Zomato acquires Urbanspoon: Interview with Founder Deepinder Goyal

Dec 19 2017, 1:46 pm

Zomato, the online and mobile restaurant search and discovery start-up, has bought their way into the North American market. The relatively young company from India has seen a phenomenal rate of success, with a strong foothold in major markets like United Kingdom and New Zealand.

The acquisition of IAC’s Urbanspoon will see the company bring the United States and Australia into the fold as well as expand their Canadian market, previously only in Toronto. The acquisition ups Zomato’s count to 22 countries around the world and their restaurant listings tripling from 300K to over 1M.

We caught up with Zomato founder and CEO Deepinder Goyal to talk everything from the deal, their plans for Canada, and what keeps him up at night.

Huge congrats on the acquisition. So now you have a foothold in the North American market. What are your goals for North America?

Thank you! We are very bullish on North America and this acquisition will definitely help us come a couple of steps closer to our aim. One of our dominant large-market entry strategies has been acquiring strong players in the market. Considering Urbanspoon is a market leader in the US and the solid foundation of rich local content they’ve built over the years, we felt it was the perfect way to establish presence in North America.

In the near term our product teams are working closely on migrating all restaurant and user-generated content and features from Urbanspoon onto the Zomato platform. This formula has worked well with our recent acquisitions. We now have a solid combined product that will marry the best of both our products and provide an enhanced experience to both users and merchants.

Acquisitions are all about negotiation. What was the toughest part of negotiating this deal? What percentage was cash vs. stocks?

Nothing in particular that comes to mind, we are very happy with this acquisition. It was an all cash deal.

When will the product launch? Can Urbanspoon users expect a complete and smooth transition to Zomato?

We are aiming to launch the integrated product by the end of March 2015. In addition to bringing detailed information for a significantly greater number of restaurants to users, this acquisition also has a lot to offer to restaurant businesses. Zomato’s hyper-local targeted advertising model, combined with the Zomato for Business app suite, will allow restaurant businesses to engage with customers like never before.

We will try our best to make this migration from Urbanspoon to Zomato as smooth as possible. Urbanspoon now comprises a large part of Zomato’s database, user generated content as well as traffic. We need to ensure that the products are migrated to a combined entity as flawlessly as possible, especially from a user experience point of view.

Can you outline Zomato’s business model?

Our revenue model is primarily based on selling advertising space to restaurateurs. Since our users globally visit the website and mobile apps to search for places to go out for a meal, get home delivery, catch up at a cafe or enjoy the local nightlife – this makes for a highly targeted platform for restaurant owners to market their product to customers. This forms the key revenue generator for Zomato. Our revenues will soon also include a cashless payment system, which is due to be launched in Dubai next month. Cashless mobile payments will allow users to pay their restaurant bills through the app and, for each transaction, Zomato will get a share of the bill from the restaurant.

Zomato oversees 35 million visits per month across our web and mobile platforms. On the merchant front, our freemium business model directly and positively impacts the restaurant industry. While we list all restaurant information on the website at no cost to the establishment, restaurant owners have the option of promoting their business by purchasing advertising slots. And we provide them with analytics to track performance, and engage with their patrons by responding to reviews and feedback.

Further, given that our advertising model is hyper-local, businesses can also display ads to hungry consumers looking for dining options in a specific area. Globally, over 4,000 restaurants advertise on our website and over 1,000 restaurant owners use the Zomato for Business app suite, and to date have seen a marked, measurable growth in their business.

Your business is unique in that it has two components – business, for restaurant listings, and the consumer side, where these listings are perused by consumers in need of the information your company provides. Which side of the business is tougher to build? To manage?

The consumer app is definitely tougher to build and manage. When we started, we were just trying to make it easy for people to have access to menu cards to restaurants around them. We scanned a lot of menu cards and put menus online. Right now, of the 300,000 restaurants on Zomato, you would find fresh scanned menus for over 95 percent of those restaurants, so we are still doing that.

Now we are solving the problem of communication – we want users to have access to all kinds of special information around them, so they can make easier and better decisions about where they should go to eat. And we also want to get into the convenience factor of things, like online ordering, table bookings, cashless payments etc; which is one of the reasons we started building our merchant apps.

Your focus is specifically on the restaurant industry. Do you see this expanding to other services/businesses in the future (like Yelp)?

Our primary focus for the next couple of years will be just the restaurant industry. We see a lot of opportunity in terms of product evolution on both the consumer as well as the merchant end.

I understand that you are planning an on-the-ground investment strategy to put down roots in what is a new market for you. The number I heard is $10 million to be invested in Canada specifically. Can you break down what you plan to do with that amount of cash?

We had organically launched in Canada in October 2014 and our operations there are doing surprisingly well. We have a current team of 35 to 40 people in Toronto and are organically seeing about half a million visits per month between web and app. Of all the countries we have launched in this has been the fastest growth curve. Sometime in mid November, when IAC got in touch with us about the acquisition, we realized that this would be a great asset. And since we are a very people intensive business, a large chunk of this investment will go into hiring people.

That’s exciting news! Can we expect a Vancouver office?

Yes! We are looking to hire an additional 300 people in Canada in the next 12-18 months. We currently have a local team in place in Toronto; Vancouver and Montréal are the next two locations we will focus on building local teams in.

Let’s talk about you – you are a successful entrepreneur. If you could teleport yourself back in time, what advice would you give to yourself in your early entrepreneurial days?

In a way, I’m still in my early entrepreneurial days and have a lot of ground to cover. However, if I were to go back in time and offer myself a piece of advice it would be something I learnt over time – always build for scale right from the onset.

What keeps you up at night? (Competition, stagnant growth, etc…)

I think the last few years, in between, were tougher in terms of losing sleep. It became intense once we raised some funds, started expanding and hired a global team. You always have your people and the company’s future on your mind, especially if you’re leading it. Eventually you learn how to trust your people to make the right calls and then things stop scaring you and start exciting you.

Who do you look up to as a mentor?

I have been particularly lucky in this aspect. I have benefitted largely from the combined experience of all our investors and board members.

Which start-up company do you admire most?

I admire the culture Tony and his team have built around Zappos.


Feature Image: YouTube