if the restaurant has an online presence or not. The platform allows restaurant owners to increase their restaurant business visibility through listing advertisements and special promotional menus through the Zomato platform.

The Zomato platform is designed with smart search engine filters, meaning that it will search for only relevant restaurants as per to the searched relevant keyword.

Zomato acts as the key-bridge to providing relevant information on potential restaurants for users that searches with keywords or keyphrases relevant to the restaurant.

Zomato has grown rapidly from a small food review website to a multinational giant serving over 70 million people every month, both in the food and entertainment business. It is now gearing up for a public listing in the first half of 2021 and focused on raising over $146.5 million in a Series J financing round. In October 2020, it raised close to $52 million from Kora Investments and $5.1 million from Pacific Horizon Investment Trust, which had previously invested $5 million in March 2020. Zomato has already raised over $270 million in 2020 alone from major investors like Tiger Global, Temasek, and Ant Financial. [ 1 ]

The following is a compilation of Zomato Business Model Canvas .

Business Model Canvas: Zomato

1. customer segments.

Zomato has three customer segments:

Users – Zomato platform is explicitly designed for users to find and locate restaurants in a range of various cuisines. Zomato is perfectly geared for customers who prefer home delivery .

Local Businesses – The platform further stands significant for restaurants who want to promote the business or restaurant name to help reach the target audience . Zomato was built on market and trend research. Marriot International is one of the latest global hotel chains to join Zomato’s long list of customers. Zomato will work alongside Marriott on Wheels to enhance its corporate outdoor catering services and home delivery services in partnership with close to 30 hotels across all major cities in India. [ 2 ]

Reviewers (content contributors) – these are active reviewers, who add reviews and photos of local restaurants or businesses on Zomato platform. 

2. Value Propositions

Zomato is an exceptional platform for diners to review a wide range of different restaurants in their serving area. At the same time, it allows restaurant owners to differentiate themselves in the market place, even if they are the owners of more than one restaurant.

 Zomato further serves as a bridge between restaurant owners and hungry customers.

Zomato provides a comprehensive pricing model for the food delivery services , providing insightful details to the overall cost, duration, etc. of the delivery order.

Additionally, Zomato provides membership and loyalty program to build loyal customer base. For example, Zomato Gold membership and Piggy Bank loyalty program ensure that customers get additional value for their money. In 2020, Zomato moved all Gold members to the newly unveiled Zomato Pro. Users on Zomato Pro get a variety of features and upgrades like instant food delivery services and a money-back guarantee from newly registered hotels, bars, and lounges. [ 3 ]

Super excited to introduce Zomato Piggybank – https://t.co/I4xs5NHHwd pic.twitter.com/h1Hrxhqy6t — Deepinder Goyal (@deepigoyal) July 10, 2018

3. Key Partners

• Zomato has built an alliance with Uber Taxi for users to book a ride to the restaurant that they plan to dine at.
• The clever innovation eliminates users from dealing with two different apps. Especially when customers are trying to review, pick, and find the best place to dine, all in a smooth, simple way.

London & Partners

Zomato has built an alliance with London & Partners to help expand their virtual foodie presence in the European regions. London & Partners were responsible for aiding Zomato with:

• Finding an office location in London.
• Assistance with the staff hiring process
• Insightful advice on salaries
• Management recruitment
• Work placements
• Market research
• Advising on accountants and legal procedures, policy, and compliance.

Other business partners – These are electronic payment companies like Visa, PayPal .

Seasonal partners – Zomato partners with companies from time to time, particularly during the holidays. For instance, Zomato partnered with the Singapore Tourism Board to stage an elaborate digital event called Zomaland in June 2020. The virtual event enables the tourism organization to engage Indian consumers successfully while maintaining social distance. [ 4 ]

4. Key Activities

The business model is incomplete without analyzing the key activities of a company. Although Zomato’s primary purpose was to make restaurant hunting exceptionally easy and convenient, it also has various key activities which are listed as follows.

• Manage Network effects : As aforementioned, Zomato provides local restaurant search service to the users, currently operating in 24 countries. It provides details and reviews of restaurants. The information includes data about the food items, contact info, and address of the restaurants.
• Manage and Utilize Advertising : Zomato has an enormous user database which it uses for advertisement. The company makes the most of its solid presence and brand popularity by posting advertisements for various restaurants, generating a considerable amount of revenue.
• Drive Customer Experience Initiatives : Zomato initiates a lot of activities to improve its customer’s experience and keep updating its features as per the trends. In April 2020, it expanded its online food aggregator platform to include contactless dinin g features that allow diners to scan a QR code on the table to check the menu, then place orders and make payments using the app. The feature reduces interaction and contact between staff and diners when they visit restaurants. [ 5 ]
• Enhancing Brand Image : Zomato maintains its brand image by providing a sense of community for foodies and facilitating people the exact information about “What to Eat and Where to Eat.”
• Expand and Diversify their service offer:
• Online food delivery and subscription : Zomato was not a delivery service at the beginning, but eventually it launched it’s delivery and subscription feature as well. However, the section does not generate much revenue for the company as it faces fierce competition from Swiggy .
• Consultancy to Restaurant Owners : Zomato has a massive database of users, revealing many significant facts about their behaviors, likes, and dislikes. Zomato offers data consultancy services to many eateries and new restaurants in town.  
• Zomato Whitelabel: Zomato also provides service for restaurants to develop their own app through a platform known as plug and play.

5. Key Resources

Zomato has a massive database on restaurants, café, and similar business places across cities in 24 countries. Zomato aims to build new alliances and capture the global market.

High-Quality Database – Massive Database of restaurants and businesses

Employees – that are working diligently to extend its outreach, apart from the current 24 countries.

Zomato Platform

A community of content contributors or reviewers

Zomato brand reputation

Funding Partners – Zomato were able to raise millions through funding channels. Top investors include Ant Financial, Sequoia Capital, Temasek Holdings, Info Edge, and Vy Capital. In the recent past, other investors have joined Zomato, including Asia Growth Fund, Steadview Capital, Luxor Capital Partners, Lugard Road Capital, and ASP India LP. The investors are part of a  $525 million financing round, which is estimated to reach around $600 million. Currently, India’s company regulator values Zomato at $3.4 billion. Zomato is also set to raise more capital once it debuts for the 2021 IPO. It seeks to issue 34,873 class J7 CCPS shares to the investors at Rs 300,235 per share to raise Rs 1,047 crore ($141 million). [ 6 ]

Cloud and Zomato Kitchens – It provides kitchen infrastructure services by partnering with entrepreneurs to set up and operate Zomato Kitchens in selected restaurants under different labels. Entrepreneurs first have to find restaurants in the right location that they wish to fund, and then Zomato invests INR 35 Lakh or more. Zomato has already set up over 180 affiliate kitchens with its partners and eliminated exclusivity for cloud kitchens, which allows its restaurants to list on rival platforms such as Swiggy . [ 7 ]

6. Channels

Zomato offers its platform accessible through multiple access points:

Application (smartphone or tablet)

Zomato Official Website

Food Porn (Zomato has also created a site specifically for the food porn industry, providing an exclusive photo of exotic foods from around the world)

7. Customer Relations

Convenient Self Servicing : Zomato provides its customers independence to make the right choice, providing all the options and information which leads to comfortable self-servicing.

Up to Date Ratings and Reviews : Users enjoy Zomato’s transparency in their ratings and reviews, providing authentic information to users about the quality and service of restaurants. It started testing a new feature in October 2020 that allows consumers to post their reviews of restaurants , photos of their favorite foods, and a short story on the app for their friends and food bloggers to see directly from the app’s feed. [ 8 ]

Customer Engagement Activities : Zomato initiates customer engaging activities like offering coupons and tickets.

Active Communication Channel and Customer Support : Zomato has a reliable customer support service platform and maintains effective communication with its customers.

8. Zomato’s Cost

The total cost of Zomato’s FY18 was $80 M, which has increased to $500 M in FY 19 . An immense shift indicating how much the business has expanded.

The annual cost of $ 500M is utilized in the following operations.

• Platform development

Zomato invests graciously on improving its online presence, brand value by enhancing its online portal, customer service, and enhanced marketing operations.

• Branding and advertisement cost

Zomato launches a lot of various marketing campaign top maintain its popularity, which of course requires a great deal of investments. In 2019, it introduced the Zomato Premier League with a diversified kitty of TV ads and offers like predicting the winners in particular matches to get further discounts. ZPL’s gamification and offers appealed to the foodies watching cricket and attracted over 4 million participants within the first three weeks of the IPL in 2019. [ 9 ]

• Credit card processing fees

Zomato pays for its credit card transactions operations as well.

