Open Table IPO seems to be the oasis in the desert of tech public listings but is it simply a mirage?
There is no doubt that there is a worldwide meme in online reservations /bookings and Open Table has benefited from this. Check out Google Trends to see what I mean. People trained in booking their travel online now understand the convenience of organizing their life online and want to be able to do it in other areas of their life. There is no doubt consumers like online reservations, as they become more trusted they will continue to grow. The question is how do you get restaurants to adopt it and how do you make money. Sarah Lacy wrote some interesting points in a recent article. Its a good article along with some of the other articles she links to and I agree with some but not all of her points
She highlights how difficult the sales model is. It has taken Open Table $48million in funding and 10 years to enable 9000* restaurants with their technology, most of which are in the Bay area and New York. Thats a pretty expensive cost of acquisition and its because they have to convince a restaurant owner to completely change their behaviour, to throw away the restaurant diary which worked pretty well and replace it with a complicated computer terminal that all of the staff will have to be retrained on and that will inevitably, like all technology go down. Tough sell.
I dont think local has to be hard to monetize its just about understanding that business just want more business. If you are selling them more business, they will pay for it. Its just when you try to sell them a monthly subscription that offers them no benefit that it gets difficult. Business owner in the past have all been ripped off by some advertsing / yellow pages sales person that sold them ads or services that didnt bring them business but if you can prove to bring them business they will pay.
I understood from being in the tech industry for 5 years before buying a share in a bar and restaurant that the problem is not that local / small business people are luddites, its that they are so damn busy working in their business. As a restaurant owner I was pitched advertising / new business opportunites 3 or 4 times a day. The only things that got any of my attention where things that guaranteed me more business at a reasonable cost.
That is what we realised in the beginning with Booking Angel. You get maxium adoption with the least friction when you fit in with the way that restaurants work today, make technology work for the business. You can then slowly start to bring them more business and only offer them more advanced technology solutions when they are needed and not before.
Compare the stats.
Open Table Funding prior to IPO $48 million - restaurants enabled 9000
Booking Angel funding to date $250,000 restaurants enabled 27,000
Its exciting times ahead for this industry. Opentable proves there is a large market and services like ours prove there is an easier way to approach it.
*(There are over 220,000 full service dining resaurants in the US according to the National Restaurant Association)
Tags: business model, local search, opentable IPO
