Internet giant Google Inc. has quietly launched an app “Areo” aggregating food delivery and home services in India, categories which have been particularly affected by a slowdown in funding and seen multiple start-ups shut down for want of funds in the recent past.
The Mountain View, California-headquartered company on Thursday launched the Areo app—currently operational in Mumbai and Bengaluru—that aggregates food delivery and home services start-ups in India. Google has partnered with companies such as Box8, Freshmenu and Faasos for food delivery and UrbanClap and Zimmber for home services.
Google confirmed the development, but did not divulge details about the services.
“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,” a company spokesperson said.
According to two people aware of the development, who spoke on the condition of anonymity, Google has been exploring such partnerships for the past 8-10 months. The company had rolled out a pilot for its employees about three months ago.
Google will not deploy delivery executives or home services professionals of its own to service the orders. The partners will handle fulfilment of the services, while Google will charge them a commission.
Social networking giant Facebook Inc also launched a hyperlocal service in India last year. From plumbers to spas, and event planners to pet services, the services were listed at facebook.com/services, Mint reported in April last year.
Google’s entry into the food delivery and home services segments comes at a time when investments by venture capital firms in Indian start-ups have dropped. As per a report by KPMG and CB Insights, Indian start-ups raised $3.3 billion in 2016 across 859 deals, as against $8.2 billion across 890 deals the previous year.
Food delivery and home services have been particularly hit, with a number of cash-starved start-ups shutting shop. For instance, food delivery companies such as Dazo, Eatlo and Spoonjoy closed down after failing to raise funds as did home services companies such as Doormint and Taskbob.
Google is aggregating some of the existing start-ups instead of getting into fulfilment on its own, which implies that it will bear only customer acquisition costs. Most start-ups in these segments end up losing money on every order fulfilled, apart from incurring customer acquisition costs.
“Whenever there is a large search volume around specific things, Google starts aggregating it and building a product around it. It has done it for the likes of travel, weather and even cricket scores. For Google, customer acquisition cost is minimal because most of these services are built on top of their own property. Google owns the Play Store, it owns the search,” said Rutvik Doshi, director at the Indian arm of Inventus Capital Partners.
Analysts say that while Areo may not be a direct competitor to end-to-end service providers, especially at this stage, it can threaten aggregators such as Zomato and Swiggy that aggregate restaurants and delivers on their behalf, in the long run. “If Google builds massive distribution, then the food delivery businesses will get impacted. However, it is a big question if the app strategy will work, because it usually integrates these services within Google search,” Doshi added.