Zomato has confirmed that it is in the process of laying off staff from its content team - the team that gathers restaurant information on the ground - and will have to let go of approximately 300 employees in the course of the next week or two. The news was first reported by TechCrunch, and has been independently confirmed by Gadgets 360.
A Zomato spokesperson told Gadgets 360 that the current model - where the company uses on-ground staff to collect menus and other information - used by the company is being reviewed, and is not a good fit for the US, where the company expanded through its acquisition of Urbanspoon.
As a result of this acquisition, the US became Zomato's biggest market, but the expansion has not been without issues. A Zomato spokesperson explained to Gadgets 360 that some of the company's processes were not a good fit for the US market, which actually echoes something that Zomato's CEO Deepinder Goyal had said some years before the company sealed the Urbanspoon acquisition: "If I expand to the USA, it won't be to offer menus, because you can already get that information online, so I would be looking for some other value-add," he had said at the time.
"The US is actually a very mature market, and a lot of the information that we gather with our feet on the street is something that is already available online," a Zomato spokesperson told Gadgets 360 on Friday. A part of the layoffs that are happening in the US are taking place because of this reason, as the feet on the street approach isn't required there.
The spokesperson confirmed that the layoffs will take place mostly in the US, because of the sheer number of restaurants there. "There are 70,000 restaurants in India, and 7 lakh there," the spokesperson said, adding that while there could be some layoffs in India as well, the impact would be minimal.
In a blog post addressing the matter, Goyal pointed out that 40 percent of the restaurants listed on the site account for 92 percent of traffic. This means that a lot of the data collected isn't even relevant to the success of the site, and by focusing its on-ground presence on the 40 percent the company can reduce its expenditure without losing out in other ways.
"We are going to have to make important changes to our business and make sure we put every dollar and every Zoman [Zomato employee] behind the things that matter the most," Goyal wrote. This will be accomplished by pushing the Zomato Business app for restaurant owners, who can input and update their information without a content team.
"The countries we entered in the recent past have not been working with our existing model of collecting content and building community relations," he added. "Alternate models will need to be identified and implemented. We have a few ideas we will be piloting in a select few regions right away."
In the post, Goyal talks about full stack markets, where Zomato is a market leader and can offer its entire range of services, from content, to ad sales, to bookings and ordering. These full stack regions are India, the Middle East, South East Asia (the Philippines and Indonesia), and ANZ (Australia and New Zealand).
In other markets, Goyal writes, Zomato will not look to ad sales, but will focus on its table reservation engine, with less focus on on-the-ground community.