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Eat, drink, (go out) and be merry? The billion-dollar idea behind Zomato’s latest move

Zomato announced the other day that it will buy up the ticketing business of Paytm

Man doesn’t live by bread alone. Sometime over the past months, Gurugram’s startup upstart Deepinder Goyal, the man who made Zomato a byword for eating in the country, started thinking along those lines.

He then hit upon a crazy idea that was the antithesis of what he was doing thus far: make his eat-in customers go out. 

Goyal’s  Zomato announced the other day that it will buy up the ticketing business of Paytm for a little over  Rs 2,000 crore. There’s a method to the madness, though. His aim, as he informed shareholders of Zomato, was to triple the revenue from the company’s going-out vertical to over 10,000 crore rupees by next financial year.

"(Zomato sees) The going-out business as a combination of multiple categories with strong network effects," said Goyal. "The idea is to drive profitability at a combined  level while allowing for different sub-categories to operate at different margin  profiles."

If Covid and the ensuing period saw Zomato battle it out with rival Swiggy in the food aggregator space, it resulted in altering food habits across urban India; ordering and eating in became more than a lifestyle choice — it became a habit.  Coupled with his nifty acquisition of grocery delivery player Grofers, quickly renamed BlinkIt, helped position him to ride well the ensuing quick commerce wave, as consumer convenience made a strong case for ordering in as an alternative to going out.

Now, Goyal’s Zomato wants to go the other way.

"For Zomato, this acquisition highlights its focus on the -"revenge entertainment" segment at a time when OTT players offer world entertainment at the customer’s fingertips," said Professor Srinivas Reddy, assistant professor (marketing management) at the T.A. Pai Management Institute. 

The Post-Covid itch to go out after spending ages cooped up inside one’s homes during the lockdowns had first manifested in revenge tourism, and slowly transmuting into ‘revenge entertainment’, seen in an overwhelming penchant for experiences — restaurants, movies, stand-up comedy acts and live entertainment.

Movies and sports events are particularly a lure. Even more so, considering that the ticketing business presently is dominated by BookMyShow, which has Reliance among those funding it. BookMyShow churns profits out of its business model of charging a convenience fee with every cinema theatre ticket booking, and its stranglehold on certain segments like cricket (it has an exclusivity deal with the BCCI when it comes to cricket ticketing).

Goyal and Zomato, which have already dabbled in the ‘going out’ space with its Zomato Dining feature (earlier called Zomato Gold) have their task cut out — Paytm’s ticketing business was a poor also-ran to BookMyShow, and Zomato will have to leverage its heft in the food business to come up with offers and events which will help sway the going out crowd, first to try out the feature, and eventually to sign up on the upcoming app for this, titled ‘District’. It will also have to swing deals with event organisers and sports federations to offer enough USPs to customers.

Live concerts could be the big lure here, especially of global pop stars as well as  Bollywood events — in the west, entities like Ticketmaster, which sell tickets to concerts of Taylor Swift and the likes, are valued at over 18 billion dollars. Can Zomato leverage itself to a position of strength in this space? It is not ironic that the Paytm ticketing acquisition was followed by an announcement that pop star Dua Lipa will be performing in India as part of Zomato’s Feeding India initiative (the ticketing deal will close only by next year, though).

"Zomato’s strategy appears risky…however, if it could build on its strong hospitality partner business to create curated events, this would be the space to watch," said Reddy.

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