• Legal and accounting fees

Zomato pays other legal fines and payments for acquiring different licensees and taxes.

• Office maintenance cost 

Zomato operates from 24 countries including Portugal, India, United Arab Emirates, Qatar, Turkey, Indonesia. The company bears office maintenance cost for all of its offices.

• Employee’s salary

Zomato has over 5000 employees overall with different pay scales. 

9. Zomato’s Revenue

Zomato’s revenue similarly increased in FY19 compared to FY18.  In FY19 , Zomato’s revenue is $206 M – a total of three times more than the FY18 (which was $68 M )

How does Zomato make money?

Now let’s see how Zomato makes money based on a few high-level categories:

The delivery service, dine out membership, advertisements, promotional deals, exclusive offers that Zomato offers are the primary revenue generators for Zomato.

• The commission from delivery transactions constitutes about 75 % of the total revenue for FY 19.
• Zomato delivery services earned $38M in FY18, while in FY19, the revenue from the services increased, generating almost $155M , indicating 4 times more growth than the last year.

Dining Out  

• Zomato has partnered with restaurants to provide complimentary food and drinks to its subscribed members. The membership is called as Zomato’s Gold membership program . The annual membership fee is Rs   1,199 , and the program has over 1 million active subscribers. All subscribers under the Gold program were upgraded on August 1, 2020, to its new subscription package called Zomato Pro that offers to dine out privileges and discounts on the best restaurants. As of July 2020, 50% more partner restaurants had already signed up on Zomato Pro than on Zomato Gold. [ 10 ]
• The dining out section also saw an increment in sales with $30 M in FY18, while $49M in FY19.

Ticket Sales

• Zomato also sells tickets for several of events and shows. Zomato earns a commission through these types of sales and deals. Zomaland is one of the most successful live events organized by Zomato, which attracted over 100,000 visitors when it debuted in 2018 across Delhi, Bengaluru, and Mumbai. In 2019, it expanded to over 10 cities and enticed major partners like the Singapore Tourism Board. In 2018 and 2019, Zomato increased its revenue by charging attendees entry fees but was forced to live stream virtual Zomaland@home carnival in June 2020 on its app and the Zomaland pages on Facebook, Instagram, TikTok, and Helo to avoid gatherings and interactions. [ 11 ]

Consultation Services

• Zomato also offers consultation services and data analytics services for clients, prospects.

Sustainability:

• In the past few years, Zomato has shifted its focus on being a transactional company instead of relying a hundred percent on its advertising revenue. The company is trying to balance its both features the delivery and the dine out which has generated a revenue of $2M in the sustainability department. In the early years, more than half of its revenues came from ad sales that grew from $38 million in 2017 to $46 million in 2018, representing 62% of its total revenues in FY18. Even though Zomato continues to charge commissions for listing and promoting restaurants on its app’s feed, it stopped considering ad sales as a standalone revenue stream. In 2020, Zomato considered reducing its commission charges by 5% after it received a request from the hotel association. [ 12 ]

Final Thought

Zomato happens to be one of the most successful platforms that was originally launched in India. Today it’s serving platforms and operations have extended to over 21+ countries and are determined to continue to grow its customer base.

Zomato is working on many new business endeavors. However, this doesn’t limit Zomato from further implementation and improvement to their existing platforms and software applications. 

 References & more information

• Bhallah, T. (2020, Nov 6). Zomato to raise $146 mn as it preps for IPO in 2021 . Live Mint
• PTI (2020, June 12). Marriott enters into a pact with Zomato to expand the home delivery service . Deccan Herald
• Flick (2020, July 5). Zomato Pro: New Features like ‘Money-Back Guarantee’ & More . Flick-on-Click
• Editor (2020, June 4). Singapore Tourism Board Partners with Zomato to bring a virtual weekend festival experience . Indian Newz
• Tandon, S. (2020, April 18). Zomato plans contactless dining post-covid-19 . Live Mint
• Rai, S. (2020, September 11). With food delivery bouncing back, Zomato plans IPO next year . The Print
• Shrivastava, A. (2020, Feb 05). Zomato lets go of exclusivity for cloud kitchens . Economic Times
• Harsh, U. (2020, Oct 20). Zomato pilots feature to post stories and reviews through the feed . Entrackr
• Pragati, B. (2020, April 20). A guide to the winning Zomato marketing strategy . Talk Walker
• Nandi, T. (2020, June 30). Zomato Gold is now Zomato Pro: Here are the extra benefits for customers . Live Mint
• Dash, S. (2020, June 2). Zomato’s popular carnival Zomaland goes online as large gatherings remain banned due to Covid19 . Business Insider
• FE Bureau (2020, October 14). Hotel association writes to Swiggy, Zomato, to cut commission charges on takeaway services . Financial Express

 Tell us what you think? Did you find this article interesting? Share your thoughts and experiences in the comments section below.

A management consultant and entrepreneur. S.K. Gupta understands how to create and implement business strategies. He is passionate about analyzing and writing about businesses.

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Zomato Business Model Explained [Case Study]

Supti Nandi

Updated on: April 6, 2024

Hungry? Grab your favorite meal through Zomato!

Well, the above line is not just a statement but an emotion of today’s generation. With the evolution of the digital world, having a meal delivered from the restaurant of your choice is a like a cakewalk. Now, you do not need to travel to the restaurant or stand in a long queue anymore to eat delicious food. All thanks to the food delivery apps for making this process super easy for you. One of the popular on-demand food delivery companies is “Zomato.” Do you know that Zomato has expanded a lot within 14 years of its existence?

The Zomato app will not only deliver your favorite food to your doorstep but will also help you to explore the food of new restaurants with honest customer reviews and by offering appealing discounts on various dishes. Have you ever wondered how it earns huge profits despite offering exclusive discounts and food at affordable prices? The secret lies in its business model . This article explains the “ Business Model of Zomato. ”

Zomato’s business model comprises of three essential components, namely-

Working Strategy

Marketing strategy, revenue sources.

The way how the business works determine the success rate of the company. You are already aware of the fact that the major function of Zomato is to recommend and take orders from the neighboring eateries and to deliver them to your doorstep. Before jumping into the core of the working strategy of Zomato, let us quickly sum up the steps involved in this food delivery app-

• Step 1 : Open the Zomato app and browse the meals to order them from whichever restaurant you like. Also, you need to give the location of receiving the food.
• Step 2 : The owner of the restaurant will receive an order request upon which they initiate the preparation of the dish.
• Step 3 : After the dish is prepared, the restaurant owners hand over the food to the deliveryman.
• Step 4 : The deliveryman delivers the meal to your location. In the meantime, you can also track the location of your order (food) on the Zomato app.
• Step 5 : You can make the payment for the food either with COD (Cash-on-delivery) or digital payment channels.
• Step 6 : After having the dish, you can site the ratings and reviews regarding it based on your experience. It will help other customers to decide whether to buy that meal or not.

The working strategy of Zomato involves the partnership with restaurants and retailers, hiring delivery providers, and collecting the data of users (like food choices, restaurant preferences, geographical location, and mode of payment) for smooth delivery of food. The three key players involved in the working model of Zomato-

• Users : The users are the customers like you who purchase meals from restaurants via Zomato and the food is delivered to your preferred location.
• Restaurants : Zomato offers a reliable and effective platform to local restaurants and their owners to attract the target audience (foodies) and market their business.
• Delivery Providers : They provide part-time or full-time delivery services on a contractual basis. This helps them to establish a rational revenue stream.

Zomato launched multiple features and services like Zomato Gold, Dining, Advertising, Hyperpure (Supply fresh ingredients to restaurants), Blinkit (Acquired grocery delivery service) etc.

Do you remember the day when you heard the name or saw the logo of “Zomato” for the first time? Never mind if you don’t! Probably you might have seen the advertisement of Zomato in the banner, youtube ad, or any meme on social media. Well, these are nothing but the marketing strategy. The marketing strategy of Zomato involves a combination of online and offline marketing. These are described in the following points-

• Online Marketing – Online marketing also called “Digital Marketing” involves SEO strategy, social media marketing, email marketing, etc. It effectively hits the target audience and increases conversion rates.
• SEO Strategy – This is the backbone of digital marketing. Here, Zomato creates relevant content that is heavily focused on its users and keenly optimized for search engines like google, bing, etc. They effectively use keywords with high search volumes and relevant URLs. All these things enhance the relevancy of their pages due to which you can access their products easily.
• Social Media Marketing – Zomato has successfully mastered the technique of “ Meme Marketing .” which helps to create a good amount of organic traffic. Zomato also uses paid ads campaigns to reach new users by using taglines related to restaurants and the delivery of food. They run various types of campaigns on social media platforms like Facebook, Instagram, and Twitter that help in the creation of a good amount of organic traffic. 
• Email Marketing – It is one of the most effective digital marketing techniques that directly influence the target audience. It helps to create awareness regarding the products to its customers by directly sending emails to their inboxes.
• Offline Marketing – Offline marketing is effective to target a broad range of audiences. It involves television commercials featuring various celebrities, advertisements in print media, and outdoor advertisements by installing billboards, banners, and hoarding to grab the attention of the public. It also supplements online marketing.

