) seems to have hit the right note with its decision to sell
third-party restaurants coupons through its website. The company's
Spotlight program has made it a direct competitor to Groupon - the
first company to fully demonstrate the effectiveness of group-based
online discounts. And restaurants using Spotlight seem to have
plenty of positives to report. Notably, 90% of restaurants
participating in the program recommend it to other restaurants.
Already the leading provider of free and real-time online
restaurant reservations, OpenTable is comfortably ahead of its
competitors in an industry that also includes Urbanspoon, owned by
), and UK-based companies liveRES Ltd and Livebookings Ltd.
We currently maintain a $94.90 price estimate for
, which is about 10-15% below the stock's market price.
Spotlight on Spotlight
Spotlight is a deep discount service similar to Groupon that
OpenTable started in August 2010. OpenTable launched the Spotlight
service under the assumption that full service restaurant owners
might prefer OpenTable over Groupon for selling their discount
coupons, as it addresses their requirement for a more focused
And the assumption was recently validated by a survey of
restaurant partners conducted by OpenTable. While 85% of the
restaurants were satisfied with the Spotlight feature, 90%
suggested that they would recommend Spotlight to other
restaurants. Also, they noted that 40% of diners that came through
Spotlight spent more than typical diners.
What this Means to OpenTable
OpenTable normally sells Spotlight coupons priced at $25 each,
and retains half of the revenue generated by the sale of these
coupons. With approximately 600 people on an average buying coupons
for a particular deal, and about 200 Spotlight deals hosted by
OpenTable in 2010, this represents revenue of $1.5 million. And
this is within months of launching the service.
The annual number of deals, which are available for a week at a
time and displayed by region, could increase towards 4,000 over the
next 5 years by our estimates. This represents annual revenue of
$30 million assuming static per coupon revenues.
See our complete analysis for OpenTable stock