This was the big showdown in the restaurant search business that everyone was anticipating. Still, the fact that it has happened is a moment of wonder for many, since it's not every day that an Indian company acquires a US one, that too in the internet arena.
Yesterday, Zomato wolfed down media mogul Barry Diller-owned, US-based Urbanspoon to officially commence the big fight for online restaurant search supremacy versus the reigning heavyweight in the arena, Yelp. It is one indication of how globally ambitious many Indian startups are becoming these days.
In Zomato's case, this kind of global domination was something planned very early on, right from when Pankaj Chaddah and Deepinder Goyal founded the company six years ago while they were consultants at Bain & Co. Since then, they've exhibited a ravenous appetite for territories, conquering them one methodical step at a time, and are now in 22 countries, including being the dominant player in the UK and New Zealand.
The all-cash acquisition of Urbanspoon, reported to be around $60 million, is its sixth so far, having scarfed up other dominant restaurant search players in New Zealand, Poland, Czech Republic, Slovakia, and Italy. And now, with Urbanspoon, it has finally officially declared its intention to go head-to-head with Yelp.
The US market is undoubtedly a precious one for Zomato, from where it apparently hopes to get at least 60 percent of its revenues and raise its restaurant listings to 1 million, according to Firstpost. In doing so, it will more than double its traffic, from 35 million visits per month to more than 80 million, and will begin to close the gap on Yelp's 139 million monthly visitors.
Still, Zomato and Yelp do differ in some major ways. Yelp has now tacked on a number of other categories such as health, medical, beauty, and spas, while Zomato has stuck to its onions by continuing to zero in only on food. However, as other categories show business promise, I'm sure the game will change. The other big difference between the two properties is in how they maintain their listings. Zomato hires people to make sure that its restaurant listings are up to date and accurate, while Yelp still leans heavily on user-generated content. Zomato is also planning on diversifying its business model that currently relies solely on online ads by test driving an in-house payment platform in key markets, which will bring it in direct competition with Zagat and OpenTable.
The US acquisition is a rosy dawn for Zomato. The restaurant search business is not exactly small potatoes. Yelp today is worth close to $4 billion. Zomato, having raised more than $113 million through multiple rounds from Info Edge and Sequoia Capital and Vy, is apparently valued by its investors at around $660 million.
Many will be watching to see whether Zomato has bitten off more than it can chew this time around. After all, seizing business from a battle-hardened, well-entrenched incumbent sounds much easier than it actually is, especially if you don't have a huge differentiator in your product line.
But Zomato seems steadfast about the road ahead: "After all, like Mark Twain famously said, it isn't the size of the dog in the fight, it's the size of the fight in the dog," wrote co-founder Goyal on his blog (as reported by Firstpost) with reference to the upcoming clash with Yelp -- so don't be too surprised if you find yourself using his search engine sometime soon.