Zomato has produced a considerable number of revenue sources that effectively aided to strengthen its presence in the food delivery market worldwide. The major revenue sources of Zomato are-

• Advertisements : As you know, advertisement plays a significant role in increasing the revenue of a company. Zomato effectively utilizes this strategy. Do you know that Zomato earns more than 70% of its revenue through advertisements? It offers a reliable advertising policy to restaurants in the form of banner ads and small pop-ups. The restaurant owners showcase their banners on Zomato to increase the visibility to the audience.
• Delivery Charges : Zomato charges a commission of 20-35% from the restaurant based on the placement of each order. It earns through the restaurants that pay commissions for each delivery. Then, it splits the earned money among the personnel and delivery partners of the company.
• Subscription Fees : It is the major revenue source of Zomato. Have you ever wondered how you get so many discounts on your favorite food whenever you search for it? The reason behind this is the huge database of Zomato that knows various details of the customer like food preferences, location, and the food you are searching for, etc. It offers analytical tools and consumer data to restaurants by charging a certain amount of fee on monthly basis. This tool is also called “Zomato Order.” Thus, restaurants use this tool to flash their appealing discount offers on your feed.

Latest News: Empowering Zomato’s Delivery Partners with Vital Lifesaving Abilities

Zomato introduced a first-responder training program for its delivery partners in India. The initiative aims to teach delivery partners medical first-aid & CPR through certified training programs under the ‘Serving India’ initiative. Over 5,000 delivery partners across Delhi-NCR, Mumbai, Bangalore, Hyderabad, and Pune have been trained as first-response emergency heroes.

Zomato founder Deepinder Goyal shared a video on the X platform highlighting the initiative, calling Zomato delivery partners ‘India’s Emergency Heroes.’ Rakesh Ranjan, CEO of Food Delivery at Zomato, stated that over the past three months, more than 5,000 delivery partners have received professional first-responder training, including first-aid, BLS, and CPR.

Each trained delivery partner will receive a comprehensive first-aid kit to provide immediate medical support to peers and customers.

After this news, Zomato’s shares increased by 2.25% to ₹122.55 at 1:45 pm on Thursday (4th April, 2024). SoftBank Group divested a 1.1% stake in Zomato for ₹1,128 crore through an open market transaction earlier this month.

After the transaction, Softbank’s shareholding in Zomato decreased to 1.09% from a 2.17% stake.

The business model of Zomato has been proven to be highly effective to reach heights in the food delivery market in a short period. Its key activities include the management of various networks of restaurants and customers, advertisements, and customer care service to increase the brand image by providing the best quality meals at your doorstep within a short time.

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Zomato Business Model: How Zomato Makes Money

While Zomato was started as a simple restaurant listing directory in 2008, the company has come a long long way since then venturing into multiple business segments, making the business more diverse than a Zomato user interacting with the business would think it to be.

In this blog, we will try to demystify Zomato’s business model. But before we do that, let’s take a look at its founding story & how the company has evolved over the years to establish better context.

Zomato Founding & Growth Story

The only person who has always been involved in the operations of Zomato is the current CEO, Deepinder Goyal. He first launched what would eventually come to be known as Zomato with a friend called Prasoon Jain under the name  foodlet.in  in the Delhi NCR region. 

But Prasoon left soon and shifted to Mumbai, leaving the company struggling. And that’s when co-founder  Pankaj Chaddah joined Deeepinder’s venture . At the time, they began afresh by changing the name of the company from Foodlet to Foodiebay. 

By Dec 2008, in a matter of 9 months, the company grew to become the largest restaurant directory in the Delhi NCR region. After seeing success in the Delhi NCR region, the company soon expanded to other cities like Bengaluru, Chennai, Pune, Ahmedabad, and Hyderabad.

By 2012, Zomato had started its international expansion, extending its services to countries like the UK, South Africa, UAE, Qatar, Sri Lanka, South Africa, the UK, and the Philippines. New Zealand, Turkey, and Brazil got added to the list in 2013.

In the midst of all of this growth, the company had to go through a minor naming glitch which led to changing the name of Foodiebay to Zomato.

Since the last four letters of ‘Foodiebay’ were ‘eBay’, the company’s name was changed to Zomato in 2010 to avoid any legal issues. Ironically, the company got a legal notice from eBay 5 days before changing their name to Zomato. But since they had already initiated the name change process, they did not have to fret over it.

In its initial years, Zomato’s primary money-making source was restaurant advertising, much like any other aggregator that aggregates user attention & sells it to advertisers. In its 2019 Financial report,  Zomato highlighted that up until 2016 , restaurant advertising represented their 100% revenue & focus. 

However, Zomato’s focus started changing in 2015, after which it launched three new business segments in the years that followed.

In around mid-2015, the company forayed into the food delivery business. 

In Nov 2017, Zomato launched Gold ( Now Zomato Pro ) in India, a subscription product, under which subscribers get additional discounts on Dining & Delivery. Discounts come out of the pocket of restaurants as they see incremental revenue from being a part of the Zomato Pro program. In 2021, Zomato also launched Zomato Pro Plus, another subscription offering with a benefit of free delivery on all order. Unlike Zomato Pro, which is funded by restaurants, the free delivery in case of Zomato Pro Plus is funded by Zomato.

In August 2018, Zomato launched a new initiative called Hyperpure , under which Zomato works directly with Farmers to improve the quality of food produced & then supplies the fresh produce to restaurateurs, thereby improving the quality of food people eat. 

In its FY19 annual report, Zomato mentioned that it had stopped considering advertising as a standalone P&L. Instead, the company was viewing its business as a combination of three key large pillars — Delivery, Dining Out, and Sustainability(Hyperpure).

As it often happens in the startup world, Zomato’s strategy underwent a big change in the next two years, more so with the pandemic bringing the business of Zomato’s partners, and thereby Zomato, to an unprecedented standstill.

In its FY22 Q2 Report , a little later after its public listing on the Indian stock market , Zomato laid out an updated vision for its business. Under this new vision, Delivery, Dining Out & Hyperpure ( previously referred to as sustainability ) will continue to be the growth levers for Zomato. However, Zomato will also look to develop the Indian e-commerce ecosystem by investing and partnering with other companies to grow beyond its core food offerings. Now, the question is why would Zomato want to take this route. Here’s the rationale behind it, in Zomato’s own words,

“Our business today is at the confluence of food and hyperlocal e-commerce. What powers our business is the last mile hyperlocal delivery fleet, which is now 300,000+ delivery partners strong on a monthly active basis. We believe that our last mile fleet is a strong moat and it sets us up well for building one of the most meaningful hyperlocal e-commerce companies in India in the long term. We are bullish about the various use cases that we can plug our delivery fleet into, and we think we can be the primary contenders for building large businesses in hyperlocal e-commerce in India. Keeping this long term view in mind, we have started investing in hyperlocal e-commerce companies (including e-commerce enablers). Over time, the idea is to add multiple large core businesses to the existing core. Here’s how we envision this to work –

As these businesses scale, we would want to be the provider of additional capital to these businesses and consolidate our stake leading to a potential merger at some point (at least in some cases, if and when the founders of these companies want to). In the worst case, we would want these investments to generate huge learnings and great financial returns for Zomato.”

One important thing to note about Zomato is that the company shut down all of its international units (other than the dining-out business in UAE ) in a bid to minimize losses and focus primarily on the Indian market.

Zomato Business Model

Zomato currently makes money from three business segments: Food Delivery, Dining Out & Hyperpure. The Food Delivery segment earns commissions from restaurants and delivery charges from customers. Dining out generates revenue mainly from Zomato Pro & Zomato Pro Plus. Hyperpure makes money by selling ingredients to restaurants.

Let’s have a look at how each segment fares individually.

Food Delivery

Since Q2 FY21, revenue from Zomato’s food delivery segment has been trending upwards. Gross Order Value (“GOV”) grew by 19% QoQ in Q2 FY22 and 158% YoY to INR 54.1 billion ($721 million).

According to Zomato, this growth was driven by an increase in the number of transacting users, number of active food delivery restaurants and active delivery partners.

