Why Zomato needs an AWS moment?
Shifting gears from operational-heavy businesses to a tech-led model
As we begin 2025, we take a moment to thank all our readers for making 2024 a fantastic year for this blog. We grew from 500 to over 3,500 subscribers, and now, an average of ~20 readers visit our website daily through google search - something that never happened in 2023. We hope God gives us the strength to scale even greater heights in 2025.
Today’s blog is a bit lengthy, recommended to view it on our website. Let’s get started!
Zomato got big goals?
(In this blog, we refer to Zomato/Blinkit as Z/B)
About two years ago, when the company was valued at around $5 billion, Deepinder (the founder/CEO) boldly shared his ambition to make Z a $100 billion company by 2030. At a time when the share price was below its IPO level and had plunged over 70% from its peak, it took immense courage to articulate a 20x vision with a clear deadline.
As of the year ending 2024, the company is valued at ~$30 Bn, marking a 5x increase over the past 2 years.
The team not only emerged as a winner in the rapidly growing quick commerce industry with B (Blinkit) leading the market, but also scaled its B2B supply chain subsidiary, Hyperpure, by ~4x in revenue terms over the last two years. Another aspect that the market has appreciated is their ability to identify new growth opportunities, execute them effectively, and gain customer loyalty - the latest example being the launch of ‘District’, their going-out app.
The company has successfully leveraged technology to scale operations, build strong customer loyalty, utilize India’s abundant and cost-effective workforce, and cater to the top 20% of the population, who now value the convenience of ordering not just food but almost everything they need, delivered within 10 minutes.
However, as we step into 2025, much of the future growth is already being factored in by the markets:
We now better realize that the potential of Quick commerce (QC) is huge, which was not the case 2 years ago. Recently in Nov’24, Morgan Stanley estimated the QC market to be worth US$42bn (6X growth in next 6 years), with Blinkit’s EBITDA margins reaching 5.1% by 2030 which is at break even today.
We now better appreciate Z for their exceptional ability to execute swiftly and establish market leadership. The latest example of this is the successful launch of the Zomato Live/District app.
We now recognize Z's strength in marketing, technology, app UI/UX, and product innovation, all of which have played a crucial role in retaining and growing their customer base, maintaining market leadership without excessive cash burn, and swiftly responding to emerging risks. The latest example is the launch of the Bistro app, aimed at capturing the growth of 10-minute food delivery.
So while they now have proven their ability in profitably building successful operational heavy businesses (All 4 - Z/ B/ Hyperpure/ District) it might be time for them to pivot. When it comes to incremental value generation and growing from $30 Bn to $100 Bn+ valuation journey which Z aims to achieve, main chunk of that might not come from what we now admire already. Z needs much more from its existing model. Time to pivot is here.
Enters Flywheel!
About 85 Crore (850 Mn) food orders were delivered by Z in 2024. The scale at which the company today operates is becoming crazier year after year. With its subsidiary, B, growing at 6X the rate of Z, very soon it would cross the scale of its parent.
At such scale where you are constantly capturing ‘what’ whole India requires, ‘when’ it requires and ‘how’ it requires, puts you into a sweet spot of launching a ‘flywheel’ wherein you continue to grow with reduced efforts. (Source)
“A flywheel effect occurs when small wins for your business build on each other over time, eventually gaining so much momentum that growth seems to happen effortlessly”
Think of it like pedaling a bicycle. Initially, you need to exert extra effort to break through the friction, but once you gain momentum, it becomes much easier to accelerate with less effort. In the case of Z, which interacts with 300,000 restaurant businesses, B, which partners with all FMCG giants and nearly every major D2C startup in India, and District, which might engage with every major public event in the future - there are numerous B2B (business-to-business) touchpoints that Z could be positioning to revolutionize through their flywheel.
If successful, this flywheel will enable Z to easily onboard new businesses opening in India, helping them reach their customers in the most efficient way possible. Let’s explore this concept further.
What is SocialAds by Zomato?
Imagine the following scenarios:
Case 1: On a lazy Sunday morning, you come across a mouth-watering Instagram reel of a ‘Chole Bhature’ dish from your city’s famous restaurant. At the same time, it offers you a 40% discount if you order immediately by clicking on the reel. You click, are navigated to Z’s app, and just like that, your breakfast plans are set.
Case 2: You have a house party planned for tomorrow, and just a day before, you start receiving targeted ads on Google search for all the essentials you’ll need as a party host. These ads lead you to B’s party essentials section, where you complete all your purchases with just a few clicks, and everything is delivered to you in 10 minutes.
Case 3: A premium D2C brand is about to launch its latest product and wants to sell it exclusively to people living on Golf Course Road in Gurugram (a posh area of North India). It targets its digital advertisements to specific localities and ensures that the required inventory is available in nearby B’s dark store. The brand also has real-time control over the Ad campaign, stopping the digital ads as the inventory begins to exhaust.
Above cases^ are only possible when your ‘Off-app data’ (social media/ search activity data) is in sync with your ‘On-app data’ (Availability of provider/ consumption behavior/ location details, etc.) which drives maximum marketing ROI for any business.
“Impact created for the early adopters is unreal”
So about 5 months ago, Z officially launched SocialAds in association with Meta for its multiple restaurant partners post few months of trial with few of chains like Chinese Wok (Chinese Food QSR brand with 200+ locations pan India). (Source)
They now also call it an Ad-tech platform.
The platform aims to integrate high-reach ad platforms (Meta & Google) with a super-efficient conversion funnel that drives repeat buying behavior on Z(and now B as well). This makes it easier for brands to control their campaigns. As a business, it enables you to launch and monitor the performance of any ad campaign run across both off-platform (Meta & Google) and on-platform (Z, B, District) metrics in just three clicks!
