Are you being served?
For a small technology company OPEN has great brand awareness. Unlike most e-commerce companies OPEN is not heavily reliant on third parties for traffic such as Google. 90-95% of users go direct to OPEN sites. Its mobile app and websites are the leading destinations for consumers to review, select, read menus and make a confirmed reservation.
Source: OpenTable
Everyone wins
One of the best aspects of the business is that OPEN receives the same amount per booking on mobile and desktop averaging 70 cents. No mobile monetisation issues here! Mobile is approximately 1/3 of bookings in North America. OPEN is a massive beneficiary of the trend to last minute location based bookings.
The pay for performance booking model is favourable for restaurants as the average check brings in $42. A lot better result then traditional advertising where there is no guarantee of a booking.
OPEN tends to make around $600 per restaurant per month including a $200 subscription fee. OPEN software is compatible with the Ipad and a cloud based system is now available. This system called Connect has no subscription fee but reservations are higher at $2.50 a booking.
No stomach churn here
Some technology companies annoyingly tend not to disclose churn in their subscription base. OPEN is happy to disclose this number because churn rates are low, they tend to be around 1% a month. A decent rate considering a lot of restaurants unfortunately go out of business.
OPEN has an interesting opportunity to be more involved in the field of data analytics. OPEN has a database of users dinning histories and preferences which can help restaurants to personalise the dining experience. This is a great opportunity as this data will help the OPEN system be more sticky and useful for the restaurants. There is also the possibility of a recommendation engine suggesting restaurants based on past data and in integration with Facebook where friends like to eat.
OPEN is still only booking 12% of diners in North America. The highest booking rate at 31% is by the technology savvy area that is San Francisco. Penetration will most likely fall somewhere just under San Francisco's 31% so there is still ample room for domestic growth. There is also growth internationally with a major growth push underway in London. OPEN has 80% of the Michelin rated restaurants in London on board. They are also adjusting the service for locals so they can search by tube stop.
Cake anyone?
OPEN is one of the best beneficiaries of the trend towards mobile usage. It is a service that is location based, sales are incremental as they are last minute and they monetize the same on mobile as desktop. Investors can have their cake and eat/book it too!
Jason
Disclosure:
Decisive is long OPEN
The material
in this article is for informational purposes only and in no way constitutes a
solicitation of business or investment advice. The material has been prepared
without regard to any client's or other person's investment objectives. Before
making an investment decision you should consider the assistance of a financial
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