Zomato Will Fire 300 Employees or 10% of Its Workforce; Content Teams To Be Reduced Globally

Zomato has confirmed that they are laying off 300 employees, or roughly 10% of their workforce, in order to concentrate more on profit-making niches. Severely hit would be their content teams, which are responsible for live data collection, part of their ‘feet on the street’ business model.

Zomato founder Deepinder Goyal has sent out a memo to all 3000 employees, announcing the need of this layoff, and their future plans to make the company more formidable. We have reproduced the memo at the end of this post.

He said, “We are also going to have to make important changes to our business and make sure we put every dollar and every Zoman behind the things that matter the most.”

‘Zomans’, as described by Deepinder, are an internal nomenclature at Zomato; used for describing members of content teams who visit various restaurants and collect live data from them. This data is then inserted into Zomato’s database to make them fresh with information. This live content feed from all listed restaurants makes Zomato different from other popular portals like Yelp, which is dependent on user generated feedbacks and ratings.

Zomans do play an important part of their operations; and they are not exactly eliminating them per se. But they are reducing their numbers, so as to focus only on few core-locations where they are experiencing more revenues.

As per the memo, these core locations are: India, the Middle East, South East Asia (the Philippines and Indonesia), and ANZ (Australia and New Zealand).

Zomans from other locations like USA and Europe would be reduced.

Interestingly, Zomato has highest number of listings from USA, as information about 700,000 restaurants is now available on their platform. Comparably, India only has 70,000 listings, Australia has 60,000 and the UK has 20,000 listings. In total, Zomato boasts of 1.4 million listings of restaurants, globally.

The New Structure

As per Deepinder, Zomato will now split all countries into two groups: Full Stack and Enterprise.

Full stack would be those countries, where they are receiving maximum traction: India, the Middle East, South East Asia (the Philippines and Indonesia), and ANZ (Australia and New Zealand).

Enterprise segment has been defined as ‘emerging markets’ for Zomato, where growth is slower, revenues lesser but momentum is on. All regions except Full Stack, are now classified under Enterprise, which includes US and Europe.

Considering that US has maximum number of restaurant listings, it is now confirmed that majority of content teams (Zomans) would be fired from US itself. Operations in India, Middle East, South East Asia and Australia-New Zealand would be largely unaffected.

One spokesperson said, “The cuts in other countries will be not be a large number given the size of those markets, and have already happened or will happen early next week. The U.S. will see a higher impact because the number of restaurants there is larger than in other countries.”

As mentioned in the memo, 40% of all restaurants bring in about 92% of overall traffic to Zomato; which is actually driving these mass layoffs in the company.

Recently, Bengaluru based food tech startup Dazo shut down, which sent tremors down this industry, which was expecting more new ventures coming up. Although Zomato’s layoffs aren’t affecting India, but still, its part of this niche and laying off 300 or 10% of its employees may signal that startups are actually looking for profits now.

Here is the memo sent by Deepinder Goyal to all employees:

Hello all,

Seven years ago, we started out as a pure-play restaurant directory for foodies in India. Now, we are in 22 countries across the world; we have organically launched and grown our business in 15 of them. In the other seven, we acquired the local leaders in our space to eventually move all their traffic over to Zomato, becoming the #1 player in those markets in the process. Today, foodies use us to look for great places to eat about 90 million times in a month. More than three quarters of these foodies visit us from outside of India.

We made an important move in India a few months ago – launching our online ordering service. And we really kicked our competition’s ass in this business with less than 0.1% of their marketing budgets. Why we were able to win? Because we have millions of users who already use us for ordering food over the phone. Now, they have started doing it online using our app. And there is a lot of growth still left, 92% of our users who search for delivery options on Zomato haven’t even started ordering online on Zomato yet. Our ticket sizes are more than double our competitors’ – because our users are not using us for the discounts. They are using us for the convenience, and the product they already love Zomato for.

Our users hold tremendous potential for transaction-based businesses. Getting into transactions was always the natural next step for our business. Online ordering is a natural and logical alternative for our users who, until now, used to call restaurants to place their orders for delivery. Table reservations fit into Zomato as easily as online ordering did. The time has come for us to focus deeply on transactions in countries where it matters.

We are also going to have to make important changes to our business and make sure we put every dollar and every Zoman behind the things that matter the most. Here are two most important things you can expect.

· Content 2.0 – we will be getting smarter with the effort that we put into content. 40% of the restaurants on Zomato account for 92% of our traffic. We will rethink our processes to make sure that the frequency of our data updates goes up in multiples for the top 40% of restaurants.

o In the meantime, we should push our app for business owners as much as possible, so that more business owners start managing their listings themselves.

o The countries we entered in the recent past have not been working with our existing model of collecting content and building community relations – alternate models will need to be identified. We have a few ideas we will be piloting in a select few regions right away.

o We need to make some fundamental changes to the product to ensure more stickiness and growth. Most of these changes are based on what we have learned from Urbanspoon.

o Over time, as we fully transition to Content 2.0, we will need leaner content teams across the world.

· We will split our countries into two types – Full Stack and Enterprise.

o Full Stack are the four regions where all of the following are true: a) large markets b) growing very fast c) Zomato is the strongest player in its space.

§ These four regions are India, the Middle East, South East Asia (the Philippines and Indonesia), and ANZ (Australia and New Zealand).

§ We will be selling our full suite of products in these four regions, since we have very high levels of traffic here.

§ Our focus on ad sales will continue to be strong, along with all the other transaction-based businesses. Ad sales has been a very profitable business for us, and will continue to be so.

o Enterprise regions are the ones where any of the following is true: a) relatively small markets b) slow growth economies c) Zomato is not the dominant player. All the remaining markets belong to this category.

§ In these regions, we will not look at ad sales. We will focus mostly on transactions businesses, with a lion’s share of our effort going into selling Book – our table reservations engine.

§ Less focus on on-the-ground community building and marketing activities. Most of the people in our teams in these regions should be sales people, to help us put Zomato Book in as many restaurants as possible. This means that in these regions, our operations will need fewer people to run the show compared to the past. This will also help bring our burn rate down and, as we go along, make our businesses in these countries much stronger.

§ Most Enterprise regions will see these changes take effect almost immediately, up until the end of this month after our global country manager offsite in Delhi next week.

§ I’ve already had conversations with some of our country managers about this, and will be reaching out to the rest soon to discuss future plans.

§ All these things will also significantly bring down our burn rate and improve our margins in some countries.

The next few months are going to be hard for all of us. But sticking together, hustling, and not spending time overthinking or being unnecessarily creative should get us to where we want to be.

Please email me if you have any questions, or catch me anytime at the OHC office tomorrow – happy to explain and go deeper into the whys of what we are doing.

Cheers!