Restaurant Discovery Site Zomato Buys IAC’s Urbanspoon, Enters The U.S.

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Zomato, the restaurant discovery site backed by Sequoia, has bought Urbanspoon from IAC, the latest in a string of acquisitions around the world. Terms of the deal were undisclosed, but sources tell TechCrunch it was between $50 million to $60 million. This marks the entrance of Zomato into the U.S. market, and is also notable because it is one of the few instances of an Indian tech company acquiring an American business. Zomato claims that the deal is one of the largest purchases of a U.S.-based consumer Internet company by an Indian startup.

Most of Urbanspoon’s current staff will be retained, but its traffic and information will be redirected to Zomato’s apps and website by the end of March, says co-founder and CEO Deepinder Goyal. The integration of Urbanspoon is expected to more than double Zomato’s web traffic to 80 million visits per month from 35 million, and grow its listings to one million from 300,000.

Its entrance into the U.S. means that Zomato is now present in 22 countries.

This is the second time that Urbanspoon, which was founded in 2006, has been acquired. It was purchased by IAC in 2009 for an undisclosed amount. A couple years after that, however, CityGrid (the IAC brand that operated Urbanspoon) began to scale back its operations as it changed advertising models. Two rounds of layoffs occurred in 2012 and 2013 as part of CityGrid’s efforts to “streamline.” After selling Urbanspoon, CityGrid’s remaining ad listings portals are CitySearch, Insider Pages, and phone advertising company Felix.

While U.S. firms like Facebook, Google, and Yahoo are showing increasing interest in acqui-hiring Indian startup teams and companies like Snapdeal, one of India’s largest e-commerce businesses, are busy buying local businesses, it is still rare for an Indian tech company to purchase one based in the U.S. (One recent exception is the acquisition of Virginia-based Lightbridge Communications for $240 million by Tech Mahindra, India’s fifth-largest IT services company).

Founded in 2008, Zomato has raised a total of $113.8 million so far, which it has used to fuel a worldwide acquisitions spree. Its latest funding round in November 2014, in which it picked up $60 million, gave the company a post-money valuation of $660 million. In addition to raising capital, Zomato also bought companies in Italy, Turkey, the Czech Republic, Slovakia, New Zealand, and Poland last year.

Other new markets Zomato is currently focused on include Canada (where it recently launched in Toronto) and Australia.

In the U.S., Zomato faces the considerable challenge of tackling well-established rivals like Yelp and Foursquare. Goyal tells TechCrunch that Zomato will stand out because its model does not rely on user-generated reviews. Instead, Zomato employees in each city upload menus and add other content about restaurants. Listings are updated every three months so customers get fresh information and don’t run into out-of-date menus or establishments that have shut down for good.

Zomato currently has 200 job listings in cities across the U.S. for people to add to its listings over the next three months. This model requires a lot of legwork, but it means the site is able to offer a more in-depth look at a restaurant’s offerings to diners. Almost half of Zomato’s traffic goes to its curation features—including lists of restaurants that have proven popular among other users—instead of its search tools.

The platform makes money through native advertising on its apps and site, as well as charging restaurant owners who want to offer promotions through their listings. Customers can also book reservations directly through Zomato’s site and apps.

“Because we are physically located in every city, we are able to collect a lot of information no one else has. We currently have listings for 300,000 restaurants across 20 countries, and almost 95 percent have a scanned menu card,” says Goyal.