Yelp Buys SeatMe, an OpenTable Competitor

Yelp recently bought SeatMe, a startup that offers online reservation and table management services to restaurants. Using the web or their iPad app, SeatMe gives restaurants the ability to take online reservations, manage the floor, kept records on guests, track walk-ins and maintain a wait list. With SeatMe, customers place reservations through SeatMe’s website, whether their desktop or mobile version. The acquisition shifts the dynamics between Yelp and OpenTable. But before discussing what the SeatMe acquisition (as a competitor of OpenTable) means for the online restaurant reservation market, we should discuss what SeatMe offers.

SeatMe is a recent San Francisco startup (2011), currently with only 15 employees. SeatMe comes to restaurant reservation in a similar manner as Urbanspoon did with Rezbook. SeatMe features a similar clean, user-friendly design that complements the iPad. Like Rezbook, the iPad is the preferred on-floor management hardware. In general, the iPad has been the optimum hardware for many new restaurant tech startups, such as Breadcrumb POS or Freebookings from Livebookings.

SeatMe is not yet complete package, unlike Urbanspoon’s Rezbook. While it does text waiting customers when their table is ready and gives accurate wait times for walk-ins, the online reservation network and tools are still missing critical pieces. From our research, we were unable to locate a SeatMe widget that appears on a restaurant’s website. Additionally, SeatMe has about 120 restaurants in their network, spread all over the world and therefore, defusing their brand recognition to customers. SeatMe does not have a mobile app for either iPhones or Android but does offer mobile websites instead. Obviously, Yelp will have to work SeatMe into their own app or develop ones. In essence, Yelp is buying the technology, not the 120 restaurant clients, which is paltry to the 100,000+ restaurants reviewed or rated on Yelp’s site.

SeatMe Invades OpenTable’s Territory

SeatMe is a direct competitor with OpenTable, by far the largest online reservation network, claiming 28,000 restaurants worldwide. SeatMe is cheaper, based on a monthly fee (as of July 30, 2013) and does not charge covers like OpenTable. Then again, being on OpenTable brings in customers as OpenTable users browse the OpenTable website and app to find new restaurants, much like Yelp (OpenTable has reviews too). Of course, SeatMe is far less tested and Yelp has a ways before SeatMe can give customers a comparable experience.

However, Yelp and OpenTable have a partnership that may be endangered by this acquisition. Addressing this indirectly, Jeremy Stoppelman, Yelp co-founder and chief executive officer comments,  “we believe SeatMe will add online reservation capabilities to a broader market while complementing our existing partnerships. “

OpenTable-Yelp Partnership On the Rocks?

OpenTable and Yelp have been partners since June 2010. On a restaurant’s Yelp page, you will see OpenTable’s reservation tool (“Make a Reservation”) if the restaurant uses OpenTable’s online reservation service. The partnership benefitted both Yelp and OpenTable as Yelp brought millions researching restaurants, while OpenTable offered online reservation for thousands (now tens of thousands) of restaurants. In the United States at least, OpenTable is the dominant player in restaurant reservation, comparable to Yelp’s position in online reviews.

Yelp’s acquisition of SeatMe suggests that the partnership between Yelp and OpenTable is as blissful as it once seemed. The reason is a matter of size. SeatMe has a little more than 100 restaurants using their service, small potatoes compared to the 20,000+ using OpenTable. The two most likely possibilities. Yelp spent $12.7 million either to get a head start into online reservation or they believe SeatMe will improve their negotiating position with OpenTable.
It is not public knowledge what cut Yelp receives of a OpenTable reservation made through a Yelp Page. Through the widget on Yelp, OpenTable must make millions, if not more, from the $2.50 OpenTable covers that restaurants pay for reservations. Yelp has 100 million people that visit their website in a month, frequently more than once. A huge portion of visitors are there for restaurants. As of late, Yelp has sought new sources of revenue beyond advertising, as they partnered with delivery.com and Eat24 in the last month.

Yelp’s Future Direction

Yelp benefits in keeping everyone guessing. Yet, OpenTable realizes that their powerful influence in the world of online restaurant reservation was not built overnight, and despite the financial resources and brand recognition of Yelp, Yelp will have to win over restaurant owners (not patrons) to directly challenge OpenTable. Yelp is journeying out in many different directions in the last few months, so it is hard to discern if any of these will lead to new revenue streams and new players in online restaurant services.