OpenTable’s near monopoly in the online restaurant reservations market may be ending soon, and that worry has sent its stock price plummeting from a high of $115.62 last April to around $36 as of this writing. Their biggest potential rival, however, hasn’t even become a reality: That would be a Zagat-branded reservation service built by Google, as the San Francisco Chronicle reports. It’s something Google has yet to announce, but which likely seems to be in the works.
Google’s purchase of Zagat back in September was one of many things to push OpenTable’s valuation down, but competition from existing services like Livebookings (mostly in Europe at this point) and start-ups like SeatMe — which recently started selling the $498 chef’s counter tickets at San Francisco’s Saison — pose a threat as well. And perhaps the biggest issue is how expensive OpenTable has become, especially to small restaurants.
Restaurateurs have long griped that they felt pressured to use OpenTable, writing out checks for thousands of dollars every month to the service without any other cheaper options to choose from. David Chang decided to go with his own online reservation system at his restaurants in New York rather than pay fees to someone else. And Mark Pastore, owner of San Francisco’s Incanto, penned an essay earlier this year about his reasons for not using OpenTable. “It’s possible,” he writes, “for convenience to come at too dear a price,” and explains how OpenTable’s fees can eat up most of a restaurant’s small profit margin. OpenTable CEO Matthew Roberts argues that for every dollar spent in fees to his company, a restaurant makes $43 in revenue. But in the every-dollar-counts world of restaurant bookkeeping, that does add up.
And while OpenTable has made significant in-roads into the restaurant marketplace, especially in major cities in the U.S., the market is still pretty open. OpenTable currently says they have signed up about 37 percent of the estimated 35,000 reservation-taking restaurants they want in North America. You’d better believe the hive mind at Google knows how to beat that faster than you can say “algorithm.”