by David S. Evans and Richard Schmalensee · 23 May 2016 · 383pp · 81,118 words
it was to fight the frictions in the restaurant-reservation business. And he’s one of the rare success stories. OpenTable’s Quest for Critical Mass After his wife’s frustrating morning, Chuck Templeton figured there had to be a better way to get people and restaurants together. In October 1998, at age
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their best customers, and, in principle at least, take reservations online. Finding that restaurants were reluctant to make large investments to purchase table management systems, OpenTable decided to charge a small installation fee and a monthly rental for its new system instead of requiring purchase. It then went knocking on the
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made it difficult to recruit more restaurants beyond the early adopters who were content with just the table management software. With limited time and resources, OpenTable had to strike the right balance between getting consumers and restaurants on board. Money wasn’t a problem. Chuck raised $36 million in venture
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The company shifted its focus to recruiting restaurants in just four cities: San Francisco, Chicago, New York, and Washington, DC. The idea was that once OpenTable had signed up enough restaurants in a city, its website would become attractive to consumers in that city. As consumers began making online reservations, it
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the short run, a restaurant can make a significant profit on every additional seat it fills. By 2004, around the time Chuck Templeton left the start-up to pursue other endeavors, OpenTable had ignited. It was growing rapidly in its four target cities as diners attracted more restaurants, which attracted more diners, and
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technology could be used to reduce the friction that kept diners and restaurants apart, thirty-two thousand restaurants, mainly fine-dining establishments with tablecloths, use OpenTable’s table management software. Sixteen million people use its website to make reservations every month. Since its inception, acting as the matchmaker between restaurants and
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than 830 million diners in seats at restaurants in the United States, Canada, Germany, Japan, Mexico, and the United Kingdom.13 OpenTable still has the same business model that Chuck Templeton proposed to investors back in 1999. Let people make reservations for free and even give them a little reward. Charge restaurants a
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restaurants and diners in each city, and they will ignite growth by attracting still more restaurants and diners. Ancient Roots, Weird Economics, and a Puzzle OpenTable used software and Internet technology to match restaurants and diners. It made it easier for consumers to make reservations and gave them more choices than
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restaurants money by filling empty tables and thus generating extra margin. OpenTable employed a multisided platform strategy that companies like Didi Kuaidi are using to reduce frictions in transportation, Airbnb in lodging, and Instacart in grocery shopping. In 1998, however, Chuck Templeton probably didn’t know that entrepreneurs had been using this strategy
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she would put candidates forward who would be good matches. And she’d broker the deal for a fee. OpenTable, and other multisided platforms, are all matchmakers in one way or another. Chuck Templeton also didn’t know, we suspect, that there were other important businesses that had faced the same kind of
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in advance, her account is terminated, even if she’s kept many reservations that made OpenTable money.17 Then there’s the fact that OpenTable, which met obvious needs of both diners and restaurants, barely survived. Chuck Templeton had a great idea. And developing a website and table management software was hardly rocket science
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the granola. The customer pays Whole Foods for the granola. The customer and the granola supplier don’t interact directly. A restaurant-reservation business like OpenTable is two-sided because it brings diners and restaurants together to interact directly. It takes no part in transactions between them. Matchmakers are called multisided
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This depiction is obviously abstract and one can quibble about whether the details fit particular multisided platforms. To see how it applies in practice, consider OpenTable. The Customer A’s are restaurants and the Customer B’s are diners. A number of restaurants and diners have joined this reservation platform.
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All the Eyeballs” Fallacy How One-Sided Analysis Led Many Dot-Coms Astray When Chuck Templeton started out, his investors told him, “grab all the eyeballs you can and figure out how to monetize them later.”1 For OpenTable, that meant signing up as many restaurants as possible anywhere there was interest without
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in this mechanical way. In fact, the promoters of the VHS and Betamax standards worked actively to attract content providers and consumers, just as OpenTable worked actively to attract restaurants and diners. VHS won because it was more successful in getting both consumers and content providers to use its standard
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to come, but new turbocharged matchmakers have already roiled existing industries. In some cases, they have created value by reducing frictions without threatening existing firms. OpenTable, for example, helps white-tablecloth restaurants work more efficiently by reducing the amount of labor they need for taking reservations and reducing the number of
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empty tables. Perhaps some reservation takers lost their jobs, and restaurants bought fewer pencils and notebooks, but OpenTable didn’t destroy businesses. Looking over the last decade, however, it is clear that turbocharged multisided platforms have developed better ways of doing things that
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are more valuable in total to all parties the more important the frictions they address are, and the greater their success at reducing them. Before OpenTable, people had to spend a significant amount of time making reservations at good restaurants for busy nights, and restaurants had to spend significant resources
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managing those reservations. Solving those frictions created a big enough pie to make all the stakeholders, the diners, the restaurants, and OpenTable significantly better off. Some frictions aren’t significant enough to sustain a multisided platform; reducing them wouldn’t create much value. Americans can pay with
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a provider of modern software solutions for the procurement departments of large corporations. During the late 1990s, it was, in effect, doing for procurement what OpenTable was doing for restaurants—using modern software technology to solve specific one-sided problems. Ariba realized that rather than connecting the procurement department of each
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have done so, they persuade the other group to join. OpenTable ended up taking this approach to a significant degree. It focused first on signing up restaurants, and then, with enough of them on board, it recruited consumers. According to Chuck Templeton, it needed dozens of restaurants in each area offering each major
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there are enough participants on each side that want to interact with enough participants on the other side. That often requires focusing efforts narrowly, as OpenTable focused on leading restaurants in only a few cities. PayPal used this approach effectively. It could have tried to persuade all online shoppers to
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to create themselves; and delivery services to get content to consumers’ personal computers, television sets, and mobile devices. Brightcove adopted a two-step strategy like OpenTable’s. It would first bring the publishers on board its platform by providing technology for delivering their content to various destinations. Content providers could upload
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of pricing. Alibaba, for example, gained incredible momentum in China by making access free for businesses to at least a basic version of its marketplaces. OpenTable found that it could reach critical mass by rewarding consumers but charging restaurants. Companies usually need to stick with the pricing strategy they used during
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complexity to platform pricing. Many matchmakers can use both of these prices to balance the demands of their customer groups, encourage interactions, and make money. OpenTable, for example, charges restaurants a monthly fee for licensing the computer-based reservation system they need to get access to the reservation platform.26 They
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American Express network. American Express charges cardholders a negative usage fee; cardholders pay nothing to execute transactions and get rewards, just as they do from OpenTable. This encourages usage and makes accepting the card more valuable to merchants. Merchants don’t pay an access fee; they can join for free. Having
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group initiate an interaction, the platform may provide incentives—possibly subsidies—to get this group to use the platform. That’s why American Express and OpenTable subsidize usage and why WEX Fleet One charges truck stops more than truck fleets. This also helps explain search engine pricing. A consumer decides