In the last few years, Zomato has ventured aggressively into the Dining Out segment. It has launched a range of initiatives like Zomato Pro & Zomato Pro Plus. As of Q2 FY22, between Zomato Pro & Zomato Pro Plus, Zomato had 1.5 million members & over 25k restaurant partners in India.

Hyperpure is Zomato’s initiative to improve the quality of ingredients used by restaurants.

On the supply side, Zomato helps farmers grow crops that are pesticide and chemical-free by providing them with surety of demand cycles, technological guidance & better prices.

Restaurants that buy ingredients from Hyperpure are recognized through a ‘Hyperpure Inside’ tag on Zomato. Not only does the ‘Hyperpure Inside’ tag help users make informed choices, but it also highlights a differentiation between Hyperpure & non-hyperpure restaurants, eventually leading more restaurants to switch to Hyperpure since Zomato users would get habituated to prefer Hyperpure restaurants over non-hyperpure restaurants.

In Q2 FY22, revenue from Hyperpure grew by 49% QoQ to INR 1.1 billion ($15 million). Hyperpure service is present in 8 cities and Zomato supplied ingredients to over 12,000 restaurants every month on an average in Q2 FY22.

Is Zomato Profitable?

Driven by the pandemic, Zomato’s revenue dropped from Rs 2742 crores in FY20 to Rs 2118 crores in FY21. In the same time frame, expenses also decreased from Rs 5006 crores to Rs 2608 crores. While Zomato managed to cut down losses in the pandemic, the company is yet to turn profitable.

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Zomato Business Model | How Does Zomato Make Money?

We’ve all probably watched people standing in queues and looking at different restaurant menus to order lunch at least once in our lives. Who would have thought that the idea could lead to the germination of Foodiebay, a prologue to Zomato, which is one of the largest food aggregators in the world?

Suppose a person suddenly feels hungry but has no idea what to order and where to order from. Bam! There comes Zomato. He can visit the site, explore different restaurants, take a glance at their ratings, and then finally order what he likes best. He’d probably then find the delivery at the doorstep any minute.

From exploring restaurants to reading reviews to food delivery or dining out, the journey with Zomato seems to cover it all. But what is Zomato and what is Zomato business model? How does it actually work? How does it make money? And how it expanded to over 24 countries ?

Let’s delve deeper into the business model of this foodtech unicorn .

What Is Zomato?

Zomato is a restaurant discovery and food delivery company that serves the needs of customers, restaurant partners, and delivery partners by connecting them on one platform.

It is a platform where people discover and explore restaurants, view menus, give and read reviews, order food and get it delivered or book a table and dine out. On the other hand, restaurant partners get the opportunity to increase their visibility and presence and engage customers while getting a reliable delivery source at the same time.

Founded by two IIT graduates, Deepinder Goyal and Pankaj Chaddah, in 2008, Zomato began its life as Foodiebay. This online restaurant directory lets its users check out restaurant menus with a few additional features. The idea was to convert restaurant paper menus to a digital platform, which is far more accessible and easy to use. Over the years, Zomato has tapped into many other business segments and expanded internationally with around 32.1 million monthly active users and a presence in around 24 countries . Let us see how this unique and sustainable business model operates.

How Does Zomato Work?

Zomato’s operating model is simple yet effective.

Customers use the website or app to search, discover and explore different restaurants to order meals or book a table to dine out. Restaurant owners receive the order request and dispatch the order after preparation. The order is picked up by a delivery partner selected by the proprietory platform’s algorithm that scouts for the nearest and most apt delivery personnel for the delivery. Delivery personnel are not employees but partners to the company and have the right to accept or reject a delivery job. Once the job is accepted, the delivery providers then deliver it to the mentioned location. The customers can make payments while ordering or at the time of delivery. They then give their reviews, which helps Zomato improve its services and helps other customers make informed choices while placing their orders.

In simple terms, Zomato’s delivery operating model can be divided into three steps  –

• Customers uses Zomato’s app to order from existing restaurants and food joints that have partnered with Zomato
• Zomato pings nearest and most apt delivery partner to deliver the order to the customer
• The delivery partner delivers the order
• Zomato and delivery partner get their commissions

Zomato’s dine-out operating model, however, is a bit different from the usual delivery service. It heavily depends on the subscription-based Zomato pro offering.

Zomato Pro is a premium subscription-based service that offers its members additional benefits and discounts on dining out and delivery services. They get complimentary food and drinks and other discount offers while ordering from partner restaurants. They get access to exclusive delivery offers and a priority while preparation of their orders and delivery. This increases the speed of the entire process by an average of 15-20%.  They also get money-back guarantees if they do not save twice the subscription fee of Zomato Pro within the subscription period.

Zomato’s Key Activities

The key activities of Zomato business model can be divided into seven categories. These are:

Restaurant listings

Before tapping into other business segments, Zomato was primarily an online restaurant directory. It partners with restaurants that join the platform for increased visibility and charges them a commission for placing them prominently on the feed. Restaurants also pay for the promotion of their events and offers for increased conversions from Zomato users.

Food Delivery

Zomato’s food delivery business is an integral part of the link chain between customers, restaurants, and delivery partners. The customers pay a delivery fee to the restaurants, which in turn give a commission to Zomato for every delivery it makes. The commission earnings are then split between the company and the delivery partners. However, these commission earnings are subject to whether Zomato does the delivery or the restaurant gets it done itself.

Live Events

Zomato entered the market of branded live events in 2018 with its food festival, Zomaland. It has organised this food carnival in multiple Indian states where people get to witness live musical performances and other entertainment activities.

White Label Access

Zomato also enables Zomato Whitelabel, a suite of technologies that restaurants can use to run their businesses online. The key feature of the platform is that restaurants can develop customized food delivery apps to connect and engage with customers. It also works with select restaurant operators to help identify possibilities of expansions at minimal costs. It helps them by providing them with the requisite licenses and other such requirements they might have.

Zomato kitchens

Zomato provides kitchen infrastructure services to select restaurant operators by working with various entrepreneurs to help them set up and operate Zomato kitchens under different labels. This helps entrepreneurs fund restaurants with an investment of Rs 35 lakh and more. Zomato offers the investors returns in the range of Rs 2 to 4 lakh per month with over 180 running kitchens so far.

Hyperpure is an initiative by Zomato which aims at enabling restaurants access to everything, from vegetables and fruits to meat and poultry to seafood and dairy and groceries and beverages by working directly with farmers and mills, that is, both producers and processors, to source these products.

Consultancy

Zomato has an enormous repository of user databases which it uses to unearth vital pieces of information. These databases help it have an idea about the user preferences in different locations. It uses various analytical tools to provide consultancy services to its partner restaurants and other eateries.

Zomato’s Key Partners

The customer segments of Zomato business model can be categorised as follows:

• Local restaurants : Zomato partners with restaurants and helps them increase their visibility and online presence to draw the target audiences and tap into new potential customer bases.
• Users : Zomato acts like a panacea for users by providing them a platform where they can search, discover and explore different restaurants and eateries and order food or book a table and dine out.
• Delivery personnel : Since Zomato offers doorstep delivery services to its customers, it partners with delivery providers who complete the entire chain by offering their full-time or part-time delivery services.
• Reviewers : Reviewers actively review restaurants, cafes, and other food places and provide relevant information to the users about the cuisine and other aspects of the eatery in a textual or graphical form.

Zomato has also partnered with a lot of other businesses like Uber Taxi, Visa, and Paypal. Its tie up with Uber taxi enabled customers to book a ride to go to the restaurants of their choice. It eliminates the need to access two different apps and brings together a combined solution by enabling customers to book a cab and explore nearby restaurants, all at one place. The different alliances provide assistance in finding set-up locations, hiring and other procedures, market research, accounting, handling political and legal issues and so on.

Zomato’s Key Resources

Zomato has a top-notch repository of databases, meticulous and dedicated employees, a talented set of reviewers and content creators, and a large number of funding partners and financial investors like Sequoia Capital, Ant Financial, Info Edge and so on, as key resources to its efficient working.

Zomato’s Key Channels

Zomato website and app are the key channels that help it deliver its services to its customers. The Zomato mobile app is available on both android and iOS devices and customers can alternatively browse the website to explore restaurants and check their ratings on the platform. These key channels help Zomato to engage with, and build its customer base, drive sales and enhance the user experience of the platform. Zomato has also created a site specifically for posting exclusive photos of exotic foods from around the world.

What Value Does Zomato Provide To Its Customers?

Zomato business model is based on the QAA model, that is, it provides quality, accessibility, affordability and assortment to its customers and partners.

