Zomato just made its biggest ever acquisition—but the real test starts now

Hungry for acquisitions.
Hungry for acquisitions.
Image: Reuters/Eddie Keogh
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This story has been updated.

After five acquisitions in the last five months, Delhi-based restaurant app Zomato just made its biggest purchase ever, acquiring restaurant search guide Urbanspoon for $52 million. At the same time, it is also looking to raise $100 million in a fresh round of funding.

With this buy, the food discovery website enters the US and Australia market for the first time.

“Our US entry has been in the cards for a while now,” said Deepinder Goyal, Zomato’s founder and CEO in a statement. “They (Urbanspoon) have a strong presence in the US and the UK, and they also dominate restaurant search in Australia and Canada.”

But Zomato’s real test starts now.

That’s because after a spree of acquisitions in Europe, the six-year-old startup is going into a large, mature market with tough competition.

The most prominent of these competitors is Yelp, the San Francisco-based company which dominates North America.

Although Zomato has been competing against Yelp since it entered Canada in Oct 2014, the majority of the other international markets the Indian startup has chosen to operate in are underdeveloped, allowing Zomato to go in and corner the online restaurant search segment rapidly.

In 2014, Zomato acquired six companies, four of which were in Europe: Cibando (Italy), Lunchtime (Czech Republic), Obedovat (Slovakia) and Gatronauci (Poland).

“It is an easy win for us,” Goyal had told Quartz in September last year.

The real challenge

Yelp had a total of 139 million unique monthly visitors during the third quarter of 2014. Zomato’s traffic numbers are only about 25% of that at 35 million—which according to a company statement will more than double to 80 million after the latest acquisition.

Based in Seattle, Urbanspoon was started by three former Jobster employees Ethan Lowry, Adam Doppelt and Patrick O’Donnell. It was acquired by the American media and Internet company InterActiveCorp in 2009 , which has invested in startups such as Tinder, OkCupid and Vimeo.

Now, Zomato has a library of over one million restaurants and a presence in 22 countries. The company is profitable in India and breaks even in the UAE. In the rest of the world, there’s much to do before Zomato can make a profit.