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Comment by joezydeco | Hacker News Reader

Nick Kokonas of Alinea/Aviary summed up the threat to OpenTable in his recent post about his restaurant ticketing system[1]:

"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...

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OpenTable isn't just a reservation system, it's a full-on restaurant management system. They've seen this possibility coming and they're reasonably well positioned to deal with it.

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.

You sound pretty convinced. But it is almost never the case that a product or service is insulated from competition.

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.

All of OpenTable's features are core competencies of a restaurant. A restaurant must do CRM, it must maintain analytics about its own performance, it must be able to manage tables and keep track of payments, and unless you're a no-reservations place, it must have a system in place to handle reservations.

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.

The vast majority of restaurants don't have a unified system to do this today. Where the company I work for has gone in, it's usually been the first step towards a unified restaurant CRM solution they've taken. It's rare for us to start talking to a client that tells us they already have a CRM solution in place. It is somewhat more common for us to come across restaurants that use services like OpenTable and competitors only as a source of bookings.

> 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)

Look at how Square attacked the POS market. They didn't start by trying to replicate everything existing POS systems were doing. They started by appealing to small shops who were not using full scale POS systems.

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.

> 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.

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...

I worked at SeatMe right before the acquisition (actually I was the first employee and engineer and built a major portion of it). I can say that it is completely designed to be a full OpenTable replacement in every way. I don't think was a feature after working on it for 18 months that OpenTable had that we didn't.

I'm not in this industry, but isn't Yelp highly untrusted and relatively despised to the point that selling this is going to be a massive challenge?

Your checkered past seems like it might come back to haunt you ad you try expanding into other verticals...

The company I work at provides systems that compete directly in this space, and yet we rarely come across OpenTable as a competitor. I don't think we've gone after a single client that has brought up OpenTable as a obstacle.

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.

"Evil? Probably. Very effective? Hell yeah."

This is why everyone hates us.

> Perhaps OpenTable management realizes this and figures this is a good time to exit.

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.

Google does not even have to enter the space to potentially upset the restaurant booking space.

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.

Has this no-name table booking platform for a small marketer received enough mindshare in the consumer land to generate tons of leads?

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.

Most of the restaurants around here just link to OpenTable on their reservations page, if you get there via Google. I think they actually pay a smaller percentage for those kind of bookings, rather than ones that were generated within the OpenTable app.

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.

The fee is 25c per booking when done through an embed on restaurant's site, $1 when generated through OpenTable or a partner site they pay.

http://blogs.houstonpress.com/eating/2014/05/as_fees_become_...

It's not $14 customer charge, that's what Priceline paid per annual lead. Cost per lead is likely to be less than a $1 dollar, annual revenues were $190M, divided by 12*15M leads is around $1.05. They likely have other income streams than lead generation, if they are providing full CRM to restaurants.

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