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platform and the ecosystem as a whole. Alternatively, they may decide to do without some potential third-party participants and solve some problems themselves. OpenTable, for example, could have waited for other companies to develop table management software and then try to build a business using their software to make
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which type of participants benefits the most from eliminating that friction can guide decisions on ignition strategies as well as on pricing. Sometimes, as with OpenTable, the platform drastically reduces a clear market friction, and the issue is whether the friction is big enough to enable the platform to earn
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in practice, plans that made sense at the start need to be adjusted in the face of evidence on how possible participants actually behave. When Chuck Templeton had trouble selling his reservation management system to restaurants reluctant to make large investments, he pivoted quickly to charging a small installation fee and a
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network effect arises when an additional participant of one type increases the value that participants of another type get. For example, an additional restaurant on OpenTable increases the value to diners, who now have an additional place to consider and at which to make reservations. A negative indirect network effect arises
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well as usage externalities. Usage fee: A fee paid by one or more participants on a multisided platform for interacting with another participant. For example, OpenTable charges restaurants a $1 per person reservation fee. Zigzag strategy: An ignition strategy in which the platform adopts tactics to increase participation of the different
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and they have not reviewed this book, much less endorsed it. Chapter 1 1. The history of OpenTable here draws on a number of sources, including Chuck Templeton (founder of OpenTable), in discussions with the authors, 2015; “OpenTable Founder Chuck Templeton on Starting Up,” interview by Katie Morell, OpenForum (June 23, 2015), https://www.americanexpress.com/us
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/small-business/openforum/articles/opentable-founder-chuck-templeton-on-starting-up/?utm_source=web&utm_medium=twitter; “Video: OpenTable Founder Chuck Templeton at Chicago Founders’ Stories
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@ 1871,” interview by Pat Ryan (April 25, 2013), http://www.1871.com/video-open-table
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-founder-chuck-templeton-at-chicago-founders-stories-1871/; Andrew Rachleff and Sara Rosenthal
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, “OpenTable,” Case E418 (Palo Alto, CA: Stanford Graduate School of Business, November 18, 2011); Benjamin Edelman and Karen L. Webster, “Optimization and Expansion
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at OpenTable,” Case 9-915-003 (Boston: Harvard Business School, March 9, 2015); and Maha Atal, “OpenTable—The Hottest
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noted, all monetary values we report are not adjusted for inflation. 9. “USA: OpenTable.com Names James Jeffrey Edwards CEO,” just-food, May 18, 2000, http://www.just-food.com/news/opentablecom-names-jeffrey-edwards-ceo_id90312.aspx. 10. Chuck Templeton (founder of OpenTable), in discussion with the authors, September 19, 2015. 11. Ibid
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. OpenTable started this strategy systematically in New York and then used it in other cities later. 12. Erick Schonfeld
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February 28, 2015, http://www.economist.com/news/briefing/21645131-smartphone-defining-technology-age-truly-personal-computer. Chapter 2 1. Andrew Rachleff and Sara Rosenthal, “OpenTable,” Case E418 (Palo Alto, CA: Stanford Graduate School of Business, November 18, 2011). 2. A focus on grabbing eyeballs makes more sense for new businesses
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the need for subsidies. See Bruno Jullien, “Competition in Multi-Sided Markets: Divide-and-Conquer,” American Economic Journal: Microeconomics 3, no. 4 (2011). 19. Chuck Templeton (founder of OpenTable), in discussion with the authors, September 19, 2015. 20. Mark Sweeney, “First Ads Appear on YouTube Clips,” The Guardian, August 22, 2007, http://www
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International Business Times, September 29, 2015, http://www.ibtimes.co.uk/youtube-ad-free-premium-service-launch-october-1521650. 26. OpenTable, “How OpenTable Works for Restaurants,” http://blog.opentable.com/2010/how-opentable-works-for-restaurants/. 27. “Earn credits searching the Web with Bing—similar to a frequent flier program. Redeem credits for popular
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and Jonathan Levin, “Peer-to-Peer Markets,” NBER working paper 21496, 2015, section 2.3, http://www.nber.org/papers/w21496. 26. OpenTable, “OpenTable Terms of Use,” http://www.opentable.com/info/agreement.aspx. 27. Matt Rosoff, “Google Has Stopped Punishing JC Penney,” Business Insider, May 25, 2011, http://www.businessinsider.com/google
by Marina Krakovsky · 14 Sep 2015 · 270pp · 79,180 words
