Software as a Service, the always controversial sarah lacy, Web/Tech, ZAPPOS!

OpenTable: So Web 1.0 It Hurts.

I have written a few times about my total dislike of OpenTable.com-- a site I adored when it first came out. Please. Someone take them down with a better product that caters to its users and not just the restaurants that buy its software. I will personally invest in the idea. OK, that's not true, because my freezing 100-year-old Victorian house takes all my money. But I'll throw you a launch party or a parade or something.

My problem in short:

OpenTable was founded amid the dot com bust and survived. Good for them. But it was infected with a lot of the worst of Web 1.0 thinking, particularly the belief that biz dev deals and partnerships with other businesses were more important than users. Back in the late 1990s, with a few exceptions like eBay and Craigslist the idea of a "community" mattering wasn't really a necessity of building a consumer Web business. It was enough that users could communicate, find things and buy things in the comfort of their living rooms using the brand new Web. Combine that with the crash and you had an environment that required any surviving company to find a way to make money quick and focus on users and features later. That's the story of OpenTable: A company that is ostensibly a consumer business, but actually makes its money from selling software and hardware reservation engines to restaurants.

Make no mistake, users: The company knows who signs the checks.

Now, I don't begrudge OpenTable a business model. Early on, I championed the company for it. But a recognition that it should appreciate its users would be nice. The point of OpenTable is to streamline the reservation process, because it's a pain to call around looking for a reservation. Awesome. Only increasingly restaurants call you to verify your OpenTable reservation. If you don't call back, it's canceled. If I had time to call, I wouldn't need OpenTable.

After having several reservations canceled in the past because of this, I complained to OpenTable's customer service department who told me, they don't particularly care about what their users think, their job is to serve the restaurants that buy OpenTable's software and I should take it up with them. When I asked one of the company's investors about it, he/she said the restaurants needed it as a hedge because too many people flaked on reservations without repercussions. Several restaurants I asked about the problem, backed that frustration up. In fact, increasingly San Francisco restaurants are offering their own online reservation engines-- mirroring the trend we saw with online airline tickets. Initially airlines were happy to have aggregators like Expedia and Travelocity handle their online ticketing, but as the Web and adoption of the Web matured, airlines realized they were giving up too much, and have since worked to drive people to their own sites instead or champion search engines like Kayak and SideStep.

Well, doesn't that show a flaw in how OpenTable works as the reservation service? Since OpenTable is getting paid and all, shouldn't it have to solve that rather than pushing the onus onto would be diners? Oh wait, OpenTable is giving us "points" and for every two thousand I get $20 off a meal. Well that makes it worthwhile, right?

Wrong. I hadn't used the service in months because of this frustration, and today I decided to give it another chance. I respect a lot of people who are involved with the company; maybe amid the Web 2.0 movement all around them, OpenTable had made some changes. Well, wouldn't you know it? My thousands of past points had "expired" with absolutely no warning or email, because of this inactivity. Points that I earned from all my "loyalty" booking reservations through OpenTable for years, helping it prove to restaurants that diners loved using their service so much, the restaurants needed to keep paying for it.

Let's make sure I have this right: OpenTable makes thousands selling reservation software. I spend thousands of dollars in business dinners I book through them dating back to 2003 when I joined. The restaurant doesn't get much, because I probably would have dined there anyway. And I get less than $100 in a dining check that I'd probably never actually redeem. Pretty lame as rewards programs go. But even lamer: Offering no warning by email when years of points were about to be canceled. I don't have the screen shot to prove it, but I'd be willing to bet the policy was added after I signed up.

Honestly, OpenTable: Was it worth the $80 or so you saved to convince me once again you don't care a thing about your users? I'd call customer service, but really, what's the point? (Not the only one annoyed by this. Google "OpenTable Sucks" or a variant to find more. Most people echo the point that they didn't sign up because of the loyalty program, so it just felt like an unnecessary slap in the face. Truth be told, a ton of newer users love the service. Just wait.)

Now, mid-2007 OpenTable started cuing up fluff pieces in the New York Times and elsewhere that were meant to build towards an upcoming IPO. A few honestly could have been penned by the company's PR department. (One wet kiss was even written by my old friend Katie Hafner in fact! To her credit, I didn't find a single grammatical mistake, just some reporting gaps.) As I've written before, the software-as-a-service business model is a brutal slog -- especially to get to the kind of volumes that excite Wall Street, and double-especially in a business like the restaurant industry that's so inherently local. Closing each deal requires pounding the pavement and is incredibly costly. So maybe OpenTable needed to cut corners to gussy up its balance sheet. Like all those dining checks it owed.