The core proposition of the flywheel can be broken down into four key segments: (Source)
Audience Science - Using the user data from Z/B, targeting signals are pushed to Meta/Google for a brand’s campaigns
Hyperlocal catalog tech - Real-time integration of funnel to ensure no Ads are shown if the restaurant/Blinkit store isn’t serviceable due to closure or stockout
Full funnel optimization - From Meta / Google AI inputs, brands constantly learn about their campaign like what is working for them or what to stop
Transparent reporting - Brands can view real time sales & campaign updates real time and independently spend as per their budgets and desired customer audience
Aim here seems to be creating a ‘Plug and Play’ solution for businesses, where their entire digital marketing spend flows through Social Ads. These ads then communicate with Google/Meta platforms for targeted advertising and route sales through Z apps.
But is this really an ‘AWS moment’?
Amazon Web Services (AWS) helped Amazon transition from an online retailer to a tech giant by leveraging its infrastructure to provide services to other businesses. Today, AWS is valued at around $ 1 trillion, which is estimated to account for half of Amazon’s overall valuation according to many forecasts.
In contrast, the Social Ads platform primarily accelerates the growth of Z’s own apps and is not necessarily viewed as a new innovation— or is it? To explore this, let’s take a look at Shopify.
How Shopify became a $100 Bn Giant?
When Tobias Lütke & Scott Lake decided to build an online store in 2004, they had no idea they would end up creating the world’s biggest e-commerce platform.
In 2006, Shopify was merely a set of tools businesses could use to build their own websites with basic features
In 2007, they built analytics into the product to help merchants track their inventory and sales
Then in 2009-2013, they did a pivot from merely a tool to an actual platform, a complete toolkit for businesses
Later, Shopify then focused a more holistic/broader mission of helping everyone sell on- and offline which led to what it is today.
Initially, Shopify’s plan was simple - to build a site where they could sell snowboarding gear. However, they pivoted to solve a much bigger problem and kept evolving along the way.
So what’s the opportunity in front of Zomato?
A tech platform has the powerful ability to scale quickly while maintaining flexibility. As Z builds its 3-click (scalable) Ad-tech platform through Social Ads, there is every possibility that they could widen or change the scope of the platform over time (flexibility). While it may seem like an exaggeration today, just like B didn’t stop at selling daily groceries but expanded to offer everything from beauty products to electronics and now ambulance service, the Ads tech platform could also evolve into a one-stop tech stack for businesses interacting with Z in any form. Some easy-to-implement examples could be:
Z could integrate a real-time inventory management toolkit for brands, dark stores, restaurants, event organizers, and other businesses—particularly on the B side. This would provide access to real-time inventory data through a dashboard on the platform. While they may already have some form of this, there is a great opportunity to enhance it through a combined offering along Ads.
Given the volume of data they handle, Z could also add a comprehensive 'Data & Analytics' toolkit, similar to what Shopify did for businesses on its platform, integrating it via APIs with other data sources.
Apart from this, Z also has the largest on-ground network of weather stations installed across the country, providing real-time updates on rain, wind speed, temperatures, and more. This data is primarily used for its own on-ground fleet and smooth operations. However, this real-time data could be incredibly valuable for anyone involved in supply chain, commerce, hospitality, and many other industries. It could also serve as a useful add-on feature on the platform for the businesses Z deals with daily.
In its pursuit of faster growth and reaching a $100+ billion valuation, Z might reconsider its global expansion strategy with Plan 2.0. A decade ago, in their Plan 1.0, they were involved aggressively in acquiring food delivery businesses worldwide (including in the USA, Poland, Czech Republic, etc.), only to wind them down later after realizing the massive cash burn required to sustain those subsidiaries.
If Z is able to pivot and successfully build B2B tech solutions for businesses and brands in India, it could gain the capability to discover and launch a tech solution that could be scaled globally. Amazon’s journey with AWS started as internal project to create a shared layer of infrastructure services for Amazon’s e-commerce tech teams. Later, Amazon recognized the huge external market potential for their internal solution, and AWS was born.
Long Story Short
In this blog, we initially focus on how Zomato has delivered exceptional execution, driving its valuation from $5 billion to $30 billion in the last two years. However, when it comes to incremental value and growing from $30 billion to the targeted $100 billion+, a significant portion of that growth may not stem from what we already admire about the company, as much of that potential is already priced in. Z is now opening the door for itself to pivot away from solely operations-heavy businesses toward more tech-driven solutions, such as Social Ads. This Ad-tech platform further lays the foundation for multiple tech-based B2B offerings and could even revive their global expansion plans someday.
Finding Outperformers is a free-to-access website, and each blog takes a month of effort to finalize. If you've read this far and you find our research useful, consider supporting our efforts by contributing here:
Feel free to reach out the authors of this blog on LinkedIn: Aditya Grover, Jay Ingle and Nimit Chhugani. Let us know your reviews about this blog here:
Find our recent blogs on Zomato below:
Disclaimers-
We are not a SEBI registered advisors; personal investment/interest in the shares exists for the company mentioned above; this isn’t investment advice but our personal thought process; DYOR (do your own research) is recommended; Investing & trading are subject to market risk; the decision maker is responsible for any outcome.
 | A guest post by
|
 | A guest post by
|
Outstanding research note. The parallels to AWS and Spotify to imagine the potential of Social Ads was truly differentiated. A multi Sided Network is only valuable once it gets mapped with strong products which increase switching costs and where users repeatedly transact. To get visibility and control on inventory and ad efficacy is one such product for sellers.