ZOMATO: The Journey from Zero to One
Created on 04 Dec 2021
Wraps up in 8 Min
Read by 5.4k people
Updated on 07 Sep 2022
“There is always a good problem to solve” Deepinder Goyal.
It was towards the end of the term in IIT Delhi when Deepinder was ordering a ‘Dominos Pizza’ and realized what a cumbersome process it was (Remember back in the days when we had to call to order a pizza in the absence of apps! 😂😂). The problem was of Cumbersome Process, and he wanted to solve it. That’s when it occurred to him to start a simple online food ordering website, he even did it, but the business failed soon.
A failed venture was hurtful, but life went on, and things became normal. He later joined a consultancy firm, Bain & Co., where they had a lot of bachelors who used to order food from a stack of Menu cards in the cafeteria. There always used to be long queues to reach those menu cards and people waited just to get a hand on them.
One day while playing foosball in the office and watching that long queue, it occurred to him that he could scan those menu cards and put them in the company portal this way, employees need not have to wait.
And it worked! Employees in the organization used it like crazy. There it occurred to him that if he could solve this problem for a group of people, he could do the same for the masses. There it was, a solution to the problem and a business! In 2008 Deepender, along with his colleague Pankaj, started Foodiebay.com.
The idea was to collect as many menus as they could from popular restaurants in Delhi, then put them together in a portal and open the portal to the public. Interestingly, their first portal was so simple; it was just hyperlinks of the menus and the restaurants' phone numbers. To search for a particular restaurant user had to use the Ctrl+f option. It was that basic! But still, people loved it, and traffic went wild on the webpage. The only source of revenue the portal had was from advertisements.
By that time, the duo had already left the high-paying jobs to give their all to the new venture. The company remained bootstrapped for at least 2 years, and the need for funds started to rise as they wanted to scale up & expand. Then one fine day, they were selected for funding of $1 Million by info edge.
Zomato, The Inception
The company came into the limelight after the funding process began. And eBay noticed them! Did you see that FoodieBay had eBay in its name? This attracted legal action; they had to change the name to something plain and nice… and ZOMATO it was! (Hans Zimmer playing in the background).
They had a simple business model. In the Zomato app, we can see the details of restaurants in terms of menus, contact numbers, addresses, pictures, and more. We could also add our reviews and read others' reviews based on the restaurants. So, basically, a model where customers can check out everything about the restaurant before visiting!
Soon the company became one of the fastest-growing startups in India, ready for international expansion. The first country they expanded in was Dubai.
“Funny thing happened, we launched in Dubai in 2012, and about 6 months we started getting more traffic than the population of Dubai. This gave us false confidence that we will work in any market that we go to. After this, we launched in 10 countries and failed in half of them.” - Deepender Goyal.
Nevertheless, they kept on expanding and worked on their technology. The biggest challenge they faced was a lot of competition from local monopolies (local restaurants) in the areas where they were expanding. And the solution was, ‘To beat the monopoly, Buy the monopoly’ that was the time they started acquiring restaurants, starting from New Zealand, moving to Turkey, the Czech Republic, and more. They were in true hustle mode. As they say, Good things come to those who Hustle!
The biggest and most pivotal acquisition was the Urban spoon in the US, as it also established its presence in Australia & Canada. Within a few years, Zomatos presence was in 22 countries with a traffic volume of…. A whopping 80 Million visits per month, making it the largest restaurants search company in the world. 🤩🤩
What I think is... The Hustle worked pretty well! But there's always more to conquer; the unfinished business never stops. They had to move ahead to something new & big, and eventually, they did.
Food at your Door-Steps
The food-tech industry was already expanding, and Goyal had to introduce big changes and solve new problems! Finally, by 2015 Zomato became the biggest newsmaker with the launch of its Food Delivery Service. From just a search & discovery app, they became the medium of food by enabling restaurants across India to deliver to customers' doorsteps.
Following this, they launched a membership program called Zomato Gold (Which later got upgraded to Zomato Pro!), giving amazing dining privileges to its customers such as discounts & more. Along with this, to cater to restaurants better, they launched Hyperpure to provide fresh, hygienic, high-quality ingredients to restaurants.
What’s cool is that Zomato moved on from just solving the problem to providing customer delight with these services. The best one in the delight category is Zomaland 🔥 the flagship event or the carnival that brings together some of the best food, DJs, comedians, and games under one roof.
The timeline goes
2008: Foodiebay was founded
2010: Seed round of funding & Rebranding as ZOMATO
2012: Developed International space
2015: Launched Food Delivery service
2017: Launched Zomato Gold
2018: Launched Hyperpure
2019: Launched Zomaland
2020: Acquired UberEats
2021 : Turns 13 & IPO launch
With all these and several other experiments, time passed, or should I say, it flew for this journey. Moving on to a very special day, July 12, 2021. 13 years had passed, and this young IITian ended up building an empire. The day is marked as the 13th birthday of Zomato.
