Zomato is putting a lot of pressure on restaurants to invest more money into their business, through ad spend and covering the cost of cancellations, in return for increased orders. This could potentially be a great deal for both parties if managed correctly. It is being reported that Zomato is speaking to restaurants and persuading them to allocate more funds towards marketing on the platform. Additionally, this will bolster their presence on the food delivery service. Restaurant owners have reported that Zomato has been encouraging them to invest at least 5% of their revenue generated from their listings on the platform into advertisements, in order to increase their visibility. Zomato recommends that restaurants increase their ad spending on the platform to be more visible at the top of the search page on the app. At present, it is optional for restaurants to pay for ads, and it is not immediately clear how much Zomato earns through ads on the platform.
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The move comes as Zomato aims to boost profitability and reverse declines in its food-delivery business. Zomato’s recommendation to restaurants to spend a minimum amount on advertising on the platform is seen as another way to pressure brands, said a restauranteur who chose not to be identified. However, some restaurant partners argue that spending on ads should be at their discretion, depending on their target audience, geography, and bandwidth to fulfill online orders.
Zomato has denied imposing any policy that mandates marketing spends on their app for restaurant partners. As per a Zomato representative, measures are taken to ensure that customers have satisfactory experiences, even if the restaurants fail to meet certain quality standards. These policies include providing extra support for establishments with problems related to hygiene and food quality. Zomato is reportedly enticing restaurants to further reduce their prices to sync with what they charge in-person. This will help the users get more value for money.
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The pressure on restaurant partners could lead to further tension between Zomato and its restaurant partners. Restaurants owners are aware that those who don’t invest at least 5% of their turnover in advertising could have difficulties being noticed on the app. Thus, many of them understand this as an important factor for success and prioritize spending a significant amount to create visibility. However, some say that Zomato’s move is an attempt to assert its dominant position in the food-delivery industry and make unreasonable demands on restaurants.