show, that’s an important role in a wide range of middleman businesses, from online marketplaces to agencies that match workers with temporary jobs. How OpenTable Secured Restaurants’ Trust in Diners * * * One middleman business that has done an admirable job of deterring bad behavior is
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OpenTable, the company that revolutionized the way diners make restaurant reservations and was recently acquired by Priceline for $2.6 billion. Instead of having to call up one restaurant at a time until they find an open table at the desired time, diners can go
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can attract more diners, and by taking online reservations up until the last minute, they can reduce idle capacity. Diners win, restaurants win, and OpenTable wins. When Chuck Templeton founded OpenTable in 1998, though, the concept was so novel that restaurants resisted, he says. “Nobody understood the Internet back then,” he recalls.8 To
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and the restaurant gets nothing.9 No-shows can happen no matter how the reservations are made. But restaurateurs feared that by taking reservations through OpenTable, they’d be exposing themselves to more no-shows—that a kid bored on a Saturday night, for example, would make online reservations just for
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kicks, with no intention of showing up. OpenTable didn’t want that, either: if someone doesn’t show up, not only does OpenTable not make any money on that reservation, but the restaurant blames OpenTable, fraying the partnership. In fact, without a good system in place to
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keep diners accountable, OpenTable would have a hard time getting restaurants to become customers in the
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’s in their best interest to set and enforce policies for good behavior because these ultimately attract better participants on both sides. The designers of OpenTable’s rules decided to allow pseudonyms, but through a clever set of rules they managed to create a system that enabled restaurants to trust diners
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. Today the system works smoothly, and no-shows are no more a problem through OpenTable than they are with restaurants taking reservations over the phone. But figuring out the right set of rules was tricky, a version of the classic
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different restaurants, Templeton explains, so inevitably they’d have to bail on two of those, sometimes not bothering to cancel. But with one simple rule, OpenTable wouldn’t allow them to do that: there had to be at least a two-hour window between a diner’s reservations. Of course, diners
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could circumvent this rule by making a reservation by phone, but OpenTable wouldn’t be a party to such ploys. Users could also, in theory, make additional reservations under a different pseudonym, but for reasons that will
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be clear in a minute, that didn’t happen much, either. Another straightforward OpenTable policy was sending e-mail reminders the day before the reservation. “They might have made the reservation two weeks ago, decided a week ago that
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same reason many doctors’ offices (and some restaurants that take phone reservations) routinely make reminder calls or send e-mail reminders. The most clever thing OpenTable did, though, happened after the meal. Being an effective Enforcer requires watching the actions of your trading partners, but playing the watchdog can be costly
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. (Just imagine if OpenTable had to install a representative at every participating restaurant.) OpenTable kept monitoring costs low by letting diners and restaurants keep tabs on each other, with OpenTable stepping in only in case of a dispute. This system runs so effortlessly
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that most OpenTable customers aren’t even aware of it. When a diner who’s
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made a reservation through OpenTable shows up, the restaurant’s maitre d’ checks the
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party into the OpenTable reservations system. That means the restaurant pays OpenTable a small fee for a successful transaction—currently $1/seat at most restaurants—and the diner
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gets credit for having dined at an OpenTable restaurant. These credits, usually 100 points per meal, eventually pay
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out as a cash bonus, so they’re a loyalty program to encourage diners to use OpenTable. The loyalty program also alleviates the pseudonymity problem, since it rewards sticking with the same username for all your reservations.12 If a diner for
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save a few dollars on reservation fees by falsely reporting a no-show, they rarely do that because they know OpenTable will be on to them. How do restaurants know that? Because OpenTable has, in effect, developed a reputation as a good Enforcer: whenever a restaurant reported a diner as a no
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-show, OpenTable would send diners a tactfully worded e-mail explaining why no-shows are a problem for restaurants and asking diners to let the restaurant know
