The Freebookings Mystery: What Does Livebookings Have Up Its Sleeve

Freebookings, owned by Livebookings, will be launched soon (this fall). This online restaurant reservation software promises something incredible. Freebookings claims it will not charge customers nor restaurants for reservations. It’s free for both. You may be like me and ask: how can this be possible? Where does the revenue come from?

We are skeptical too, as we were months ago when the Freebookings website site first appeared. This is something Livebookings, the parent company has not done before. Livebookings has been rather successful (over 9000 restaurants worldwide) selling online reservation tools to restaurants the same way OpenTable does. The restaurant pays for each seated diner (normally if a customer uses restaurant’s own website for a reservation, the restaurant is charged less or nothing).  If you haven’t heard of Livebookings, it is probably because the bulk of their business is in Europe.

I will forewarn you. I don’t know what Livebookings’ master plan is. Some have speculated without telling us who writes the checks and for what. I doubt Livebookings would settle for a terribly worse business model (getting nickles and pennies for reservations) even though they might see that the current situation in online restaurant reservation cannot last.

I agree with Pete Rose that Freebookings is likely to move away from a central platform model and to widgets. But as far as I know, they haven’t partnered with any Internet behemoths yet. Google through Zagat has a relationship with OpenTable. And vague comments do not actually mean something is in the works. Building a business model that principally relies on access to a much larger companies’ resources and traffic seems doubtful.

Perhaps Livebookings believes that they can quickly starve (somewhat unpopular) OpenTable if restaurants move over in mass. With a severely weakened competitor. they can negotiate good terms with the gatekeepers like Facebook and Google. But nothing like that is guaranteed and another agile competitor may copy Freebookings’ business model and neutralize their advantage. Any scenario I know of presents challenges, and these challenges will not be accompanied by a proven revenue stream.

Freebookings might just turn online reservation on its head, if it has a viable revenue stream.  Restaurants owners may get a much better deal in the end. This is possible because Livebookings has a significant advantage over OpenTable. As Livebookings is privately held, they can change their business model without their stock price tanking. OpenTable executives would cripple their publicly traded company if they tried out an unproven business model (see Netflix). Investors know that the “restaurant pays per seated diner” system provides reliable revenue.

Other positives may come out of Freebookings. They claim it will have a simple interface. Urbanspoon’s RezBook, using the iPad, pioneered this emphasis on simplicity and ease of use. Also, Freebookings can be managed from a smartphone, a tablet or a laptop, giving it a lot of versatility. Other questions persist. How much customization is possible with the software? With their blog, we are reading for even the slightest hints.

The answers will have to wait. Some will be arrive when the beta version comes out this fall. Even if Freebookings still does not explain what company will be paying the bills, we will try to find how through their software. Their website does not divulge anything beyond what introducing the software. If you have any insights, put them down in the comments section.