Great Expectations


I am a big fan of OpenTable. I use it regularly, I appreciate its transactional business model, and it is sitting on a mountain of incredibly valuable data that it has barely begun to tap.

Recently I was surprised to find an article entitled "Why OpenTable Is A Lousy Deal For Some Restaurants." Who says so? Apparently, a growing number of restaurants in the San Francisco area. And what specifically about OpenTable troubles these restaurants? Several things.

First, OpenTable allegedly does not increase the number of people dining out on any given night. Rather, it simply shifts some of those diners to restaurants using OpenTable.

Second, OpenTable costs money. And because OpenTable is so popular, restaurants feel compelled to subscribe, making OpenTable fees akin to extortion. Worse yet, restaurants have to raise their prices to offset OpenTable fees, which in turn drives down the total number of people dining out.

Third, OpenTable owns all the customer data that passes through its network. Cancel your subscription and you lose access to all that data.

Needless to say, this is some mighty weak reasoning. OpenTable was not created to popularize the restaurant experience and expand the market. It has a simple goal to make subscriber restaurants more attractive to diners by providing a simple, fast, seamless reservation experience. 

The second argument, that restaurants resent OpenTable because it works so well is equally odd logic. OpenTable provides a powerful application most restaurants could never afford to build and maintain. More importantly, OpenTable provides the audience as well. By the way, OpenTable succeeded in large part because it was so painful and inefficient to make reservations before it came along. Further, OpenTable helps fill seats that might otherwise go empty, makes it easy to cancel reservations that otherwise would cost a restaurant money, and helps the restaurant professionalize and better manage its entire operation, all without additional staff. Presumably benefits like these offset the fees being paid.

On the issue of data ownership, I have more sympathy. At the same time, it's news to me that non-chain restaurants ever worried about their customer databases, since so few make even the slightest effort to build them on their own.

The bigger issue here is that companies, whether data providers, transactional services providers or both, can become victims of their own success. All the rumblings above suggest an emerging view that OpenTable is so dominant it is being thought of as a monopoly and a utility. And nothing good comes out of assuming either status. We all seek lock-in and workflow embedment, but once we achieve it, we are faced with a delicate, ongoing balancing act to keep the goodwill of the industries we serve. And that challenge is compounded when industry objections are long on emotion and weak on logic, especially in the wonderful world of online, where "free" is considered an entirely reasonable price point and value is hard to demonstrate when so much is taken for granted. Going forward, OpenTable will need to continuously re-calibrate its value proposition, perhaps unlocking some of the treasure trove of data it is amassing to help its subscribers fine-tune their marketing and tighten their own business operations.

 

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