Great piece by Mark Pastore owner of Incanto, a nice italian place in San Francisco.
Mark makes a couple of really important points in his nicely written post:
1. With OpenTable, restaurants no longer own the relationship with customers. This means that the customer loyalty is to OpenTable and in essence businesses are paying OpenTable to create a loyal customer for OpenTable. Once OpenTable has that customers, businesses need to keep paying OpenTable for access to that customer.
2. OpenTable is expensive. Mark talks a lot about typical margins at restaurants of about 5%. with these margins he finds it difficult to justify the payments to OpenTable.
The overall point that Mark makes is that network based businesses that own customers (like Yelp, GroupOn, MerchantCircle or OpenTable etc.) are not great for local business. This is because if a network owns the customers, business will be held hostage by the power of the network.
Could not agree more!!!!