I was reading about Urbanspoons foray into the online reservation market. Its a clever strategic move. With innovations like the iPhone and soon the apple tablet PC it doesn’t make sense for companies like Open Table to force restaurateurs to use an old school point of sale system. But will new restaurants throw away their paper and pen diary. I dont think they will - at least not quickly and certainly not without a huge and expensive sales effort from Urbanspoon / IAC. I have no doubt that restaurateurs who are sick of paying the $300 a month to Open Table for the PC might switch if Urbanspoon can demonstrate they will bring as many customers. Which they should as Urbanspoons 1 million shakers a day and Citysearch / IAC’s (who recently acquired them) users of slightly less than that is more than Opentable or anyone else in the restaurant space. - yes including Yelp or the Yellowpages.
The $700 million question is. Can Urbanspoon sell it to restaurateurs. It took Opentable $52 + million in venture funding and 10 years to sign up 10,000 restaurants. Admittedly the market is easier now, restaurants are better informed but still a little over 50% of them have a website are they really going to throw away their paper and pen for any kind of technology. Only if it brings them more business. You have to prove to an owner that it will bring them more business, when only a maximum of 10% of a restaurants reservations currently come from online its a matter of waiting until you prove that to an owner.
If Urbanspoon can prove they will bring the restaurant more business before the restaurant has to commit and come up with a cost effective way to sell to restaurants then I think Open table and its shareholders should be shaking in their boots. That’s what we see as the opportunity - deliver online reservations without the restaurant having to change any behaviour. Then when we know who is getting the reservations . he proven the restaurant will get more business, we know who is going to be interested in a software as a service reservation system. Whether we are re-selling something like Opentable or Urbanspoon or something of our own development remains to be seen but its critical whoever wins in this market think of a way to take it mainstream and acquires new restaurants cost effectively.
