Zomato is a restaurant-focused startup that was founded in India in 2008. Since then, the company has expanded steadily throughout the world - except for the United States.
This is rapidly changing, as Zomato has successfully acquired local restaurant review company Urbanspoon. The company says it "spent most of our last round of funding on this acquisition – but we’ve always believed that the edge of our comfort zone is where the magic happens."
This is the second acquisition in the past month, as Zomato also recently bought Cibando.
In the blog post announcing the deal, Zomato CEO Deepi Goyal explains further:
"Urbanspoon has been a dominant player in the US, Canada and Australia for years now, and it’s a great business that’s been built on a solid foundation of exhaustive, rich local restaurant content. Everything they’ve done has been powered by a fantastic team that shares our vision and core values, and brings a wealth of local knowledge and expertise to the table."
"As we stand here now, we felt joining forces with Urbanspoon would be the best way to turbocharge our growth and make our way into the US, Canada and Australia. Without question, this will also help us take significant strides forward in the markets we’ve been sharing with Urbanspoon so far – the UK, Canada, New Zealand, and Ireland."
Based in Seattle and a division of IAC since 2009, Urbanspoon compiles user, critic and blogger reviews and then cultivates community around those reviews. The company sold its proprietary reservations system Rezbook to OpenTable two years ago, and is now focused more on the content side of the business.
The link up with UrbanSpoon gives Zomato a solid foothold in the United States, where it can experiment with comprehensive marketing and other products to help restaurants both actively attract consumers and ensure satisfaction during the visit.
This focus on alternative products beyond simply advertising to users will set it apart from Yelp, the predominant local competitor that is now pursuing rapid international growth of its own.
For success in the US, Zomato will need to do a good job at differentiating itself from Yelp with both users and business owners. Yelp has developed a certain style of community, and the question will be: How does Zomato's community and style fit into the American food consumer landscape?
The company has identified its most pressing challenges as:
"Needless to say, the road ahead is a long one, and there are big challenges to overcome. For one, we’ll need to ensure that Urbanspoon’s website and app are integrated into Zomato smoothly over the next couple of months, without sacrificing the usability or utility of either. Urbanspoon has built vast legions of faithful followers over the years, and we’ll need to work extra hard to ensure that the finished product is one that users and merchants alike will love and enjoy using."
For Yelp, the fight has come home. The company will now have to fight battles on multiple fronts - against a newly minted competitor here on home turf with international reach, while also ensuring the successful transition of recent acquisitions of Restaurant-Kritik and CityVox.
On its end, Zomato is relishing the prospect of the fight ahead, saying in the blog:
"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."
Yelp's stock is trading down 2.5% on the news so far today.
Other outlets have reported the purchase price in the realm of $60 million, and that CEO Keela Robinson will depart as the result of the deal.
Zomato claims 331,000 listings in 19 countries and is currently not operating in the United States. Yet the company took on an additional $60 million in a round led by Sequoia, signalling serious growth ambitions.
The combined company will be quite enormous, as the following graphic makes clear.