GO
Loading...

OpenTable Scraps Spotlight; an Omen from Groupon?

When OpenTable launched its Spotlight daily deals business a little over a year ago, investors thought it was a slam-dunk growth business. Some thought it would do $30 million a year by 2012. As recently as May the company boasted, “Ninety percent of participants said they would recommend Spotlight to other restaurants, and almost two-thirds reported that Spotlight diners spend more than diners from the other group buying programs they've used.”

Now hear this: In its earnings call Tuesday OpenTable said it was scrapping Spotlight.

According to OpenTable CEO Matt Roberts: “After more than a year, and learnings from 13 markets, we have determined this offer is not one that resonates with the majority of our restaurant base…”

Turns out rather than becoming a booming part of the business, it amounted to less than 2% of sales last quarter—or less than $6 million.

But the bigger issue is what OpenTable’s decision to drop its daily deals business means for companies like Groupon, which is expected to go public later this week. OpenTable is the latest company to throw in the towel.

The answer might be in the cost of getting those sales. According to Roberts, “It does require some resources, not the least of which is sales resources.”

Reality of the daily deals biz: The only people getting rich from it are probably the commissioned sales people.

P.S.: OpenTable’s earnings showed a sequential slowdown in key metrics, including sales and seated dinner revenue, as costs (and competition) have been rising. The company's once high-flying tug-of-war stock has since met the laws of gravity.

Questions? Comments? Write to HerbOnTheStreet@cnbc.com

Follow Herb on Twitter: @herbgreenberg and on Google+

For more stock ideas, go to CNBC's Stock Blog

_____________________________
CNBC Data Pages:

______________________________

Disclaimer

Symbol
Price
 
Change
%Change
3O9
---

Featured

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC Senior Commodities Correspondent and Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.