Yeah, so like I Said, OpenTable Is Gussying up for an IPO...

Earlier this month I made my feelings about OpenTable abundantly clear, and as I said then, the reason the company is most likely anxious to get all those unused dining checks off its books is because it's gussying up its financials to go public. Of course, I thought the company would wait until the market recovered. Nope, they filed today, which means OpenTable is either very optimistic about a turnaround in 2009 or really needs some cash.

Since flaming the company, I've had a few conversations with people who really do love it, find it useful and have not had my issues. (Although most everyone I've talked to agrees the dining rewards program is lame, at best.) Still, should OpenTable price, I don't think this is a stock you want to own for the following five reasons:

1. Did I mention it's 2009? Have you seen the markets?

2. OpenTable is essentially a local business. They have to conquer territory market-by-market, restaurant-by-restaurant. Local is one of the hardest and most expensive things to do well. It's also one of the only things that the Internet doesn't particularly make easier. Just look at Craigslist: The gods of local. The site's traffic is still dominated by a few big cities. Local hits tipping points and network effects but only in each city. There is traditionally no national tipping point for locally-oriented businesses. In other words, a restaurant in Memphis isn't going to do something because a restaurant in New York finds it valuable.

3. Margins. Imagine that! OpenTable isn't very profitable selling software-as-a-service. That's because it's a very expensive business model to scale, as I've detailed at length here. In short: The software doesn't sell itself, subscription revenues are monthly and steady, but lower in dollar amount and customers can cancel at any time. Such is the pay-as-you-go business model. You can build a huge business here as Salesforce.com has proven. Unfortunately, it's really the only one who has proven that. Even Netsuite, who I'm very bullish on, has struggled with profitability.

4. Restaurants are going to be closing and cutting corners as the recession wears on-- that can't be good for revenue growth. When fewer people are coming in your doors, do you need to pay for a reservation service?

5. The online travel agency effect. I could be way off here, but a lot of San Francisco restaurants just take reservations on their own sites, eschewing OpenTable. They don't want to pay the fees, and why should they when building and maintaining a Web site isn't exactly hard in this day and age? OpenTable may have brought restaurants into the online age, the way sites like Expedia and Travelocity did for the airlines, but increasingly vendors hate middlemen. Especially middlemen who control the customer relationship and take a cut of the proceeds. A lot of restaurants will still want to outsource, of course, but I think it's a risk when it comes to growth.

To OpenTable's credit, they reached out to me after that nasty early January post, and I was supposed to have a sit down with CEO Jeff Jordan. That's not happening now thanks to the quiet period! But I look forward to talking to him when he can talk again. OpenTable has always been ostrich-like when it comes to media so maybe there's something I'm missing here. I'm always open to someone changing my mind, as Tony Hsieh knows!