The New Side of OpenTable

OpenTable (NASDAQ:OPEN) has become synonymous with the concept of online restaurant booking in North America. But the company does far more than provide you with free and real-time online restaurant reservations. OpenTable has gone on to add Groupon to its list of competitors that, previously, only included online restaurant reservation providers like Urbanspoon, owned by IAC/InterActiveCorp (NASDAQ:IACI), and the UK-based liveRES Ltd and Livebookings Ltd. Groupon also seems to have hit the right note with its decision to sell third-party restaurants coupons through its website.

We currently maintain a $94.90 price estimate for OpenTable, which is in-line with the stock’s market price.

The ‘Other’ Sources of Revenues

OpenTable is able to provide its services to diners for free by collecting a monthly subscription fee as well as a per diner reservation fee from the restaurants it hosts on its website. These subscription and reservation revenues are by far the biggest sources of value for the company – an estimated 80% of the company’s stock value by our analysis.

But over the past few months, OpenTable has successfully implemented new features with significant revenue potential in the years to come. These features include Spotlight, OpenTable advertising, OpenTable Connect and Private Dining. We estimate that these features, together, constitute almost 17% of the company’s stock value.

Focus on Spotlight

Spotlight is the star pick among the 4 newly launched services by OpenTable. It allows restaurants to sell Groupon-like restaurant coupons as weekly deals through the opentable.com website. Groupon has already demonstrated the effectiveness of group-based coupons in attracting new customers to try a product or service. And full service restaurant owners would clearly prefer OpenTable over Groupon for selling their discount coupons, as it addresses their requirement for a more focused target audience.

The fact that OpenTable retains half of the revenue generated from the sale of coupons, and weekly deals are featured separately for different cities/regions means there is substantial revenue potential in Spotlight. One analyst estimate pegs the possible revenues from Spotlight to be between $18 million and $24 million by 2012. ^[1]

To derive our analysis of Spotlight’s value, we estimate that 600 people buy coupons worth $25 each as a part of a deal on average, which represents a revenue of $7,500 per deal for OpenTable.

See our full analysis and $94.90 price estimate for OpenTable

1. OpenTable: Pros Have Reservations After 147 Percent Jump, Bloomberg Businessweek, Sept 16 2010 [↩]