• Improved Quality : It aims at providing improved quality of food and services and maintaining high standards of fresh and high-quality ingredients through Hyperpure. The hygiene rating is one of the most yearned symbols of quality which is well known to its partner restaurants.
• Increase accessibility : Zomato delivery services have been expanding ever since their inception to increase its accessibility to more parts of the world. The app and website are both easy to use and convenient in terms of their availability on different android and iOS devices.
• Increased affordability : Zomato strives to leave no stone unturned in providing affordable choices to customers without compromising with its quality or profits. The Zomato Pro subscription based model also aims at benefitting the customers in different ways by providing them offers, discounts on dining out and food delivery and provides them faster delivery services.
• Assortment : It aims at providing a wide range of choices and the best information to its customers so that they can make well-informed choices. It believes in the idea that taste and experiences transcend any geographical borders.

Moreover, Zomato’s customer service provides online customer support with a mandatory rating mechanism. Customer support chat is available round the clock and call services are available to customers in case they feel the need to inquire about any problems they might face. It provides different incentives to customers to keep them engaged and ensures that the reviews and ratings are up to date so that customers have complete information before making their choice.

How Does Zomato Make Money?

Zomato has become a top player in the food industry since its inception. It had a revenue of a whopping $394 million in 2020 while there has been an increase in hyperpure’s revenue from $1.8 million in 2020 to $14.7 million in 2021. The diversified set of activities that play a key role in generating its revenue are:

Zomato Advertisements

Zomato partners with restaurants that wish to amplify their visibility and online presence through the platform. A major chunk of Zomato’s revenue comes through advertising and promoting these restaurants who pay it for the same.

Zomato Subscriptions

Zomato has a subscription-based freemium model. Zomato Pro offers customers different discounts and offers on dining out and food delivery services. They make offers like (1+1) on food items or (2+2) on drinks to Zomato Pro users and get their deliveries made faster. It offers a 3-month membership at a cost of Rs 200 and an annual pro membership at a cost of Rs 750 in India.

Consultancy And Data Monetisation

Zomato can analyse users’ behaviour based on the data repositories it has. It gives an insight into which dish is trending , what people are searching for, what kind of food is in more demand, and so on. Restaurant owners need to pay Zomato to get this information to improve and optimise their services according to the users’ requirements.

Food Delivery Services

Zomato charges a commission for the restaurant partners for every delivery that it makes. It charges a commission of around 20-25% which can vary depending on different factors like location, timing, and so on.

Zomato charges an entry fee for the carnivals and live events that it organises in collaboration with different restaurants. These events are usually hosted on occasions like Christmas or New year’s eve in order to boost sales. The purchase of these tickets becomes a source of revenue for the company.

Zomato Kitchens

Zomato offers a kitchen infrastructure service to restaurants that want to expand their business to new locations at a minimum possible cost. This helps it get more restaurant partners and generate greater revenues.

Costs Incurred

Zomato has to spend on a lot of operations and advertisements that it makes. The primary costs it incurs are:

• Platform development: Zomato invests large amounts to increase its user experience of the platform by improving its customer services, user interface, and overall online presence.
• Branding and advertising : Zomato launches a wide range of marketing campaigns and advertisements to gain greater popularity and spread consumer awareness about its offers and discounts.
• Credit card processing fees : Zomato has to pay for the credit card transactions that take place as well.
• Office maintenance cost : Zomato operates in around 24 countries around the world which include India, Australia, UAE, USA, Turkey, and so on. Thus, it has to bear the maintenance costs of offices in all these countries that it operates in.
• Employees’ salary : Zomato has over 5000 employees working for it all over the world. It has to pay salaries to this set of dedicated employees with different pay scales.
• Legal and accounting fees : The company has to pay legal fines and payments for mergers and acquisitions and different licenses that it requires. It also has to pay taxes for various purposes as well.

Bottom-Line?

Zomato’s simple yet effective business model has led it to be one of the largest food aggregators in the world and any aspiring entrepreneur has much to learn from it. It offers a combined solution to users’ problems in the food market and takes care of the entire process till the order reaches their doorstep.

It strives to work on different new business endeavours while working on better implementation and improvisation of existing applications and services it provides. It is just as they say, the story has just begun. It has far more heights to attain and greater audiences to tap into all over the world.

Go On, Tell Us What You Think!

Did we miss something? Come on! Tell us what you think of this article on  Zomato business model  in the comments section.

An economics aficionado and a researcher at heart, Shrishti has also worked as a consultant to assist startups and NGOs in varied verticals. When not working, she is a passionate dancer and painter.

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Business Model of Zomato – How does Zomato make money?

June 9, 2023 | By Hitesh Bhasin | Filed Under: Business

The business model of Zomato revolves around providing food delivery services, information, user reviews and menus of partner restaurants.

Zomato’s business model has revolutionized the food business industries by incorporating various restaurants and making it convenient for people to find restaurants, provide feedback, check listings, and availability according to their choice of cuisine.

This food-platform is available across 24 countries in the world, providing insightful analytics to various restaurants. These analytics helps the restaurants to improvise and enhance their business.

In this post, we will be unraveling the key idiosyncrasies of the Zomato business model and understand how it manages all its operations and generates revenues. So, let us get started right away –

Table of Contents

Introduction to the Business Model of Zomato

Zomato is an Indian food-based application that provides various services like restaurant search & discovery, online delivery, and a plethora of different cuisines to choose from depending on your price ranges.

The popularity and applications of Zomato have increased manifold in the last few years, which makes people wonder about the actual Business model of Zomato.

In the next few sections, we will be going through the various verticals of the Business model of Zomato, but first, let us have a look upon its creation and some other associated historical aspects-

Creation and Essential history of Zomato

Before analyzing the Business model of Zomato, it is better to know a little about the background of Zomato. Zomato was created by two Indian IIT graduates Deepinder Goyal and Pankaj Chadda in 2008.

Initially known as FoodieBay, the idea of Zomato popped up when Deepinder found his roommates searching for leaflets of menus to order food. By incorporating the menus of various restaurants in one single application, the task of choosing a restaurant and ordering food can be tremendously eased.

This led to the creation of Zomato.

Zomato has tremendously developed from a simple home project to one of the most used online food-based platforms in the world. It accommodates a list of restaurants and cafés belonging to various price ranges and cuisines.

But the real factor that makes Zomato so successful lies in the robust and robust business model which is initially presented. Different services that are offered by Zomato business model are-

• Restaurant Search & Discovery
• Online Ordering
• Table Reservations & Management
• POS Systems
• Subscription Services

Different Segments of the business model of Zomato 

The Business model of Zomato is hugely different from its contemporaries Swiggy and Foodpanda . This application was the pioneer of online food-based applications, and hence, it was a more significant challenge for Zomato to make the market accept the concept of “online restaurant-searching.”

The Business model of Zomato is a well-orchestrated plan which consists of various aspects for the smooth functioning of the application. Following are some of the critical elements of Zomato-

1) Customer Segments

Zomato consists of three primary segments i.e., Users, local businesses, and reviewers.

• Users- Zomato provides a platform for people to search and locate restaurants according to their budget, location, and preferred cuisine. It also provides an online-based efficient food delivery service.
• Local businesses – Zomato also provides a platform for restaurants and local cafes to promote their business and to reach a target audience, thereby generating revenue for various outlets.
• Reviewers- Reviewers or content contributors are the people who provide positive ratings and comments. These comments are mostly synonymous with the quality of food and services provided by the restaurants.

2) Zomato Provisions

Zomato provides information on the restaurants and cafes to the customers based on their location, their choice of cuisine as well as the specified budget.

It also builds a bridge and facilitates communication between the partnered restaurants and the customers.

Zomato also has an organized and well-orchestrated pricing model for the online delivery services that they provide.

Their quality of services has also been enhanced due to the inclusion of Zomato Gold and Piggy Bank.

3) Notable alliances of Zomato

In recent years, Zomato has also partnered with various companies like Uber Taxi, London & Partners as well as online or electronic payment companies such as Visa and PayPal .

These partnerships have also played a significant role in enhancing the Business model of Zomato .

Having partnered with London & Partners, there were various ways in which the company aided Zomato. Some of them are specified below-

• Finding a location to set-up an office
• Assisting in staff hiring and, management recruitment procedures
• Work placements and market research
• Providing useful advice on policies, legal systems, handling of accounts, etc.

Now, after going through different aspects of Zomato business model, the time has come to delve into its revenue generation strategies -

How does Zomato Make Money?

Zomato’s revenue took a significant leap this year as its valuation increased from $68M in the financial year of 2018 (FY18) to $206 M in the Financial Year of 2019 (FY19).

