Why has Zomato acquired Paytm’s movie ticketing business, Paytm Insider?
At an estimated ₹300-350 crore in annual revenue, the move ticketing business would add just ~2.5% to Zomato’s top-line, to acquire which it’s expected to trump-up ₹2,048 crore.
So, why would Zomato be interested in what appears to be a minuscule acquisition? The answer may lie in Zomato’s future growth trajectory.
Its core food business is experiencing a slowdown, as showcased in the latest quarterly results wherein gross order value suffered a decline, which although may have been marginal, is in the opposite direction of the growth trajectory which stock market investors would want to see. While to some the fall may appear to be just a blip, to others it appears that the food delivery industry’s growth phase is coming to an end as penetration of serviceable cities nears maxing out.
As a result, industry onlookers’ focus has in recent times switched towards Blinkit, Zomato’s quick-commerce arm, with many analysts/brokerage houses forecasting Blinkit to outgrow Zomato’ core food delivery business.
With Zomato’s core food business generating profits and Blinkit delivering growth, their one-two punch combo should surely satiate investors’ demand for growth, right? Yes, but only for today.
While Blinkit is powering Zomato’s growth at present there remains an uncertainty as to whether it will be able to continue to do so in future, because it remains to be seen whether quick-commerce will find significant traction in tier-2 and -3 cities as they max out their penetration in metro cities.
As a result, Zomato is in need of a fourth engine, beyond its online food ordering, Hyperpure by Zomato, and Blinkit businesses, to carry forward its growth trajectory into the future.
That fourth engine could be Zomato’s “Going-out” vertical, comprising of dining and live events.
When you open Zomato’s mobile app, you by default end up on its “Delivery” tab, which is natural as you’d expect that to be the primary reason as to why a user would open the app to begin with. Next to it is the “Dining” tab for when we want to eat out and use Zomato to book a discounted table or avail a payment offer while transacting our bill. However, how often do you go one tab further and open the “Live” tab that’s the farthest to the left? In my case, I honestly can’t recall.
Unsurprisingly, the revenue generated through that “Live” tab accounts for not even 10% of Zomato’s revenue. So, how could that emerge as its silver bullet?
Growing its share of the events & ticketing pie could enable Zomato to increase its share of captive users’ wallets by cornering another segment of their lifestyle expenses. Zomato already has millions of users who can be further monetised via charging a convenience fee for ticketing, serving ads, etc.
Enter, Paytm.
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