Popular restaurant search platform Zomato is planning a massive staff cut that will reduce its staff by 300 — a significant 10 percent reduction in the workforce which currently is somewhere in the neighbourhood of 3000 employees.
The India based corporation, with a net worth of over a billion and extensive operations in over 22 countries, said that the move was prompted by a strategy shift that will see increased focus into revenue-generating areas like reservations. That being said, it seems like the axe will fall mostly on the US-based staffs, with Content Teams among some of the most affected.
The decision is particularly significant because these Content Teams were once at the center of Zomato’s original “feet on the street” business model and were responsible for collecting firsthand data about listed restaurants. The feet on the street model, it should be remembered, was what set Zomato apart from competitors and was responsible for some of the company’s early successes.
However, as succesful as the modal was, Zomato feels that the time has come to move on from the workforce intensive “eat on the street” and make the shift to a more subtle strategy. According to the company’s new approach, all regions of operation will now be divided into “Full-Stack” and “Enterprise”. Deepinder Goyal, CEO and co-founder, described the nuances of the division as follows,
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).
While Enterprise is how Zomato labelled the places, where it is not the top gun at the moment.
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.
(Zomato Internal Memo, TechCrunch)
So, why the division? Apparently, because the company has different plans and strategies for dealing with the situation in both the regions. While the “Full Stack” markets will continue to receive the full spectrum of Zomato services including live content collection and ad sales, the “Enterprise” markets will see the company lay increased stress on transactional businesses, including the Zomato Book reservations engine, with “on-the-ground community building and marketing activities,” shifted to the background, hence the lay-offs.
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.
Reading between the lines, bad news for the content teams, which include the people involved with “on-the-ground community building and marketing activities”. Or in other words, people who physically visit restaurants to collect data such as timings, menus etc. for the massive Zomato database.
Zomato also brushed aside rumors that the cuts will be concentrated among the staff that it gained from its recent string of acquisitions. Speaking on the topic, a spokesperson said,
The cuts are not a result of Zomato’s acquisitions, Most of these people were hired after the completion of the acquisitions. However, over the last few months, we have been working hard to make sure that we prioritize our efforts, and the recent cuts are a step towards that direction.
Instead, the cuts will be global with more emphasis laid upon areas with a larger number of restaurants. US, with its 700,000 of the total 1.4 million restaurants listed on Zomato platform, is likely to make it to the top of the layoffs list.
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.
Though unfortunate, the decision does make sense. According to data from Zomato, only 40% of the restaurants on it’s platform are responsible for almost 92% of its traffic, making all the work that goes into live data acquisition from the other 60%, not really worth the effort it takes. It seems as if, with the company’s valuation crossing the 1 billion mark in April and its steadily increasing global footprint, Zomato is unwilling to get involved in something that doesn’t pay-off reasonable dividends.
As the CEO summed it up in his memo,
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.
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.