Various aspects of Zomato act as a contributory factor in the current generation of revenue. Following are some of the major factors-

• The commission earned due to delivery services constituted about 75%of the total revenue generated in the year 2019. This is equivalent to an estimated amount of $155M, almost four times more than $8M made last year.
• The newly introduced system of Zomato Gold provided complimentary food and beverage service to customers with gold-membership. This service alone generated about $30M in 2018 and $49M in 2019.
• The ticket sales for various events organized by restaurants in partnership with Zomato generate a certain amount of revenue in the form of commissions. At the same time, consultation provided by Zomato to various restaurants to improve their business also adds to the Business model of Zomato.
• Unlike the past few years, Zomato is now trying to balance and form an equilibrium between all its sources of revenue generation by not prioritizing advertising revenue more than the other sources. This again has been a contributory factor in the efficient Business model of Zomato.

Zomato is known to bring in massive revenue due to its various business operations , but most people are still doubtful of the actual revenue-generating system of Zomato.

The Business model of Zomato consists of various sources through which the application generates revenue. The following are some of the operations undertaken by the app-

Sources that play key role in helping Zomato make Money

1) Zomato Advertising

Zomato provides people, access to multiple restaurants and allows them to rate the quality of the business that these restaurants offer.

These ratings are often reliable and useful. Various restaurants can promote their businesses by posting banners and pictures on Zomato.

This advertising method proves to benefit not only for restaurants but also for the app itself.

2) Zomato Subscription

Restaurants pay a certain amount of money to Zomato in exchange for various analytic tools and services provided by Zomato.

The food-based app has a variety of analytic tools and databases of information about the consumer through the use of cookies.

3) Zomato Event Organization

Zomato also organizes various events and food-based festivals by collaborating and partnering with multiple restaurants across the world.

The attendees pay a specified amount for the ticket. Zomato receives a certain percentage of the money collected. Hence, this aspect also proves to be very helpful for the app to generate revenue.

4) Zomato Food Delivery Services

Other sources of revenue for Zomato include Online food delivery service.

Zomato charges a certain sum of money called commission from restaurants in exchange for food delivery services.

5) Zomato Gold

Started in April 2018, Zomato Gold offers premium services based on membership.

In the facility, customers with gold-membership receive complimentary food and beverages from partnered restaurants.

Statistical analysis of Zomato’s revenue sources

As mentioned earlier, the Business model of Zomato is highly efficient, involving numerous sources which play a crucial role in generating revenue.

Following are some of the helpful statistics in understanding the Business model of Zomato-

• Restaurant Advertising and marketing constitutes about 72% of the total revenue.
• Event advertising contributes approximately 4% of the revenue generated.
• A total of 12% of the total revenue is generated by the ticket which is sold during events organized by Zomato.
• Consulting services and online-food delivery services constitute about 3% and 2% respectively.
• Zomato Gold and other developed services are generating 7% of the total revenue to the customers.

Wrapping it up!

Zomato has wholly changed the functioning of the food and restaurant industry by bringing in the concept of creating universal access for various restaurants and cafes.

Zomato makes available outlets based on the location, choice of cuisine, and the budget specified by the clients. It also provides online-delivery service to customers which makes the process of “ordering food” smooth and efficient.

Zomato also proves to help enhance the business models of various restaurants, bistros, and cafes by providing them consultation as well as the chance to promote their business by uploading pictures and posters on the Zomato application. Zomato also organizes various events and festivals in partnership with multiple restaurants to generate revenue not only for themselves but also for the restaurants involved.

The Business model of Zomato is well-organized and orchestrated, encompassing the various aspects which act as revenue sources for the company.

Restaurant advertising, event advertising, ticket-selling during organized events as well as specialized services like Zomato Gold and Piggybank are some of the significant revenue-generating sources of Zomato. The food-based application not only focuses on advertising but also provides equal importance to other sources which are the primary reason why Zomato earned five times the revenue earned this year in comparison to the previous financial year.

Intending to enhance the revenue-generating system as well as to develop the services provided, Zomato also partnered with various companies this year, creating helpful and beneficial alliances.

These include Uber Taxi, PayPal, and Visa. All these reasons make Zomato one of the most efficient applications of recent times.

So, how effective, profit-driven and inspiring do you consider the business model of Zomato? Share with us in the comments below.

Liked this post? Check out the complete series on Business Models

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About Hitesh Bhasin

Hitesh Bhasin is the CEO of Marketing91 and has over a decade of experience in the marketing field. He is an accomplished author of thousands of insightful articles, including in-depth analyses of brands and companies. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about.

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How Does Zomato Work, Zomato Business Model, and Revenue Insights

Keeping in mind the current scenario, the bubble of the on-demand business model will not burst soon. Today, there is hardly anyone in the world who does not know about Uber’s prevalent business model and its success story. Similarly, Zomato is a successful on-demand food delivery platform that helps users discover food places and get it delivered to their doorstep.

Now you must be wondering why Zomato earns huge profits only by delivering food. Let’s dig into the details of how Zomato works and the Zomato business model, due to which it has gained huge momentum in recent years.

More and more business owners are jumping into the online food delivery system bandwagon as it saves the user’s time and effort. You must be shocked to know that the online food delivery market is growing at an annual growth rate of 15.4 % by the year-end 2025.

Furthermore, attractive cashback offers, multiple payment options, fast and smooth doorstep delivery, etc., are the key drivers that make an app for business more successful in the competitive market. Now you must be curious to know how it earns huge revenue and grows by leaps and bounds each day.

What is Zomato?

Zomato is one of the most comprehensive and user-friendly apps where people can search for nearby restaurants and cafés, order food online, and get it delivered to their doorstep in no time. Moreover, you can also get accurate information about restaurants as it provides menus, reviews, and ratings. Based on that, users can place orders and enjoy lip-smacking food at their homes.

Zomato Foundation: Success Story Behind The Idea

Zomato was founded by Deepinder Goyal and Pankaj Chaddah, two Delhi IITs, in 2008. Till November 2010, Zomato was known as “Foodiebay.” Once, they saw their colleagues who were seeking menus of different restaurants to order food. That’s when the idea took birth, and they thought of converting these manual menus into a digital format.

In the year 2012, Zomato spread its wings across the globe and started to list out the number of restaurants in the market. Zomato kept on racing one after other milestones time on time. Gross order value (GOV) — the total value of all orders, a percentage Zomato gets as revenue — rose 13.9% in its food delivery business, as counted on August 2023.

Zomato also has an enthusiastic team of food soldiers who visit each restaurant and assure them that their data is secured. Users can share reviews, give their opinions, and enable users to create stories based on their food experience. This initiative makes Zomato more social.

Zomato’s user-friendly app is one of the reasons why people prefer to order food online. Now using their mobile device to order food, Zomato enables them to get a meal at their location without any trouble.

Interesting Facts About Zomato’s Funding History

Zomato received a total number of 909.6 million from different investors. Their recent funding was from Private Equity in 2020. Info Edge is one of the leading investors of Zomato. Other than that, Ant Financial, Delivery Hero, Shunwei Capital, Vy Capital, and many others are the investors of Zomato who have contributed their major stack to make Zomato popular worldwide.

Now let’s have a look at some interesting financial figures about Zomato’s funding history.

Zomato has raised $2.7B in funding over 23 rounds. Their latest funding was raised on August 30, 2023, from a post-IPO secondary round. It’s funded by 35 investors. Invesco Mutual Fund and Societe Generale are the most recent investors.

Zomato has made 14 investments. Their most recent investment was on April 17, 2022, when UrbanPiper raised $24M. Zomato has had 2 exits. Zomato’s most notable exits include Blinkit and Grab. Zomato has acquired 15 organizations. Their most recent acquisition was BlinkIt on March 16, 2022. They acquired Blinkit for $725M.

Their stock opened with ₹116.00 in its Jul 23, 2021 IPO.

Zomato’s active monthly users increased between 2019 and 2020. There is a surge of 177% in restaurant listings. Active delivery providers are the backbone of their smooth operations, and 200K+ delivery partners feel proud to work with Zomato.

How Does Zomato Work?

Zomato has been rapidly growing since 2008 and is one of the most successful startups in India. Even well-established business owners and entrepreneurs are excited to know how it works and how it generates huge profits even after offering attractive discounts.

The main work of Zomato is to suggest local and nearby restaurants to users and receive orders from them. Users can place orders from their favorite restaurant based on ratings and reviews shared by previous customers. Perhaps this is why more and more startup owners are interested in developing an app similar to Zomato.

It offers comfort to the users and helps business owners reach their local food business to new heights. Zomato’s workflow is simple; let’s see how, within a few minutes, consumers can enjoy a delicious meal.

Step 1: Users can explore various restaurants and order meals from the desiccated app solution or website. Step 2: Particular restaurant owners receive an order request and start preparing a meal. Step 3: Once the food is ready to dispatch, it will be handed over to delivery providers. Step 4: Delivery providers deliver the meal to the customer’s preferred location. Step 5: Customers can make payments and share reviews based on their experience with the given payment options.

