An Informed Guide to Zomato's Business Model - How It Makes Money
Zomato business model guide

An Informed Guide to Zomato’s Business Model – How Does It Make Money

I love to travel whenever I get the chance. A good thing about travelling is that you experience new cultures, eat new types of food and see how people around your country (and the world) live and eat every day. For centuries, food was bartered, exchanged and even used as a currency in many countries worldwide. Mayans and the Aztecs used Cacao beans for trading. Cacao beans were an informal currency during the US Revolutionary War of the 18th century.

Travelers often face problems with finding good places to eat in new cities (or countries). I encountered this problem while backpacking through Europe, where I relied on inputs from locals about good food joints in the vicinity. Although I was always fortunate enough to find nice places to eat, I occasionally ran into roadblocks. My only go-to-reference for places to eat was the “Rough Guide” and “Lonely Planet Guides” to various places I went to—other than that, my choices were limited.

With the advent of the internet, things changed dramatically. Websites, blogs and discussion forums such as Indiamike.com and others came up, which gave international travelers a place to discuss, talk and learn what to eat in new places. Smartphones and mobile apps brought this information to our mobile phones, which led entrepreneurs to create apps such as Grubhub, Zomato and many others.

What is Zomato?

Zomato is a global on-demand food delivery aggregator. This app helps travelers, foodies, and everybody else order food online, reserve a table at a restaurant, and read reviews about the restaurant you plan to visit. Zomato offers both restaurants and individuals a platform to connect and share a common love for food. With a presence in 24 countries across 10,000 cities, Zomato is a top-rated global food aggregator.

Is the food delivery aggregator industry growing?

Yes, it is! The global food delivery industry will breach the US$2 70,317m mark by 2021. Growing at an annual CAGR of 10.39%, this industry’s market volume will cross US$401,391m by 2025. The ARPU or average revenue per user in this segment is US$154.89, making it an extremely lucrative market for entrepreneurs.

How did Zomato get so popular?

Zomato initially launched as an online restaurant directory called Foodiebay. Zomato’s CEO thought that the name was too similar to eBay. So a few naming iterations later, they came up with Zomato. Zomato used innovative marketing techniques and deals with restaurant owners to offer restaurant-goers discounts and deals, making it rapidly gain popularity. 

Zomato initially focused on growth through word-of-mouth and added over 1400 restaurants around New Delhi to its list. Zomato had over 2M customers, 8000 restaurants and expanded its operations to 5 cities in less than two years. Backed by its investors, Zomato grew through expansions and acquisitions, making it one of the most valuable food delivery aggregators globally.

What benefits does Zomato offer to its users?

Zomato reaches out to restaurants to get them listed on its platform. This makes the restaurant “active” on Zomato. This benefits those who wish to eat out, order in or suggest options to others. Additionally, as users keep ordering from or visiting restaurants on Zomato, they rate and review the restaurant too, helping others on the platform make informed culinary decisions.

Zomato’s mobile app offers an intuitive interface that helps you find a restaurant by cuisine, dish, location or review/rating, making it easy for those browsing for restaurants in an area to choose.

What benefits does Zomato offer to its restaurant and delivery partners?

Restaurants benefit from Zomato’s massive 32 million-strong monthly active user base to gain traction, increase order value and footfall, and get their food delivered to their customers. This improves the restaurant’s visibility and reach, making them cater to customers that might have otherwise skipped ordering from them. Additionally, with sponsored listings and specials, restaurants can stay higher up in search results, boosting their revenue further.

Delivery partners take advantage of the gig-economy popularized by Uber, Zomato and the likes, making it possible to earn a side income and improve their financial condition.

Today, every new and existing restaurant that wishes to gain popularity lists itself on Zomato to take advantage of its massive 32.1 million-strong monthly active user base. Zomato offers everyone using its platform visibility, choice and a tasty meal!

Zomato’s statistics

Zomato boasts of a staggering 45% market share in the food serving and delivery business and gets over 19 million visits to their website every month. Although most of their users are in India, Zomato has a massive fan following around the globe. The top contributors to Zomato’s foodie kitty include:

  • India (54%)
  • Australia (8%)
  • United Arab Emirates (7.5%)
  • United States (6.1%)
  • Turkey (3.4%)

Over 58% of Zomato’s traffic comes from searches, of which 94.45% are organic searches. With over 1.4 million restaurants, 12,000 restaurant partners and 162,000 delivery partners, making it one of the most popular food delivery and aggregation platforms globally.

How many funding rounds has Zomato gone through?

