Restaurant search service Zomato was started five years ago in India and launched in London in January. Having secured a further £23m in funding, the business has its sights on more UK expansion.
Marketing Week (MW): Zomato is expanding its UK presence after launching in London earlier this year, but what are the brand’s origins?
Pankaj Chaddah (PC): My co-founder Deepinder Goyal and I were working at a management consulting firm (Bain & Company) in its Delhi office in India. We’d often get take-out for lunch and dinner and so we had all these menu cards from local places. We realised it would be a good idea to put them online and create something comprehensive for people to use.
So as a hobby we went around the suburbs picking up as many menus as possible from restaurants. We scanned them and put them on the site. We started Zomato in 2008 and from there we kept looking at how we could build a bigger website. We basically spent our weekends on Zomato for one and a half years while working at Bain to build the website and collect menus for all the restaurants in the city.
MW: How did the site evolve into the service it is today?
PC: It started off as a basic menu search website and slowly we started to add more features, such as photographs, contact details, maps and user ratings and reviews. In addition to the search function, we want to be seen as a social network focused on food and restaurants.
With that in mind, we have social features such as user profiles and people can follow each other. When people join they start out as a ‘foodie’ and they can get promoted to a ‘big foodie’ once they write a certain number of reviews and gain a certain number of followers. After that they can become a ‘super foodie’ and finally a ‘connoisseur’. There are clear bragging rights to reaching these levels, which is a big incentive for people to contribute.
MW: How did you know when to leave your permanent job to work full-time on the start-up?
PC: After the 18 months where we were working at both Bain and Zomato, we started to get some traction from restaurants that wanted to advertise with us. That’s when we figured out the revenue model and the possible scalability of the business. We decided to quit our jobs and do it full time.
There’s a pre-occupation with technology in digital business but it’s important to get out on the ground and understand what your users want
MW: How has the business grown, both in India and internationally?
We continue to launch city by city, using the same process of going out onto the street to meet restaurant owners and collect their menus and information for the website. Our first international expansion was about 15 months ago when we moved into the United Arab Emirates (UAE). We got very good feedback from that market and realised that, comparing our product to what else is out there, we could become much bigger.
So we started to go into markets that didn’t have a dominant player and where we had the opportunity to be market leader. Earlier this month we launched in three countries – Brazil, Turkey and Indonesia, so we’re now present in 11 countries. Mobile is hugely important to our growth too. We launched our mobile app in early 2011 and now more than half of our traffic comes from mobile.
MW: How has Zomato’s launch in the UK been different to other countries?
PC: In developing markets where we are present, such as India and South Africa, people have not seen anything similar to Zomato and so the concept is a big draw. In the UK, however, there are so many players that are serving certain segments of customers: for example, Toptable for people making restaurant bookings or Just Eat for people who want takeaway and delivery.
So we’ve really had to push our performance in the UK and develop the quality of our product. We ran an outdoor advertising campaign on the London Underground earlier this year as a way of raising people’s awareness of us. That was an exception because in other countries we haven’t needed to advertise.
MW: Besides the outdoor ad campaign you ran in London, what marketing tactics do you use?
PC: We’ve always had a very focused marketing plan that uses tools such as PR and search engine optimisation, but we also want to let the product do the talking. The product is so strong that we just need to bring people to the website once and then we can build our community from there.
For example, we reach out to food bloggers and invite them to participate on Zomato by enabling them to publish and share their reviews on the site. That creates content for us and helps bloggers to grow their own online following. In addition to having the different levels of membership up to ‘connoisseur’, we encourage people to contribute by running a ‘write for a bite’ contest each week, in which we give away a voucher for a restaurant to someone who writes a great review.
MW: How does Zomato generate revenue and is the business profitable?
PC: The revenue model is based on advertising from restaurants. Restaurants are used to advertising in newspapers and through flyers but they can advertise on banner ads on our website. The restaurants can target users by different search criteria such as the type of cuisine and the locality. So an ad for a bar in Canary Wharf will be shown to someone searching for drinking options in that area. It’s a very scalable model in terms of the options we can offer restaurants.
Our India and UAE operations are now profitable but we have another year to go before we’ll reach profitability in the UK as we continue to grow.
MW: What is the most important thing you’ve learnt about growing an online business?
PC: I’d say the one thing that’s really important is to get your hands dirty. A lot of the time with digital businesses there’s a tendency to have a pre-occupation with technology, but it’s also important you get out on the ground and understand what users want. It’s about the execution, not just the idea.
The finances served up
This month Zomato secured $37m (£23m) in new funding from US venture capital firm Sequoia Capital and existing investor Info Edge. The investment is a significant development for the restaurant search service after it had previously raised a total of $16.5m over the course of four separate rounds of funding. The sudden increase in new investment for the business reflects the speed at which it is growing internationally.
The company was set up in India in 2008 but only began its international expansion last year, when it launched in the UAE. Since then Zomato has moved into a further nine countries so that it now covers 35 cities globally. For each launch, the company sends staff out into the city to meet restaurant owners and collect menus and information from as many locations as possible, before uploading these to the website.
Zomato opened in London in January 2013, followed by Manchester and Birmingham in the first half of the year. This month it launched in Glasgow and Edinburgh and is planning further launches in cities such as Leeds and Newcastle in the coming year.
The company claims it is the dominant restaurant search service in India and the UAE with an estimated 70 per cent traffic share. In the UK, by contrast, Zomato faces competition from bigger and more established players like Yelp, Urbanspoon and Toptable.
Zomato co-founder Pankaj Chaddah says the site aims to carve a niche for itself by building a social community of food lovers and by focusing on the functionality of its service and the quality of its content. “We feel we’ve got the most comprehensive and updated content that you’ll find on the internet,” he adds. “We have 19,000-plus restaurants in London alone and we update the menus and information once every three months by going out on the streets. The content is a huge differentiator.”
Zomato reports that it receives over 15 million visitors across its web and mobile platforms every month and that traffic has grown by more than 300 per cent in the past year. It plans to expand to 22 more countries over the next two years.