Zomato Buys Urbanspoon to expand into the United States and Australia.

Date: 12-01-2015

Zomato, the Restaurant recommendations website which is backed by Sequoia Capital has just announced that it has bought Urbanspoon from IAC.  It appears that the purchase price was between $50 and $60 million.  The purchase gives Zomato an entrance into the key US market as well as operations in the United Kingdom, Canada, New Zealand, Ireland and Australia.

This is one of the largest US consumer internet company purchases by an Indian startup.

Deepinder Goyal has said that mostof the staff will be retained, but that traffic and information will be migrated to Zomato’s apps and website by the end of March.

The purchase will take Zomato to 80,000,000 visits which combines their existing 35,000,000 with the 45,000,000 from Urbanspoon and more importantly the listings will grow to 1,000,000 from 300,000.  Zomato is now represented in 22 countries.’

Urbanspoon was acquired by IAC in 2009, but as it changed it’s advertising model it went through two series of downsizing.  The monetisation of review sites has proved problematic.  Zomato gets revenue through native advertising on it’s apps and the site and from Restuarant owners who can offer promotions through their listings.

Zomato, which was founded in 2008 has raised $113 million so far, which has fuled a worldwide acquisitions spree.  It received $60 million in November 2014, giving it a post money valuation of $660 million.  It has bought companies in Italy, Turkey, Slovakia, New Zealand, Poland and the Czech Repubic.  It has recently launched in Canada and has plans for Australia.

In the United States Zomato will face increasing competion from Yelp and Foursquare, along with the potential for Google to increase it’s presence in the Restaurant reviews space.

This will make for an interesting year in Australia.  We think the relationship between Dimmi and Urbanspoon has been tenuous at best with Dimmi claiming that they are the number one source for trusted reviews and yet they partner with Urbanspoon, which essential is a reviews site.  Will this be the end of the Dimmi / Urbanspoon partnership?  Dimmi charges restaurants $3 per seat booked through their network and probably splits the revenue 50/50 with Urbanspoon.  With their own booking feature, this could mean an end to the relationship.

Our research has shown that Urbanspoon has been the strongest of Eatability, Dimmi and Yelp in Australia for driving traffic to restaurant websites, although the last report was down 18 months ago.  It might be time to rerun that report. 🙂

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