Reservations About OpenTable's IPO?

OpenTable, the premier site for online restaurant reservations, is among several companies braving the anemic market for raising capital and giving initial public offerings a shot this week. Smart move or incredibly stupid?


In an effort for full disclosure, I love OpenTable. The delight I feel in making a reservation with the ease of a mouse click - or now finger swipe on my iPhone - replaces the dread I used to face spelling out my ten-letter last name to snotty reservationistas.

Still, as Bloomberg reports, this would only be the fifth tech IPO in as many months this year, a far cry from the tech boom of the late 1990s where five IPOs sometimes took place in as many minutes. OpenTable would be defying the odds.

All Things D's John Paczkowski seems unconvinced. He cites the fact that the restaurant industry is doing terribly in the current recession. True. But Erick Schonfeld over at TechCrunch points out:

Revenues through the nine months ended September 30, 2008 were $41.3 million, a 41 percent increase from the same period in 2007. The company makes money from the restaurants, which pay both subscription fees (54 percent of revenues) and reservation fees for each diner that shows up through the system (42 percent of revenues). It also makes a small amount on installation fees (4 percent of revenues).

Keep in mind those 9 months of 2008 were technically during the recession. And revenues were still up 41 percent pre-recession. That's impressive.

An argument can also be made that OpenTable holds the distinction of being the most dominant online reservation site, by far. It seems, according to Schonfeld's above analysis of their revenues that they have also barely begun to tap the revenue potential of their database of diner preferences. Imagine the value of that data to restaurants - it's analogous to what facebook can sell to companies for marketing based on their users' interests.

So despite the restaurant industry's current troubles, investors should, and probably will, see OpenTable's value in the long term. It's set to price post-close Wednesday.

Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

Never Tell People How Old They Look

Age discrimination affects us all. Who cares about youth? James Hamblin turns to his colleague Jeffrey Goldberg for advice.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

Never Tell People How Old They Look

Age discrimination affects us all. James Hamblin turns to a colleague for advice.

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

Video

Pittsburgh: 'Better Than You Thought'

How Steel City became a bikeable, walkable paradise

Video

A Four-Dimensional Tour of Boston

In this groundbreaking video, time moves at multiple speeds within a single frame.

Video

Who Made Pop Music So Repetitive? You Did.

If pop music is too homogenous, that's because listeners want it that way.

More in Business

Just In