Open a food-delivery app and search for biryani. There may be hundreds of options available. You will likely shortlist fewer than a dozen. That makes the first page incredibly valuable. Restaurants used to compete on food, location, pricing and word of mouth. On a food-delivery platform, they compete on a different front - inside an algorithm. The app not only delivers their food, but also the road on which their restaurant lies. And the best addresses on that road can be bought.
The Restaurant Has Two Customers
A restaurant used to have one customer: the diner. With food delivery platforms, it finds another one. The restaurant may pay commission or a fee to the platform for its service in facilitating the order. The customer may pay extra for delivery or other charges. The restaurant can then choose to pay for advertisements within the app. The same order can thus fund multiple sources of revenue for the platform. The intermediary is not a mere delivery rider. It is a marketplace, sitting between the diner and the eatery.
Swiggy reported food-delivery gross order value of ₹28,783 crore in FY2024–25, with 238,000 average monthly transacting restaurant partners, while advertising revenue was growing rapidly and more than 65% of transacting restaurant partners were using its self-serve advertising products (Swiggy). The restaurant pays to list itself on this marketplace. It then pays again to appear at the top of its category.
The Digital High Street Has Infinite Restaurants
Each physical restaurant has an address. A shop at a mall's frontage enjoys natural traffic while one tucked at the back has to pull off more marketing. Delivery apps replicate this problem digitally. The search results change constantly based on location, timing, delivery estimates, rating, cuisine and other parameters.
Advertising then offers another lever to grab attention. A diner searching for pizza can see a paid ad for a pizza restaurant right after. This is powerful because the customer is in search of a food item. A restaurant with a physical billboard has to hope that the prospective customer will remember the brand and return later. The sponsored ads on a food delivery search, however, appear when the consumer is already looking for something to eat.
Advertising Can Be More Attractive Than Delivery
The platform stands to make money each time a rider takes off with an order. It bears the cost of logistics, customer service and technology to facilitate the transaction. Selling advertisements is a relatively cheaper way to make money. It explains why such spending can be such a lucrative opportunity for platforms. Swiggy noted that in the food-delivery segment, its advertising revenue was poised to grow to over 4% of gross order value by the second quarter of FY2025–26, contributing to improved profitability for the company (Swiggy).
Four percent is not a large number. At the scale of tens of thousands of crores, however, it can be worth billions. More importantly, unlike delivery fees, the advertising does not require another rider to make another trip.
The Restaurant Cannot Easily Ignore the Platform
There are alternatives for a restaurant. It can advertise its own website, take calls, use WhatsApp, invest in social media or even encourage people to walk into the eatery. The challenge is that millions of customers already open a delivery app when they decide to order something. By ignoring the app, a restaurant misses out on these customers entirely. That gives the platform tremendous leverage.
A restaurant may not like the cut it pays, but it is unlikely to survive if others are not present on the app. Once enough people start searching for restaurants on an app, it transforms from a directory to an infrastructure. Google fundamentally changed the way businesses marketed themselves by digitizing the search. The food-delivery platforms are now doing the same to restaurants.
Advertising Creates a New Competition
Imagine two otherwise identical restaurants. One pays handsomely to appear atop of search results while the other does not. It is obvious which one will get more orders. These will lead to more reviews, data and customers. In turn, organic reach and search rankings can improve. The same act of paid discovery can fuel unpaid discovery further.
That does not mean the restaurant that paid will necessarily dominate. Its competition may offer cheaper meals or promise faster delivery. Food quality will still matter, but it will no longer be the sole deciding factor. Restaurants are now in a unique war of pixels.
The Platform Sees What the Restaurant Cannot
While a restaurant owner sees her own customers, the platform can see everyone's. It has the ability to analyze what works and what does not. It knows which cuisines are rising, when people are most hungry to order, how they react to promotions and what other restaurants they browsed before settling down on an order.
That gives the platform advertiser credentials as it possesses this deep consumer insight to help the restaurant make its money. The restaurant does not merely buy space; it buys opportunity. It buys access to a marketplace where the other players are also vying for attention. The platform owns the map. The restaurant owns one location.