Zomato has raised over US$900 million to date from various investors. These include:

  • Seed Funding: $1M, July 2010, Infoedge
  • Series A: Sep2011, Sep 2012: $3M, Infoedge
  • Series B: 2012, $2.3M, Infoedge
  • Series C: Feb 2013, $10M, Infoedge
  • Series D: Nov 2013, $37M, Sequoia
  • Series E: Nov 2014, $60M, Vy Capital, Infoedge
  • Series F: Apr 2015, Infoedge
  • Series G: Sep 2015, $60M, Temasek Holdings
  • Series H: Feb 2018, $200M, Ant Group
  • Series I: Feb 2019, $39M, Glade Brook
  • Corporate Round: Jan 2020, $150M, Ant Group
  • Venture Round: Feb 2021, $250M, Kora

In July 2021, Zomato went for a wildly popular $1.2B IPO, shelving all speculations about the sustainability of the food delivery business.

How does Zomato work?

For users, Zomato brings food to their table. For restaurants, Zomato brings them orders and customers. For delivery partners, Zomato brings them avenues to earn more money. Zomato’s workflow is exceedingly simple, which is the main reason for its popularity. Here’s how Zomato works:

  1. Customers find what they want to order through Zomato’s app or website and place an order
  2. Restaurants receive the order and start preparing food
  3. Delivery partners reach the restaurant to pick up the meal for delivery
  4. The delivery partner delivers the order to the customer
  5. Customers can either pre-pay for their orders online or pay cash-on-delivery in some locations

What is Zomato’s business model?

Zomato is a food delivery aggregator. They help restaurants and individuals come together on their platform to order and deliver food. Here’s how Zomato earns money through various channels:

Advertisements

Zomato generates over 70% of its revenue through ads placed by restaurant partners. This boosts the restaurant’s visibility and gives customers a chance to try something new.

Subscriptions

Zomato Gold and Zomato Pro listings and subscriptions provide Zomato with a steady stream of income. These subscriptions help customers take advantage of free delivery, 1+1 offers and table bookings at partner gold restaurants.

Commission

Zomato charges a 25% commission per order. Note that this number may vary according to Zomato’s policies and local laws. Zomato earns a substantial share of its revenue through commissions and ensures that the aggregator functions without hiccups.

Delivery charges

Zomato’s delivery charges ensure that they can sustainably grow their delivery fleet, which is essential for their growth and to support their delivery partners.

Events

Events such as Zomaland and Zomato’s New Year Eve and other events provide them with additional revenue. Customers purchase tickets to these events and get a chance to taste exclusive dishes that restaurants can showcase during the event.

Zomato Kitchens

Zomato launched Zomato Kitchens to allow kitchen partners to invest in space for cloud kitchens. Restaurant partners can lease or hire these restaurants to run the kitchen.

In addition to those listed above, Zomato offers many region-specific avenues to boost revenue.

How to create an app like Zomato?

I wish I could say that’s easy! Although in some ways, it is. Here’s all you need to create an app like Zomato:

  1. Perform market research to understand the viability of the product in your area
  2. Interact with industry experts or those with experience in the industry to help you analyze your idea
  3. Explore the competition—including major players such as Swiggy and Zomato
  4. Know the underserved needs of your customers
  5. Find a world-class development partner such as Volumetree to get access to their tech experts
  6. Focus on building an immersive user experience
  7. Get feedback from actual users to improve your app’s flow
  8. Develop, test, and launch your app

That’s it. These seven simple steps can help you create an outstanding app like Zomato. However, there’s a catch. 

You must understand that users need a reason to switch to your app. Although most entrepreneurs switch to deep discounting to boost numbers, that is not a sustainable business model. Additionally, without innovation and exciting new features, users may simply start using an established provider such as Zomato, abandoning your app for good.

Want to build a food delivery app? Volumetree can help

We’re a great fit for funded startups and medium-large businesses, thanks to our experience in the food delivery industry, backed by a team of creative problem-solvers, designers, and tech experts.

We’re actively working with brands in Canada, Sweden, and the MENA region to test new ideas, and scale established products. 

Here’s how we work:

  1. Intro call to understand your project.
  2. Our teams help you figure out the viability of your idea and/or provide you with a completion time and budget.
  3. We brainstorm with you to create an effective strategy that backs the vision of your product.
  4. Our Project Management, UX, UI, and QA teams come together to create effective requirement documents and early product prototypes.
  5. We begin building your product and continue to improve it iteratively.
  6. Documentation and project hand-over

Do you have an innovative food delivery app idea in mind? Schedule a free 15-minute consultation with us to know how we can help you!

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