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: and on Google+
For more stock ideas, go to CNBC's Stock Blog
CNBC Data Pages: