Eateries may quit Zomato, Swiggy over steep ad costs, deep discounts

Topics Zomato | Swiggy | zomato ads

Restaurants and food catering companies might soon quit platforms such as Zomato and Swiggy to save themselves from high advertisement costs as well as being an unwilling partner of deep discounting initiatives.

According to several restaurateurs, steep advertisement costs and deep discounting schemes run by several restaurants, including portals such as Zomato, Swiggy, are the main reasons for some of them to completely quit these platforms. 

Deep discounting

Restaurant associations in their interactions with players, including Swiggy, Dineout, UberEats, Foodpanda and few others, over the past few days have made it clear that companies cannot continue deep discounting tactics at the expense of restaurant owners.

“In an industry, with already razor-thin margins, deep discounting being offered by some of the aggregators creates huge pressure. What started out as something that would increase footfalls and increase revenues have turned into massive discounts that render sales through these aggregators unprofitable,” Zorawar Kalra, founder and managing director, Massive Restaurants said.

Restaurant owners claim the cost of deep discounting campaigns such as 50 percent off and one dish free falls on them. 

“The National Restaurants Association of India (NRAI) held extensive meetings with all restaurant aggregators and we were bemused to learn they were promoting deep discounts to stay competitive among each other. While one aggregator gave 1+1, the other had to adopt a 50 per cent discount scheme in order to stay relevant. These deep discounts are funded by restaurant industry,” Rahul Singh, president, NRAI.

Zomato’s ad revenue might get hit

Zomato’s largest chunk of its business, might feel the same heat its premium membership service Gold faced. According to sources, advertisement sales constitute 70 per cent of Zomato’s total revenue. 

According to several restaurant owners, Zomato charges one of the highest rates for putting advertisements on the platform, much more than major players such as Google. 

Zomato charges as much as Rs 40 to Rs 50 per click for an advertisements on its platform, which is much more than what Google and several other players charge. Also, there is no transparency on how many clicks happen in a day. After my contract ends, I do not intend to renew it,” said Vishal Anand, founder of a popular pub Saints and Sinners in Gurugram and partner Farzi Café Aerocity.

Anand is not the only one. One of the biggest restaurateurs in the country A D Singh, founder and MD of Olive group of restaurants, has said it was very difficult to post advertisements at the rates that were being levied by Zomato.

“The click rates are exorbitant. Higher than industry standards and with no guarantees on conversions. Like any other medium of advertising, it does help reach newer audience but of course the deep discounting alongside does not help and is not sustainable in the long run. We are currently assessing our relationship with them for all their verticals and platforms. They are our partners in the delivery business. However, advertising with Zomato is getting difficult at these rates,” Singh said.

Zomato to a detailed questionnaire on this issue said its ad revenue had been growing consistently and they have a large base of restaurants, which see immense value in advertising with them.

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