When Overspending Doesn’t Deliver: The Zomato Case Study
Zomato is one of India’s most recognized consumer tech brands. With a presence in hundreds of cities and millions of users, the platform has become synonymous with online food delivery. But behind the glossy brand and ever-expanding service lines lies a financial reality worth dissecting: a pattern of overspending that may not translate into sustainable long-term growth.
The Numbers
In FY24, Zomato’s IT expenditure stood at about ₹485 crore. In FY25, that number jumped to ₹644 crore. A year-on-year increase of over 32%.
On the marketing front, Zomato spent a staggering ₹1,972 crore on advertising and promotions in FY25 alone. To put that in perspective, the company spent nearly three times more on advertising than on technology — a striking imbalance for a tech-driven business.
The Risks of Inflated IT Spending
Technology is the backbone of a digital platform, but rising IT costs don’t automatically signal innovation. More often, ballooning budgets indicate structural inefficiencies:
- Large, layered teams that slow down decision-making.
- Heavy reliance on vendors or third-party solutions.
- Repeated cycles of rework and lack of ownership.
Without a corresponding leap in product innovation or customer experience, higher IT spends become a weight rather than a weapon.
Advertising at All Costs
Promotions and discounts are effective tools to win users, but they cannot be the cornerstone of retention. A burn of nearly ₹2,000 crore on marketing raises tough questions:
- Is user loyalty being bought instead of earned?
- Will customers stay when discounts taper off?
- Does the product experience itself generate stickiness, or is it driven purely by cashbacks and offers?
The danger of this model is clear. Competitors can easily replicate discounts, but they cannot replicate a truly differentiated product experience.
The Inevitable Reckoning
Overspending can mask underlying weaknesses for a while, but not forever. Investors eventually scrutinize whether the burn translates into durable value. When customer acquisition costs rise further, or capital markets tighten, companies with inflated expense structures face sharper corrections.
Zomato’s brand strength and scale are undeniable, but numbers this large demand a rethink. Efficiency, innovation, and genuine customer stickiness will define the winners of the next decade — not just the size of the budget.
The Takeaway
Zomato’s case is a reminder that bigger isn’t always better. Sustainable growth doesn’t come from throwing money at the problem. It comes from sharper execution, leaner operations, and building products that users return to even without a discount.