On that very day, I noticed their amazing marketing style; I mean, look at the mail they sent us. Leaked WhatsApp chat! Thoughtful?
(PS: I adore their emails and posts. Just out of excitement shared a few good ones randomly! 🙈)
2021 was a big year for the company; one of the biggest points of success in an entrepreneur's life is when their company goes public. It's like the end of an era and the beginning of a new chapter. Zomato’s IPO was one of the most talked-about of the year. Not so surprising, it opened at more than 50% premium on a listing day.
We discussed all the glorifying, nice & shiny things about the company, but every great story has a twist. The twist in Zomato's story is the controversies it has always attracted.
The food delivery giant finds itself around controversies every now and then. They have seen it all, starting from angry users to hurting religious sentiments, but as far as I can remember, they have always faced the biggest issues when it comes to their delivery guys. We have all seen the social media rage that it has created over the years.
Back in 2018, in a shocking event, a Zomato delivery boy was caught on camera eating the food that was meant for delivery. He ate from one packet and repacked it. Later did the same with a few more. As usual, the video went viral, and the company had to apologize, calling it a ‘Highly unusual & rare incident.’
Following this, in 2019, the food delivery guys all around the country went on a strike on account of hurting religious sentiments based on the food items they had to deliver, such as beef or pork, where they refused to deliver the food that was against their religious beliefs.
Lastly, how can we forget what happened recently in March 2021 (The Show-Stopper controversy of this segment 😅) Where a Bengaluru-based influencer took to social media alleging that she was punched in the face by a Zomato delivery guy.
Yes, all their major controversies revolve around social media & delivery guys. Nevertheless, the employees are the asset of any company & mischief is fairly managed! 😇
Crazy Genius Business Model
Let's get a bit technical and discuss their Business Model. The USP of Zomato is the huge discounts they provide. Who pays for those discounts? And how does the company generate revenue even after these rebates? So, Zomato has 3 business segments.
1. Food Delivery Services
A typical Zomato discount is anywhere between 20% - 30%. So, if a dish costs RS.100 in a restaurant, in the Zomato app, you will find that its price is inflated by 10%-15% to Rs. 110-115; thus, that % of discount which we get is covered by the inflated price in the app. Also, a restaurant owner incurs more costs when customers come for dine-in (additional cost of waiter, utensils, services), but this additional cost is reduced when a customer takes home delivery.
The majority of restaurant owners want less footfall and more home deliveries to reduce additional expenses. Thus, the dish which costs Rs. 100 in a restaurant, Zomato buys it for 85 because the additional cost is reduced in-home deliveries, and we get a discount on 115 (the price which we see in the app). And if we apply a 20% discount at Rs.115, we will get to buy the dish at Rs.92!
Smart? I think it's a win-win situation.
2. Advertising Services
Nevertheless, the company has massive operational expenses in terms of salaries, app building, R&D, customer support & service etc. To cater for these expenses, Zomato also charges fees from restaurants to showcase them in the top searches.
If you type Milkshake in the app, you will get some restaurant results. The chances are high that the top-most restaurant which appears in the result has paid extra fees to appear at the top. This way, Zomato charges promotional, sponsored fees to increase the visibility of the restaurants.
3. Business Consultancy Services
Customer data is the key! The company has a chunk of data for better decision-making. To understand this more clearly, Zomato, with the help of analyzing user data knows in which state what kind of food is popular and which restaurant provides it. Eg. They understand what kind of restaurant and food is famous in Bangalore or Rajasthan, what dishes are popular, and at what price. This way, decision-making becomes simple for restaurants in terms of pricing, menus, and more.
Suppose you want to open a restaurant. In that case, you can take consultancy services by Zomato where they can help you in creating a business plan based on the information like what kind of restaurant will work in which area of the city, what kind of pricing will work in which area, and more.
The Bottom Line
Don't you think using the same data, Zomato can open its own restaurants in the near future? You never know! 🤷♀️ As far as long-term views are concerned, the company plans to shut down or divest any business which will not drive exponential growth. Additionally, they are trying to build the hyperlocal e-commerce ecosystem to tap growth opportunities beyond food.
What started as a simple business plan where people could check out restaurants has somehow made an ecosystem around food and so much more in between. Zomato has its ups & downs, profits and loss, and even more loss followed by so much in store for the future. Nevertheless, you and I will mutually agree that Zomato is the one that brings us food on a gloomy Saturday when we just want to stay in and have a good time!
Never have a bad meal! Until next time..
Isn't it amazing to read these success stories? You might also enjoy reading the story behind the factory of the cheapest heart surgeries around the world: Narayana Health: The factory of Cheapest Heart Surgeries
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