This simplicity encourages food lovers to order food online. If you are already engaged in the food business and want to expand its reach, investing in Zomato like an app will give you a promising return in the long run.

Zomato Business Model Canvas - Explained In Depth

Zomato ensures prompt doorstep delivery that makes food lovers delight. Now, customers no longer need to wait for hours at restaurants. Right now, Zomato is one of the leading online food delivery platforms used in almost 22 countries across the globe. On the other hand, restaurant owners also increase their online visibility by listing themselves on the Zomato app.

Let’s discuss in detail how the Zomato works.

Customer Segments

Basically, Zomato has three customer segments that contain:

Users: An online platform designed for users to find nearby restaurants and perfect for those people who prefer doorstep delivery. Local Restaurants: The Zomato platform is significant for restaurant owners who want to promote their business in order to grab the target user’s attention. Delivery Providers: By offering part-time/full-time services, they can generate a decent revenue source income.

Further diving into our major concern – the Zomato business model and understanding its business strategies

Value Proposition

Zomato is an ultimate online platform that enables users to order food online from an extensive range of options near their vicinity. Moreover, if you are new to the food market and want to make an online presence strong, Zomato allows you to promote your food business. Hence, we can say that Zomato fills the gap between restaurant owners and consumers.

Once the order gets placed, users can track their orders in real time with an estimated arrival time. With advanced search and filter options, customers can place orders without any hassle.

Zomato also provides Gold Membership to build a strong customer base and foster loyalty. Zomato’s Gold service comes with additional perks where customers can enjoy heavy discounts on food and beverage orders.

Key Partners

• Zomato has tied up with an Uber taxi if any customer wants to book a ride to the restaurant to dine out.
• It means users no longer need to access two apps; they can book a cab and find nearby restaurants together.

Other Business Partners: Built an alliance with electronic payment companies like Visa and PayPal.

Key Activities

Zomato’s business model is incomplete without having a look at its core activities. Although its primary goal is to make restaurant searching easy, it has various key activities such as:

• Managing multiple networks
• Manage advertising and sponsored content
• Enhance customer service
• Increase brand image

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How Does Zomato Make Money? Take A Look At Its Revenue Streams

Zomato has strengthened its presence in the food market at a global level since its inception. Zomato has generated lots of income sources, and certain are listed below, which helps you understand in detail how Zomato earns huge profits through its business model and diversification.

Zomato Advertisements

Advertisements are one of the trusted and main sources of income for Zomato as it offers advertising policies to restaurants that want to maximize their profits and customer base. It generates more than 70% of its revenue through this channel. It allows restaurant owners to put their banners on their sites to increase visibility.

Zomato Subscription

With the help of advanced tools and software, Zomato can predict users’ behavior, like what they are searching for, what they are not searching for, which dish is trending, which food is in more demand, etc. Restaurant owners need to pay a certain amount to Zomato in exchange for this information. Based on that, they can improve their services and meet customers’ expectations.

Zomato Food Delivery Services

Zomato charges a 20-25% commission from the particular restaurant for each order placed. In some regions, the commission rate may vary from 5-7%.

Zomato Event Organization

In collaboration with certain restaurants, Zomato hosts multiple events such as Christmas Eve, New Year’s Eve, or any other event to boost sales. People have to purchase tickets for those who want to attend these events.

Zomato Kitchens

This is a kitchen infrastructure service offered by Zomato, where they will work with certain restaurant owners who want to expand their business to more locations at minimum cost. It means entrepreneurs can easily establish their restaurant at the right location with minimum fixed and operating costs.

Wrapping It Up

Zomato’s success story is inspiring to every other entrepreneur who is still new to the food delivery market. The workflow of Zomato and its business model is perfect for those who want to capture the market in its early stages.

It saves the user’s time and offers comfort at each level-from online ordering to payment to doorstep delivery. For your business idea, our on-demand mobile app development services are in addition to that to leverage the best results by integrating all your requirements.

Nirav Parmar

Having More than three years of experience, Nirav is an outreach expert at Elluminati. Having a keen interest in communication, content, and digital marketing, he has worked with many brands and helped entrepreneurs to establish an online presence that drives their business forward.

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First things first. Why do you need a business plan?

The restaurant industry is still known to be an unorganized one. Which is exactly why a business plan needs to be in place. It also is important to have a business plan so you can show your investors where their money is being put and even to get that bank loan you’ve been waiting on. A business plan is the blueprint for your restaurant where you chalk out the restaurant’s goals – short and long term ones, what your vision is for the restaurant and how you plan to make it a success. There are plenty of modules, guides and even softwares that can help you make these plans. But before any of that, you need clarity on what you’re going to do.

You need to define your business for yourself and for the investors.

What kind of restaurant will yours be? Cafe, fine dining, casual dining, QSR, or any other.

What cuisines will you serve? Based on location, demographic and your own business interest, understand what cuisines will work for your restaurant.

What will be the USP? A unique theme or cuisine, events, or anything else.

A cafe serving American cuisine with a circulating library within the cafe and live music on Friday evenings. Here, the library and live music can be your USPs and something that customers will be drawn to.

Key factors to succeed

In all businesses, there are a few key factors that ensure the success or failure of it. It’s not different with the restaurant business as well.

Location – List of ideal locations and why you want to open a restaurant there.

Demographic – The kinds of people you’re targeting – age group, floating population or locals.

Staff – Are you hiring experienced staff or new ones to be trained? What are your staff retention plans?

Food costs – How are you going to control food costs? Have you spoken to multiple suppliers before finalizing on the ones that would work out for your business?

Investors need to know your strategy to success. We mentioned key factors earlier, but without a strategy, they are only just points on paper. From operations to staff, you need to have a clear strategy that you intend to follow.

Operations – Number of people required in various shifts, whether you’re going to be open all day or just for lunch and dinner services, supplier management, etc.

Home delivery – Do you have enough staff to run delivery operations? You can sure improve on profit margins, but can you handle the volume? Will it work in the locations ideal to run the restaurant in? Will you use a third party for delivery or in house staff? Will you go online or stay off it?

Costs – How are you pricing your menu – starting low and bump it after 6 months, or keep it stable for a year and raise it according to market later?

Financial analysis

A business plan cannot be complete without a mention of financials. Even if it isn’t elaborate, you need to cover the important points. Cash flow, profit and loss statements, risk analysis, pricing, cost control, operational costs, sales forecast, quarterly and annual growth rate, etc. It’s not easy to work on financials if you don’t have experienced people working with you to guide you in the right direction. There is a lot to consider at the beginning so you don’t suffer later in the business.

Future plan and vision

Even a restaurant, however unorganized the industry may be, should have a vision and a plan to achieve set goals.

Expansion – Do you plan to open other outlets in other locations of the city? Financially, will you be in a position to do so in the time set to achieve this goal? Do you want to expand the brand or open different kinds restaurants?

Diversification – Do you intend to add cuisines? Or events? How else do you plan to keep your restaurant relevant?

A good business plan should basically talk about what your restaurant will be like on paper and how you intend to run it bearing in mind the financials and other practical aspects. You must have an executive summary for your business plan where you condense everything into just two or three pages. A lengthy powerpoint presentation is outdated and tiresome to compile as well as read. Keep it simple and as clear as you can.

More for you to read

Restaurants

Read more about Zomato Restaurant Hotline that provides holistic solutions to the needs of restaurant partners.

We are excited to announce the launch of Zomato Wings, a platform to connect investors with restaurants.

Another step towards helping the restaurant ecosystem get back on its feet quickly.

The bar at any restaurant is underrated and sometimes undersold, even. More often than not, it acts as a buffer…

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Zomato opens new vertical for fresh revenue stream

Pain is over for us: Zomato co-founder Chaddah

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Zomato's future plan - focus on three key areas

Online food delivery platform Zomato has decided to narrow its focus on three key areas of food ordering and delivery; supplies to restaurants through 'Hyperpure' and quick commerce, company Chairman Kaushik Dutta said on Tuesday.

In his address to shareholders at the company's annual general meeting, Dutta said the move was part of strategy to focus "only on areas that have the potential to become meaningfully large businesses ten years from now".

In FY22, he said Zomato was able to achieve strong top line growth while keeping its "adjusted EBITDA burn under control", despite multiple challenges such as disruptions due to Covid-19 pandemic, macro-economic uncertainty, rising inflation, fuel prices, among others.

This year after reflecting on the strategic priorities as a company, given the size and scale of the platform now, Dutta said it was decided that the focus would be only on areas that have the potential to become meaningfully large businesses ten years from now.

