How does Zomato earn money? Zomato business model.

 In this article, we are going to have a look at Zomato’s business model and find answers to questions like “How does Zomato earn money?”

We will go through the following points:

Who started Zomato?

What are the expenses of Zomato?

How does Zomato earn money?

1. Who started Zomato?

Let’s start from the beginning, Zomato was started in 2008 when Deepinder Goyal and Pankaj Chaddah started a company named “Foodiebay” which used to work as a Food Aggregator i.e. they used to list the menus and reviews of restaurants on their website. Later “Foodiebay” was renamed “Zomato” and it started providing food delivery service. If you ever had a doubt about the meaning of the word “Zomato”, Let me tell you there is no meaning to the word “zomato”. It is just a rhyming word of “Tomato”. Until now in total 15 rounds of funding, Zomato has raised 759.6 Million dollars. In the financial year 2019, the revenue of Zomato was Rs. 1,397 crores which has been increased by 188% compared to last year. In FY2018, the revenue of Zomato was Rs.485 crore. But the losses of Zomato have also increased, In 2018 they suffered a loss of Rs.106 crore, whereas in FY2019 they suffered a loss of Rs.1,001 crore.

2. What are the expenses of Zomato?

So now let us have a look at some of the major expenses of Zomato. The first one is the “Discount” which they provide every day. You will easily be able to get around 30-50% every day. Someday it is Zomato’s birthday, someday it is No cooking November or December or Monday or Friday and so on. The second expense is the “salary” they pay to their delivery executives. Zomato usually pays higher salaries when compared to market standards. A Zomato delivery boy earns Rs 15000- 40000 in a month. The earnings of a delivery boy depend on the city, he is serving and the frequency of delivering orders. They are also given bonuses for completing 5, 10, 15, 20 delivery in a day. If a delivery boy gets 5 stars as feedback from a customer then also a bonus is given.

The salary of other employees like customer support, engineers, infrastructure cost, and also the cost of maintaining the app. The third expense is “Marketing”. You can frequently see advertisements for Zomato in online and offline mediums. So these are the major expenses of Zomato.

3. How Zomato makes money?

Now let us talk about the main point, the revenue streams of Zomato. Zomato makes money through the following methods

• Advertisements of restaurants
• Commission on orders
• Event organizations
• Zomato products
• Zomato Whitelabel
• Food supply chain

So the first one is “Advertisements”. If you want to list your restaurant on Zomato then it is completely free but if you want to promote your restaurant on the platform, then you have to run advertisements on Zomato. So if “Promoted” is written in the listing of a restaurant then that particular restaurant is running advertisements on Zomato and that particular restaurant will appear before other restaurants.

The second revenue stream is “Commission” so if an order is placed on a restaurant listed on Zomato, then a particular percentage of cut has to be paid by the restaurant to Zomato depending upon the deal that has been made. The commission rate is usually around 20%.

The third revenue stream of Zomato is “Events”. Sometimes Zomato organizes its own events like “Zomatoland”, but also they promote events of other restaurants for example if there is a new year party, etc.

  The fourth revenue stream is Zomato products. So they have two major products. The first one is “Zomato Book” which is a table management system using which restaurants can easily manage their table bookings efficiently. So the restaurants have to pay a subscription fee to use these products. Another product is “Zomato Order” which is used to manage the online orders received by restaurants.

The fifth revenue stream is “Zomato Whitelabel” in which Zomato will provide a separate mobile application (Android & iOS) for your restaurant. You can market your own app and receive orders on them.

The sixth revenue stream is the Food Supply chain which has been recently started by the name “Hyperpure”. Because every restaurant requires raw materials, this demand for raw materials can be easily fulfilled by Zomato. So Zomato has become a link between the farmer and the restaurant. Another old revenue stream of Zomato is consulting services. Because Zomato has a lot of data, they can exactly predict which dish will be bought at what price in a particular locality. So new restaurant owners can consult Zomato to cater to the actual demand present in a location. But the consulting services have been shut down by Zomato since 2013, and they might bring it back in the future. 

Recently Zomato started in-app advertisement also. If you look carefully look at the Zomato app you can find the advertisement via google ad service.

This is the business model of Zomato.

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