This deal is paying $14 per annualized booking....it's a valuable company, but that's pretty insane imho.
Although as someone else pointed out, they could move into other industries.
Although as someone else pointed out, they could move into other industries.
Considering that they don't really have a real competitor right now, even if the OpenTable killer is being worked on right now, it'll be a while yet before they actually threaten OpenTable's numbers.
"At one time it was definitely the case that if I were looking for an Italian restaurant in a certain neighborhood I would consult OpenTable, read the reviews, and book directly. Now I just use Google or Google Maps. Google of course knows this and that’s why they bought Zagat. I’d bet Google will soon begin the reservations game as part of Zagat ratings."
Could Google deliver a reservation system to restaurants without renting them hardware and nixing the $14 customer charge? Sure. Could they even pay for the hardware out of their own pockets to get traction and dump a pile of Nexus tablets in every store? Absolutely.
Perhaps OpenTable management realizes this and figures this is a good time to exit.
[1] http://website.alinearestaurant.com/site/2014/06/tickets-for...
OpenTable only does reservations when facing the diner, but when facing the restaurant they do reservations, CRM, payments, table tracking, and analytics.
Whoever wants to replace OpenTable needs to replace all of this at once. Not only that, they need to convince a restaurant to ditch practically their entire IT stack, retrain all of their employees in the new system, and do so without service or quality interruption.
OpenTable has positioned themselves to be about as sticky as you can imagine a software business to be. They've locked in their vendors hard. Evil? Probably. Very effective? Hell yeah.
It's not as if no one's challenged OpenTable before - there are in fact a number of restaurant management startups out there, but none can even dent OpenTable's dominance due to the lock-in. Google couldn't take out OpenTable even if they tried, not without burning a pile of cash taller than this current purchase price.
And I completely disagree that for competitors to emerge they MUST do everything that OpenTable does. They only have to offer a couple of features that OpenTable doesn't. Or do one thing better or cheaper.
If you don't cover all of the above bases as a competitor, you're leaving your customers to cobble these pieces together themselves. Maximum freedom? Sure, but how many takers do you think you'll have?
"Hey Mr. Restaurant Owner, I understand you have a substandard but perfectly functional system that runs every major concern of your restaurant. Your employees kind of hate it, but they're extremely proficient at using it since it's the industry standard. Boy do I have a great idea for you! You should throw this system away so you can assemble multiple pieces of software from multiple vendors together to do the same thing, in a field where interoperability isn't even in the vocabulary! How your payments system talks to your CRM system? Fuck knows. But you should do this!"
OpenTable isn't completely immune from competition, but they're pretty much as close as any software company can get. There's a reason why every potential competitor to OpenTable has taken the "full restaurant management system" angle.
OpenTable is vulnerable if someone can execute on the kitchen-sink restaurant management system better and more cheaply. I don't think it's vulnerable to piecemeal replacement.
> Your employees kind of hate it, but they're extremely proficient at using it since it's the industry standard.
The thing is, it's not the industry standard. It may be by far the largest, but it serves a tiny portion of the industry.
According to the press release, they serve 31,000 restaurants worldwide. There are more than 400,000 restaurants in the US, of which more than 200,000 are "full service" restaurants.
Most of these are still "unexplored territory" where there's either little to no IT investment (the small operators) or a patchwork of custom/partial solutions, often bolted onto the till-system with no central CRM solution (the larger operators)
It may appear now that OpenTable has a death grip on the market but it only takes a slight shift in ideology for opportunities to emerge.
Yelp acquired SeatMe[0] (front of house management) last year to expand into this market, and Yelp Reservations[1] was launched last month. These two products combined function as an OpenTable replacement.
Disclaimer: I work at Yelp.
[0] https://www.seatme.yelp.com/
[1] http://officialblog.yelp.com/2014/05/yelp-reservations-new-f...
Your checkered past seems like it might come back to haunt you ad you try expanding into other verticals...
Some of our clients use OpenTable or competitors to feed them extra bookings, but most of the ones that do see them as expensive enough to be undesirable as their only or main source of bookings, and prefer to avoid them as much as possible. Most our clients are larger operators, though.
And 31,000 restaurants is not all that much worldwide - it leaves a vast number of restaurants open for competitors. There are more than 30,000 restaurants in the UK alone, for example. Most of these are operated by chains that are less likely to be willing to let OpenTable into their business as more than one amongst multiple third party booking sources.
This is why everyone hates us.
It's also 2 billion dollars. That's simply a good time to exit. You could foresee-ably work the rest of your life and never build your company to that level on your own. No doubt OpenTable worked extremely hard to get to this point so I wish them all the best in the future and nice, long lives to enjoy that wealth.
That thing he mentions about restaurants not putting up their prime time reservations is a bigger threat to OpenTable, since they know they will be sold and don't want to pay the fees, but I don't know how widespread that is outside of chic city restaurants. I know that I would just book elsewhere if I saw that a place "seemed" book solid in OpenTable.
http://blogs.houstonpress.com/eating/2014/05/as_fees_become_...
If they added "book a table" to the search result page & map listing or restaurants, and solicited those as paid ads, competitors could encroach on OpenTable's success.
Even small local marketers could get in on that game: buy a software license for a table booking platform and start selling to local restaurants. Collect $X per booking, pay Google $Y, profit $X - $Y. No OpenTable required.
Of course, OpenTable could get in on it, too.
If a diner makes a reservation off the restaurant's Web site by clicking the embedded OpenTable form, their fee is 25c. The big bucks is in generating new customers through OpenTable app/site itself and various partners (Yelp, etc.) and rewards where OpenTable brings in customers during slow hours by awarding them 1,000 points.
Disclaimer: I work at TripAdvisor.
They could be toast within a year, if a Slack-quality competitor decided to take them on.
I say this because we provide a solution (http://carwashy.com) somewhat similar to opentable, except we provide it for cleaning businesses. The featureset we provide and demanded by our customers is a superset of what opentable provides to restaurants. Albeit we initially asked the question of why isn't there an opentable for x service-based business.
I'd say if they weren't bought, they still had a lot to go- I doubt they have >60% market penetration even in NA.