Subsequently, he said Zomato would narrow its focus to three key areas -- food ordering and delivery; Hyperpure and quick commerce.

Zomato's core food delivery business is stable and headed for profitability, he said, adding in India food delivery still has a large runway for growth.

While restaurant food consumption has increased in the past few years, its overall penetration in India is still significantly low as compared to global counterparts, he reasoned.

On Hyperpure -- Zomato's supply platform for restaurants for fresh items, he said the company is now starting to see strong adoption of its services by restaurant partners.

"We think that this business has the potential of becoming as large or even larger than our food delivery business because the addressable market here is potentially larger than food delivery," he added.

On quick commerce, he said the acquisition of Blinkit was completed this month and the integration of the two teams has started.

In June this year Zomato had announced acquisition of Blink Commerce Pvt Ltd (formerly known as Grofers) for Rs 4,447.48 crore in a share-swap deal as part of its strategy of investing in quick commerce business.

Dutta said Zomato considers quick commerce as a natural extension to its core food delivery business and increases its addressable market manifold.

It has the potential to help the company build a more profitable business by cross leveraging existing customer base and increase hyperlocal delivery fleet utilisation, he added.

"With this, we now have a clear execution plan around these three businesses and our focus as a team will be to get these businesses to meaningful scale and profits," Dutta said.

He also said Zomato's dining-out and certain other segments saw a revenue decline of 15 per cent in FY22, due to discontinuation of most of its international operations as well as certain non-core businesses.

The dining-out business was adversely impacted in FY22 by Covid-related lockdowns.

He also said the company is making progress in its efforts for adoption of electric vehicles with around 4,500 active EV based delivery partners and around 18 per cent of orders delivered on bicycles as of March 2022.

In reply to shareholder queries, Zomato founder & CEO Deepinder Goyal said the company does not expect to make any other strategic minority investments for the foreseeable future as it has made all the investments that needed to for its future plans.

On safety of delivery partners, he said it has always been a priority for Zomato and "no compromises have been or will be made here", while also asserting that the platform does not incentivise riders to be on time.

Goyal also said Zomato will put a phone number on the bags of its delivery partners for people to call and report if any one of them were found to be speeding.

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Zomato seeks shareholder approval for ESOP plan of 18.2 cr shares worth over Rs 3,500 cr

Z omato has sought shareholder approval for a fresh employee stock option plan (ESOP) of 18.2 crore shares of the company that are cumulatively worth over Rs 3,500 crore at current market value.

After a new ESOP plan is approved, it is typically granted to employees over a few years. In its shareholder letter, Zomato CEO Deepinder Goyal said that this ESOP pool should be sufficient for the next 5 years, and amounts to 2%

of the company's outstanding share capital on a fully diluted basis.

"ESOPs are important to help build a culture of long-term thinking and innovation and create a ‘founder mindset’ amongst senior employees, which ultimately drives the right outcomes for long-term shareholder value creation. Also, in people-dependent businesses like ours, where great execution and constant innovation are the only determinants of survival, ESOPs are a great way to drive the high-performance culture that we thrive on," he said.

This comes even as the company’s stock has been on an upsurge, rising 62 percent to Rs 198 apiece in the past 6 months, on the back of rising profitability in its core business and the fast growth of its quick commerce arm, Blinkit.

High ESOP costs have been a thorny issue for new-age companies like Zomato and Paytm for the past few years.

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"At an overall level, our total employee expense (including cash expense and non-cash ESOP charge) as a % of Adjusted Revenue has reduced from 29% in FY22 to 12% in FY24, and despite the expected increase in both the ESOP charge and the cash employee expense, we expect this ratio to continue trending downwards in FY25 and beyond," he added.

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The rich valuations for Zomato looked justified given “significantly higher” projected revenue and profits for the company, according to ICICI Securities Ltd. analyst Abhisek Banerjee. The broker adds that the stock has basically moved in line with Doordash Inc. over the past six months amid improving sentiment on tech stocks around the world.

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Explained: Why Zomato shares fell after delivering strong Q4 results

Zomato shares fell as much as 6% in early trade despite reporting strong q4fy24 results. here's all you need to know..

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• Zomato shares fall despite strong Q4 results
• Shares tumble as much as 6% in early trade
• Multiple brokerages maintain bullish outlook, raise target prices

Shares of online food delivery giant Zomato fell sharply on Tuesday even as the company announced strong Q4 results a day ago .

Zomato shares fell as much as 6% in early trade, but rebounded to trade 1.63% lower at Rs 190.55 at around 10:45 am.

The company reported a consolidated net profit of Rs 175 crore, compared to a loss of Rs 188 crore in the same period a year ago. Its revenue from operations stood at Rs 3,562 crore, compared to Rs 2,056 crore in the corresponding period a year ago.

In addition, Zomato’s quick commerce business Blinkit has also achieved operational EBITDA breakeven in March 2024 .

While Zomato delivered a solid performance in the March quarter, its shares fell today. Market experts say this could be due to profit booking and ongoing market volatility.

Another factor that may have led to the decline could be elevated employee stock ownership plan (ESOP) costs. It may be noted that the company has sought shareholder approval for a fresh ESOP plan of 18.2 crore shares worth over Rs 3,500 crore.

However, multiple brokerages continue to maintain their bullish outlook on Zomato stock and some have even raised their target price.

Emkay Global said in a note that the company’s management is bullish on Blinkit and aims to maintain its adjusted EBITDA close to break-even levels over the next few quarters.

It noted that Blinkit intends to increase its dark store count from 525 in the March quarter of the fiscal year 2024 to 1,000 by the conclusion of the fiscal year 2025.

The brokerage further added that the majority of this expansion is expected to occur in the top-eight cities, where Blinkit perceives substantial growth opportunities due to its current under-penetration in these markets.

Meanwhile, Nuvama Institutional Equities upgraded the Zomato stock, citing Blinkit’s strong growth and expansion plans. It said the company’s decision to ramp up dark store count signifies a notable shift in expectations and strategic positioning for Blinkit within the quick commerce sector.

"While this shall impact short-term profitability, this shall cement Blinkit as the clear leader in quick commerce," Nuvama said while valuing Zomato's food delivery at $10 billion and Blinkit at $13 billion. The brokerage has maintained a 'buy' rating and revised upward its target price on the stock to Rs 245 from Rs 180 earlier.

Meanwhile, brokerage firm CLSA has also maintained its ‘buy’ rating on the Zomato stock. CLSA has increased its target price to Rs 248, citing Blinkit’s growth and the company’s focus on expanding the quick commerce business.

Citi, with a 'buy' rating on Zomato, noted the company achieved adjusted EBITDA breakeven in quick commerce for the March quarter and remains on track with its guidance for the first quarter of FY25.

The brokerage has increased its target price to Rs 235 per share, highlighting Zomato's swift expansion of its dark-store presence in quick commerce and anticipates sustained adjusted EBITDA breakeven in this segment throughout FY25.

Bernstein, maintaining an 'outperform' rating on Zomato, praised Blinkit's impressive growth, lifting its target to Rs 230 per share.

It reiterated confidence in Zomato's quick commerce business reaching the breakeven milestone and emphasised the company's commitment to growth, with a long-term adjusted EBITDA target of 4-5%.

Jefferies, while affirming a 'buy' rating, acknowledged Zomato's remarkable performance over the past year, but cautioned that investor expectations are lofty.

The brokerage has raised its target to Rs230, citing the quick commerce breakeven as a key highlight for the March quarter and anticipating aggressive growth as store count is poised to double next year. Published By: Koustav Das Published On: May 14, 2024

Technology business and policy in India

Zomato Pulls Plug on Payment Aggregator Plans, Citing Lack of Competitive Advantage

What’s the news: Zomato surrendered its payment aggregator license and withdrew its application to operate as the issuer of pre-paid payment instruments, as per a stock exchange filing on May 13, 2024. The decision was made following a meeting of the board of directors of ZPPL, a wholly owned subsidiary of Zomato Limited.

The company had first submitted a disclosure for the payments license in August 2021 and received the same in January 2024. It had applied to work as the issuer of pre-paid payment instruments in November 11, 2021. However, in its latest filings, the entity said it did not see a competitive advantage in this investment any longer.

“At Zomato, we do not see ourselves having a significant competitive advantage against the incumbents in the payments space and hence we don’t foresee a business in payments space as commercially viable for us, at this stage,” said Zomato in its filings, adding that the real impact of the developments in the payments sector became more apparent once the company started setting up the structure to commence the operations.

The company recognised an impairment loss of INR 39 crores on its investment in ZPPL. However, it stated that there is no material impact on the revenue/ operations of the company on account of the voluntary surrender and withdrawal.

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