As I said above, I get all this. And I get the climate during which OpenTable was founded. But compare the attitude to that of Zappos; a company founded at the same time and under the same harsh scrutiny. Zappos's core competency is customer service, even to the detriment of the company's bottom line. Zappos is doing about $1 billion in annual revenues-- the company could clearly cancel free overnight shipping and returns and move its call centers off-shore and have a beautiful balance sheet Wall Street would drool over. But its management actually gets what building a company for the long haul entails.

Mark my words: In ten years Zappos will be a far bigger, far more relevant business than OpenTable. Because while the convenience of booking a reservation online is great, it's not so great that you can ignore the users that make it all possible. I've long hoped Yelp might get into this game. I know they'd never get in the console/software business, but maybe there's another way to use the Web to solve the reservation problem. A quick Compete graph shows by focusing on community, the far younger Yelp has grown to 20 million uniques, per month, while OpenTable spent the last year flat at around 1 million.

Now, if you'll excuse me, I have to go wait by the phone to make sure my dinner reservations don't get canceled.

Comments

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Missing the point...Many of the restaurants don't answer the phone, or it is impossible to get through..Per Se, The French Laundry, etc so Open Table is great at matching availability with demand. Also, most good or popular restaurants call to confirm the reservation the day of, regardless of whether you book through Open Table or through their online sight/phone. As for Yelp, it is nice that you can chat about your interests, but it won't and probably never will get me a reservation at the latest Mario Batalli restaurant.

hey phil-

like i said in my twitter, maybe it's me! a lot of people like 'em. but i've used them since 2003 and had more problems every year. there's a general attitude that's anti-user.

i've eaten at hundreds of restaurants in the last year without using OT and i haven't had a problem getting through- it's just less convenient. but maybe we dine at different places!

Hi Sarah,

I have to say, I agree 100%. OpenTable seems increasingly stale, and not just from a usability standpoint. The whole business model just seems to say "We don't really give a rat's ass about what *you* think. We're here to serve *our* customers, the restaurants."

Never mind that if their customers' customers (namely us) find out that a much more friendly and user oriented system is in play (namely yelp?), we might just drop them like a bad New Year's habit.

wow a response from the author herself...I very much enjoy and look forward to your columns/postings...and your book was excellent. Next time you are in NY, lets try the Per Se thing with Open Table vs calling. I will treat http://en.wikipedia.org/wiki/Per_se_(restaurant)

Stop bitching. Propose a solution. You'll feel more productive that way.

Sarah,

Great post. I am neutral on Opentable (Full disclosure I am the founder of a web app for restaurants, but do not compete with Opentable)

I think Opentable could have turned the corner with their iPhone app that from what I can tell works well.

There are other booking apps out there that are cheaper (for restaurants) and easier to use (for consumers) but they are not able to beat the 10,000lb gorilla that is Opentable.

I can't figure that out, especially now that restaurant owners have figured out that they are getting screwed by OT.

As booking apps start to mature we will see a shift so be patient.

PS Feel free to invest in us, or buy us dinner. Food and/or money makes us smile.

You could have just posted that Compete.com graph, WOW!

Users rule - and although I've never tried open table, you (as a user) have just about convinced me not to waste my time on it.

Also, I think it'll only be a matter of time until we find a one-stop website for connecting to restaurant reservations/take-out menus, e.g. granted it's fast food, Chipotle's leading the way with an iPhone app http://www.techcrunch.com/2009/01/12/the-case-of-the-missing-burrito/

Help is on the way!! I won't get into what I have but the last phase of our restaurant section will be to have online reservations.. Just starting to research this now so don't know everything that goes into it.. Is it possible to hook up directly to the restaurants POS or does OpenTable have the rights or some shit like that? I'd love to talk to you about this as I'm swamped in other areas.. If there is no exclusive then I'll run OpenTable to the ground in the next 12 months.. I guarantee this, I will not affiliate with them.. Anyhow, take it or leave it, I got something pretty special coming and I would love to add this final piece and squash them!! You want to take them down? I'm the man that can help

Tony

It would be smart to contact www.restaurantdiary.com

So is anyone else confused how this $55M rev company with almost no profits has a $700M market cap?? I guess it truly is a Web 1.0 redux!

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Srah Lacy

Sarah Lacy is an award-winning reporter who has covered high-growth entrepreneurship for more than fifteen years. She is the founder, CEO and Editor-in-Chief of PandoDaily.com, the site-of-record for the startup ecosystem. She lives in San Francisco.

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