Open Table and Competitors: Where Do They Go From Here?

The phenomenon that is Open Table reached a new milestone recently. On May 4, 2010, the company announced that it has seated 3 million diners via its mobile applications- a 200% increase in only eight months. At an average of $50 per check, this translates into $150 million in revenue for restaurants that be directly attributed to Open Table. http://www.opentable.com/info/newspage.aspx?id=325 For any restaurants not already on board with Open Table, no advertising campaign can match the persuasive power of results like these. First Quarter financial results were also promising for Open Table- total revenues were $21.3 million, a 33% increase over last quarter. http://investors.opentable.com/releasedetail.cfm?ReleaseID=466460.

So with Open Table on the rise, where does this leave its few competitors? While Open Table is the clear market leader, its remaining competitors struggles to capture the remaining market share. The main competitors are Restaurant.com,Inc. http://www.restaurant.com/, SavvyDiner, Inc. http://savvydiner.com/, and Yelp, Inc.http://www.yelp.com/. All three organizations are privately held, and therefore specific financial information is not available, and basically serve only North American restaurants and diners.

Due to the nature of the information market, these competitors face several challenges in their quest to unseat Open Table. First, network effects are a huge factor in this market. The whole point of these business models is to put the customers in direct connection with the restaurant of their choice. The more restaurants on the network, the broader the reach to the diners and the more valuable the product becomes- to both the restaurants who reach a broader base of diners and the consumers who have more options.

Second, but almost as important, are lock in and switching costs. Restaurants lay out a sizeable investment in order to connect to the Electronic Reservations Booking system hosted by Open Table, including an initial expenditure for hardware as well as monthly maintenance fees. Switching to one of these competitors would cause restaurants to incur substantial start up costs in switching out the hardware. Moreover, with its mobile capabilities, Open Table offers the largest reach of any of the companies, allowing customers to make reservations from virtually anywhere. If Open Table's claims are accurate, the results produced by their mobile applications are enough to make any restaurant think twice about moving to a competitor.

So is there anything that competitors can do to increase their market share? Time will tell, however as technology develops, survival will depend on foresight. Competitors must rely on partnerships with existing networks, or creating new networks to stay ahead. Will new products like the iPad, and the slew of tablets to follow, have any effect on this market? Almost certainly, as will the next version of the iPhone, and the next big technological phenomenon that exists now only as an idea. Seeing the trends before they happen, and positioning their organizations to gain maximum competitive advantage, will make all the difference. Open Table can't rest on its laurels- but for now, it remains the clear market leader in the industry.