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. If a diner really was a no-show, the e-mail would make the person think twice about ditching a reservation next time. In fact, OpenTable kicks out diners for life if they have four no-shows within a year. Depending on your perspective, the policy may seem too harsh—for
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clock restarts after a year. But the policy does what it’s meant to do—it keeps the bad apples out without losing valuable customers. OpenTable doesn’t want anyone to incur four no-shows: the company would rather use each no-show as a warning, a teachable moment on how
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to be a good citizen in the OpenTable ecosystem. What’s remarkable is that the e-mail made restaurants accountable, too—“a good way to keep both buyer and seller honest,” Templeton says
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report no-shows. If a restaurant reports someone as a no-show who was actually there, and that diner complains to OpenTable, the discrepancy actually gives OpenTable a bit of useful information. OpenTable doesn’t even need to investigate. “If that happens once, then that doesn’t matter,” Templeton explains. “But if you
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either the restaurant side or the diner side, we could then quickly tell who’s the one doing the shenanigans.”13 In other words, through OpenTable, each diner and each restaurant developed a reputation within the system. And, as always, reputation is a powerful motivator for good behavior. Just as the
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threat of getting kicked off OpenTable keeps diners from incurring too many no-shows, so does a track record of contested no-shows keep a restaurant from cheating
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OpenTable. As Templeton says, “A restaurant can’t do it more than five or six times before we’re calling them saying, ‘Hey, we’ve got
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these customers saying they were there and you’re no-showing them. Is everything OK?’” The wording of this question is deliberately vague and diplomatic. OpenTable doesn’t want to catch its restaurant partners in a lie: it wants them to save face, to stick with the relationship, and to do
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the right thing in the future. This is a stunning feat: even though OpenTable is never on the scene, it has better information about no-shows than anyone else. Most restaurants don’t even have a record of who
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who turned out to be a no-show at their own restaurant; no one but a middleman can see that kind of information across restaurants. OpenTable can and does, creating the kind of virtuous cycle all two-sided markets aspire to. In securing the restaurants’ trust
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, OpenTable attracted more restaurants, and the more restaurants there are to choose from, the more attractive OpenTable becomes to diners; the more reservations are made through OpenTable, the more worthwhile the site becomes to restaurants, and so on. Other successful
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Enforcers by which they benefit both sides and from which they can profit themselves. This sort of policing isn’t just for Internet marketplaces (like OpenTable and Airbnb), and it does not rely heavily on cheap, crowd-sourced reviews. This chapter looks at middlemen operating off the Internet, too—a modeling
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when you’re confirming everything with both the client and the model. We are following up and following up.” Notice that this is the tack OpenTable uses to make sure diners show up for their reservation: both middlemen understand that to err is human and that it’s a bad idea
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, “and usually we have to push back.” Pushing back naturally risks angering the client, which business people are loath to do. For example, Chuck Templeton, the founder of OpenTable, told me that as much as he wanted to protect the interests of both diners and restaurants, that wasn’t always possible, so when
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restaurant is the one paying the bill.” But an agency model, who is probably more valuable to an agency than an individual diner is to OpenTable, does expect the agency to protect her interests against an opportunistic client. Sometimes, despite the agency’s attempts to be evenhanded in these disputes, the
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that doesn’t work for a client, they can look elsewhere.” The talent agency, it seems, benefits from the same indirect network effects that help OpenTable and other successful two-sided markets: if the agency can do a good job of protecting the interests of the model, it can attract the
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complete discussion of this argument is by Ara Norenzayan, Big Gods: How Religion Transformed Cooperation and Conflict (Princeton: Princeton University Press, 2013). 8.Interview with Chuck Templeton, March 12, 2014. 9.Some middlemen businesses are trying to change that: it seems easier for highly popular restaurants to get away with asking for
