Zomato enters US with a big bang

Zomato, the restaurant search application, today made its biggest acquisition ever by lapping up the Seattle-based restaurant search guide Urbanspoon for an undisclosed amount in an all-cash deal. Reports, however, have pegged the deal at around $60 million (Rs 373 crore ). The acquisition marks Zomato’s entry into the United States and also establishes its presence in Australia and Canada, while adding to its already dominant position in United Kingdom and New Zealand. The company has pretty much spent its entire last round of funding on this acquisition as Zomato  expects to derive at least 60% of its traffic from the US as a result of this deal and boost its restaurant listings to one million. In other words, Zomato today is one step closer to achieving its vision of becoming the ‘Google of Food’. 

In November, Zomato had raised $60 million in a fresh round of funding at a pre-money valuation of $600 million from existing investors Info Edge (India) and Sequoia while adding Vy Capital as a new investor. While the company has an advertisement-driven revenue model, it has added the table-booking feature and online food ordering may also be on the cards.

This is Zomato’s sixth acquisition in as many months, and the biggest one. Zomato has recently acquired local dominant restaurant search players in New Zealand, Poland, Czech Republic, Slovakia and Italy.

Post the acquisition, Zomato will be present in 22 countries across the world, while its restaurant coverage will increase from about 300000 restaurants to more than 1 million restaurants across the globe.

“Our US entry has been in the cards for a while now, and we’re delighted to be doing so by welcoming Urbanspoon into Zomato. They have a strong presence in the US and the UK, and they also dominate restaurant search in Australia and Canada. Urbanspoon has a huge following, and is home to legions of people who are as passionate about food as we are. We will soon be integrating the two products to bring the best of both products to our users in the United States as well as the rest of the world," said Zomato Founder and CEO Deepinder Goyal.

Zomato’s traffic will more than double from about 35 million visits per months to more than 80 million visits per month, probably making it the largest restaurant search company in the world. But Urbanspoon's acquisition could also be the acid test for Zomato as it prepares to take on its biggest competitor Yelp, which had 139 million unique monthly visitors during the third quarter of 2014.

"The biggest challenge and most fun part of this move, however, is the fight we’re going to be picking with Yelp. In the market they have dominated for so long. 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," Said Goyal in a blog post.  But while Zomato has focused on expanding in the restaurant listing space alone, Yelp has expanded to include numerous categories including health, medical, beauty, spas, home services etc and has a current market cap of around $4 billion.  Zomato on the other hand has raised more than $113 million, over multiple rounds of funding from investors including Vy Capital, Info Edge and Sequoia Capital and is valued at around $660 million.

The first task for Goyal will be to work closely over the coming months to integrate Urbanspoon into Zomato. In due course of time, all Urbanspoon traffic will move to Zomato.com, and all Urbanspoon app users will be able to use the Zomato app. Urbanspoon has built vast legions of faithful followers over the years, and Zomato will need to work extra hard to ensure that the finished product is one that users and merchants alike will love and enjoy using, said Goyal.

“Zomato has experienced phenomenal growth in recent years, and our customer bases complement each other’s perfectly,” said Keela Robison, Urbanspoon CEO. “Zomato’s significant investments in people and technology will bring Urbanspoon customers, restaurant owners, and food bloggers a number of new capabilities and features. We’re excited to combine our strengths to accelerate growth.”