Smart Company is today reporting further details of the Zomato deal. The purcahse price of $52,000,000 USD was paid all cash and sees Zomato planning to hire 300 people in Australia and an investment of $10,000,000.
Smart Company has quoted Zomato CEO, Deepinder Goyal as saying that the deal has a lot to offer restaurant businesses in Australia with it’s “hyperlocal” advertising model, along with the Zomato for Business app suite, which allows restaurant businesses to reach out to and connect with customers.
“We will have people in every city working on content, collecting and updating restaurant information, collecting menu cards and collecting pictures,” he says.
“The sales team goes out meets restaurant owners and sells them ad space on the website that is the business. ”
Most interesting Goyal has stated that the current turnover doesn’t matter as it is network advertising, as opposed to Zomato selling advertising to Restaurants. Zomato’s revenue goal for 4 years is $75,000,000 out of the Australian business.
Zomato is continuing to look for acquisition targets in Asia.
$75 million is a large amount of money to generate out of the Australian industry.
The ABS in 2007 listed 13,987 restaurants and cafes in Australia.
IBIS reported 8,200 restaurants in Australia.
IF Zomato had every restaurant and cafe in Australia, assuming that there is around 14,000, it would need $5,357 in revenue from each restaurant and cafe per year, which is $446 per month. That kind of market penetration would be very difficult to achieve and many restaurants would not be capable of paying $446 per month.
Dimmi tried aggressively to gain market share in the online bookings sector, and has had to change it’s business model to be a reseller of Restaurant Diary as it has struggled to grow online bookings and Restaurants have started to use Free Online Restaurant Booking Systems. Only time will tell how Zomato goes, but we think it is pretty unlikely to hit anywhere near those revenue numbers. Hopefully they can come up with a product that produces enough value for Restaurants that they are willing to pay those kinds of dollars, but it will definately be a struggle.
Zomato is currently flush with cash due to recent capital raisings, but to Mar 2014, AUD $6 million and lost $8.2 million worldwide. The question will be how to they transform to a labour intensive business model which many other businesses have struggled to generate adequate cash flow out of.
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