OpenTable – business model to go?

Palm Restaurant (Bryce Edwards via Flickr)Online restaurant reservation site OpenTable went public today. And at the prices it is trading at, it’s a startling sign of hope in the down economy (TechCrunch reported it surging to $30 a share as of 11am PST).

As the San Jose Mercury news reports, OpenTable and SolarWinds‘ debuts on Wall Street marks the end of a “15 month drought” for Silicon Valley start up companies. Venture capitalists are celebrating, and it’s a triumph no doubt for OpenTable they weathered the first dot-com bubble and now appear to be doing quite well in this recession. However, what is interesting about OpenTable is the way they are making their dough, so to speak. 

The company doesn’t sell ads against its public-facing web pages, but rather, sells its software to restaurants and then charges the restaurant $1 for each table booked on its site. Their filing with the Securities and Exchange Commission claims 3 million diners per month and $55.8 million revenue in 2008: “For the twelve months ended December 31, 2007 and 2008, our subscription revenues accounted for 55% and 54% of our total revenues, respectively, and our reservation revenues accounted for 41% and 41% of our total revenues…”

OpenTable started out with a good software product, created a free service for the public and were able to get 10,000 restaurants to buy into it. Now, they’ll have to take the next step and continue to grow via the applications market and abroad. Seems like a recipe other tech and web start ups will want to emulate?

As Erick Schoenfeld writes, “If OpenTable is the new measuring stick, a company needs at least $50 million in revenues, have at least one quarter of profits, customers with proven loyalty, and solid growth potential. In other words, it needs to be a real business.”