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Summary:

OpenTable is a holdover from the Web 1.0 economy and it might be finding new growth opportunities, thanks to the growing popularity of mobile devices and the rise of anywhere computing. Now all it has to do is think smartly about its business.

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I’ve often argued that the proliferation of mobile devices changes everything, and OpenTable, a San Francisco-based company that was founded in the Web 1.0 days, is certainly benefitting from the growing number of smartphones. OpenTable allows folks to make reservations at restaurants over the Internet. It announced its second quarter 2010 earnings yesterday, and a number caught my eye that tells me the company might be on the verge of major mobile transformation.

According to OpenTable, of the 17 million total seated diners during the second quarter, nearly 1.3 million came from the company’s mobile apps. In the first quarter of 2010, of 15.6 million seated diners, about one million diners came from mobile users. Since it  first started offering mobile apps in 2009, OpenTable has in total seated around 4 million diners via mobile devices — with 2.3 million of those signing up in 2010. I’m one of them, and find it more convenient to use the app to make a reservation minutes after I am done making plans to dine out.

Smartphones are to computing what mobile phones were to communication. Mobile phones made it possible to talk to anyone, anywhere. Smartphones (and other such devices) free computing from the shackles of a desk. Now we can compute everywhere, which means we can browse and do short tasks wherever we are. From that perspective, we’re going to see more and more usage of web-based services such as OpenTable. I’d go out on the limb and say that in a couple of years, a majority of OpenTable’s diners will be coming from the mobile apps. For another company benefitting from this shift, check out Pandora.

According to Morgan Stanley’s Mary Meeker, today nearly 7.5 percent of OpenTable’s “seated diners” are coming from mobile applications, a share which is going to increase as the company launches newer apps. OpenTable recently released an iPad app, which is getting a lot of traction, according to Meeker.

From my perspective, I’d say OpenTable needs to add some additional functionality. For instance, it should be looking at ways to transform itself from just being a reservation service to being a combination of Yelp, Gowalla and Groupon. (Since OpenTable doesn’t have a market cap ($1.1 billion) big enough (or pockets deep enough with about $87 million in cash) to buy these companies, it would be better off partnering with one or more of them.

OpenTable has the database of places which are actually interesting to people, and customer feedback about a restaurant. It has the actual data which shows how many times people have visited a restaurant. I’d bet they have the data on how many people abandon a restaurant. That data could be used to build new behavior patterns, including loyalty programs to reward the loyalists and lure in the holdouts.

OpenTable CEO Jeff Jordan is an astonishingly smart guy — I met him once and I know that for a fact — so I’m sure there is more than a good chance he’s already thinking along those lines. If not, he should.

  1. I tend to agree with the notion that mobile apps and smartphones are the future of computing. However this article on the Economist http://www.economist.com/node/16381330?story_id=16381330 had a counter argument. The article looked at revenue generated the mobile app sale and not at the service provided by the app. OpenTable asserts my belief that the service ( software) is the revenue generator not the mobile application ( Opentable is a Free app on App Store).

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  2. Mobile smartphone platform is a greta fit for services sauch as Opentable and I am not suprised at the traffic and seatings they are generating from their app.
    It’s only natural for them to extend and provide value added services and a loyalty program as suggested by you is the key.
    Wow, tonnes of opportunity for Open Table them, great work guys keep it up.
    Jeff Jordan is indeed a very smart guy, I listened to his inteview once [can't remember where] and I immediatley concluded that he is the right person at Open Table

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  3. Like your love for Opentable; however, they have announced a coupon effort called spotlight (http://blog.opentable.com/2010/introducing-opentable-spotlight%E2%84%A2-delicious-deals-on-meals/) and have an existing relationship with Yelp (http://bits.blogs.nytimes.com/2010/06/03/yelp-and-opentable-join-forces/?dbk).

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  4. In my opinon OpenTable needs to own a site focused around places and activities since they already have the database of places and then integrate opentable functionality. that way it transforms itself from just being a reservation service to being a combination of Yelp, Gowalla and Groupon.
    I suggest they buy a domain like http://www.placesa.com (places and activities), since they already have the database of places which are actually interesting to people, and customer feedback about a restaurant this will make placesa a combination of Yelp, Gowalla and Groupon.
    I bet this a better way going forward.

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  5. Hey thanks for the great article. I tweeted.

    I like your points on mobile, but it’s dangerous. I was working at a startup that was competing with OT back in the day but lost because it was too focused on mobile. OT was way better at doing something people are used to and are comfortable doing, instead of pushing customers into something they’re not. As people are more used to mobile, OT should definitely put out features to match, but focus on core which was what kept it profitable and alive.

    There’s several OTs in europe. Just eat has a lot of VC money.

    Taige

    find me @ http://www.mificlub.com

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  6. [...] one of the big beneficiaries of the emergence of mobile Internet today acquired UK-based toptable.com for roughly $55 million in cash. The [...]

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  7. [...] The bet is that social gaming is moving to mobile phones, which while small compared to Facebook, potentially has a larger audience as more people buy smartphones. PopCap Games recently shared that 25 percent of its revenues now come mobile titles. Other non-gaming companies built on the web are finding success branching out their models to mobile, like OpenTable, which is increasingly booking reservations via its mobile app. [...]

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