Google Areo uses unique model to enter food delivery and home services sector

Technology giant Google plays it safe with its foray; will function only as an aggregator and not enter the fulfilment part of the business

e4m by Venkata Susmita Biswas
Updated: Apr 18, 2017 8:21 AM
Google Areo uses unique model to enter food delivery and home services sector

At a time when most food apps struggle to establish themselves and others are forced to shut down, technology giant Google has entered the Indian food-tech and home services market with its latest app - Areo - on April 12.

The app has already seen downloads in the range of 10,000-50,000, claims Google app store.

While Google chose to keep its cards closed about its business plans, industry experts believe that Google’s experiment may work as it will function only as an aggregator and not enter the fulfilment part of the business. Thereby, Google will be playing it safe, as it will not require too many capabilities.

Calling the Areo’s aggregator model interesting and unique, Sreedhar Prasad, Partner - Internet Business, KPMG said, “If the customer intent is checking out where to buy food from, Google can become a major player because the trust factor that Google enjoys is more than any other brand.” He added that Google will take food-listing to the next level by deploying Google Reviews for restaurants and services.

“Google’s aim in the food-delivery business will be to be a one-stop aggregator, with high quality technology interface, and bring the authenticity factor to the place where one orders food from,” Prasad said.

Because of its aggregator model, Google Areo may come as competition to other apps that only list restaurants or services. “The preliminary thought is that the entry of Google Areo will impact apps that focus primarily on listings, for example, Zomato,” said Rohan Agrawal, Senior Consultant, RedSeer Consulting.

In 2016 a number of food delivery start-ups shut down, scaled down operations, and laid off employees. According to RedSeer Consulting, the industry saw a total funding of less than USD 80 million in 2016 against USD 500 million in the same period the year before. Despite the measly funding, RedSeer found that the industry (aggregators and Internet kitchens together) grew at the rate of 150 per cent year-on-year last year.

The food delivery sector may see an uptick if Google brings its innovative problem-solving capabilities to the table. “The way the food delivery app sector has been struggling with regards to unit economics and delivery cost, in particular, will not change with Google’s entry unless Google surprises us with unusual ways to solve these problems,” said Agrawal.

In addition, Agarwal said that Google Areo seems to be Google’s way of addressing the issue of users retreating from using Google Search. “Now users go to specific apps when they want to look for things, which has impacted the search volumes negatively. Google Areo seems to be an effort to reach out to those customers and give them the information they are looking for in the manner that they want,” he said.

“We are constantly experimenting with ways to better serve our users in India. In this case, Areo makes everyday chores and ordering food easier by bringing together useful local services like ordering food or hiring a cleaner in one place,” said a Google spokesperson about the launch of the app.

In Mumbai, HolaChef and Faasos have been onboarded on the Google Areo app. Sources confirm that Areo will be partnering with Scootsy and tap into the hyper-local food delivery start-up’s delivery fleet. exchange4media reached out to Google India for a comment, but did not receive a response.

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