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, 183–9, 191–2 Nesbit, Lynn, 185 Netflix, 135 NFL, 173–4, 179–80, 183 Nozad, Pejman, 18–20, 22–3, 26–8, 40–2 OpenTable, 78–84, 108–9 opportunism, 74, 92, 104–5, 108 Parasites, 8–11, 89, 118 Parker, Eugene, 180 Partners, 8–9, 13 Pejman Mar, 19
by Lonely Planet
recommendations below and foodie sites such as www.chowhound.com and http://sf.eater.com, then scan for deals at www.blackboardeats.com and www.opentable.com – and since SF’s top restaurants are quite small, reserve now. Prices are often more reasonable than you might expect for organic, sustainable fare
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Laundry is epic, a high-wattage culinary experience on par with the world’s best. Book two months ahead at 10am sharp, or log onto OpenTable.com precisely at midnight. Avoid tables before 7pm; first-service seating moves faster than the second – sometimes too fast. Bouchon FRENCH $$$ ( 707-944-8037; www
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(www.surlatable.com) also offer casual introductory cooking classes. EDIBLE REGIONAL SPECIALTIES San Francisco Bay Area For coupons and deals on coastal California restaurants, check Open Table (www.opentable.com), Blackboard Eats (http://blackboardeats.com), Restaurants.com (www.restaurants.com), Living Social (www.livingsocial.com), Groupon (www.groupon.com) and Yelp (www.yelp
by Fodor's · 5 Nov 2013 · 1,540pp · 400,759 words
“heart healthy” icon next to some of the menu items. On Friday and Saturday nights famished patrons overflow onto the sidewalk as they wait for open tables. If you try to linger over a mango lassi or an order of the excellent kheer (rice pudding) on one of these nights, you’ll
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a jacket or a jacket and tie. Online reservation services make it easy to book a table before you even leave home. OpenTable covers many California cities. Contacts OpenTable. | www.opentable.com. Wines, Beer, and Spirits Throughout the state, most famously in the Napa and Sonoma valleys, you can visit wineries, many of
by Bruce Nussbaum · 5 Mar 2013 · 385pp · 101,761 words
restaurant reservations. Before OpenTable and other apps like it, we had to call each restaurant sequentially, wait for an answer, deal with often snooty gatekeepers, and negotiate a specific time to dine. It was a time-consuming and sometimes anxiety-inducing experience. By taking the process online, Open Table allows patrons to check
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), 18–20, 27 Oldham, Andrew Loog, 8 Omidyar, Pam and Pierre, 138 Online e-commerce companies, 152, 162–66, 174, 204 Open-source philosophy, 36 OpenTable app, 98–99 Organic food, 154 Organizational creativity, 21–22, 28–33 Organizational knowledge mining, 78–83 Osher, John, 61 OSS. See Office of Strategic
by David G. Blanchflower · 12 Apr 2021 · 566pp · 160,453 words
going, Transportation Security Administration passenger data, New York City subway usage data, bookings on Grub Hub, drug prescription data, and much more. Data from the Open Table network for the numbers of seated diners at restaurants have been especially useful in showing a total collapse around the world—essentially to zero in
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writing at the start of November 2020 the index was still at 38 percent of its pre-pandemic levels in the United States (https://www.opentable.com/state-of-industry). In 2020, Dhaval, Friedson, McNichols, and Sabia used cell phone data to examine the impact of the Sturgis Motorcycle Rally, which
by Rebecca Fannin · 2 Sep 2019 · 269pp · 70,543 words
, book hotels, purchase movie tickets, and redeem vouchers for manicures and massages. This multifunctional app combines Yelp, Booking.com, GrubHub, Uber Eats, Kayak, Fandango, and Open-Table and even loops in a Whole Foods–type grocery store. There’s no single equivalent to Meituan in the United States, where apps typically specialize
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, 206–207 Nuomi, 96 Nvidia, 196 O Ofo, 61, 128, 138, 157, 174–175 On-demand ordering and delivery of takeout orders, 5 O2O, 97 OpenTable, 90 OPPO, 76, 168 Optibus, 56 Oracle, 129 O’Sullivan, Sean, 123, 214 P Page, Larry, 29, 34 Palo Alto, 52 Panda Selected, 175 Parrot
by Lonely Planet · 27 Sep 2012
.twitter.com/korillabbq) and Calexico Cart (www.twitter.com/calexiconyc). Top Tips › Reserve a table at a number of restaurants around the city using Open Table (www.opentable.com). Best for Old-School NYC Katz’s Delicatessen Classic pastrami on rye is the name of the game at this New York stalwart and
by Douglas McWilliams · 15 Feb 2015 · 193pp · 47,808 words
Flat Whiters and a focal point for creativity. Trendies pride themselves on being coffee connoisseurs, while the coffee shops with their free Wi-Fi and open table arrangements act as ideal meeting places for the creative processes required by Flat White industries. Throughout the day and much of the night, the sight
by Rachel Dratch · 29 Mar 2012
’m not a megastar, occasional perks come along for me because I was at one time on Saturday Night Live. Nothing major. Stuff like an open table at a busy restaurant. I lucked out big-time, though, when I was five months pregnant. I was walking down the street and a guy
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