Yelp Inc. YELP and OpenTable ended their 5-year long partnership in April this year and managed to keep it “secret” until last week, per a Reuters report.
Reuters observes that the two companies split as a result of increasing competition between them. In 2010, both the companies had signed a deal that would enable Yelp users to make restaurant reservations through OpenTable directly on Yelp’s website. The move in fact was directed at eliminating competition from UrbanSpoon and Rez.
As per analysts, the split was a widely speculated move. The companies had been facing tremendous pressure which made it necessary to expand into adjacent areas thus “encroached on each other’s territory.”
Yelp witnessed sluggish user growth despite massive international expansion and the closure of its brand advertising business. While the company managed to grow its market valuation to over $2 billion in a couple of years, intense competition from behemoths, like Alphabet Inc.’s GOOGL Google in the digital advertising business has been a constant headwind. Adding to the woes, recently Facebook Inc. FB launched a service called Facebook Professional Services for providing local reviews, which is in direct competition with Yelp’s offerings.
As for OpenTable, an increase in the number of players in the booking/reservation space caused market share losses.
OpenTable was acquired by Priceline.com PCLN for $2.6 billion in 2014. With the acquisition, OpenTable expanded to reviews, trespassing on its ally’s territory, while Yelp’s acquisition of SeatMe in 2013, a rival of OpenTable, ensured that the break up was imminent. With the SeatMe acquisition, Yelp had launched its own reservation service called Yelp Reservations. Yelp Reservation currently covers more than 18,000 affiliated restaurants.
As per an analyst, "both companies are trying to take charge of the entire customer experience. If they have to share that customer with someone else, it threatens their long-term viability."
At present, Yelp has a Zacks Rank #3 (Hold).
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