Online media influenced 40 percent of recent restaurant visitors, with restaurant Web sites having the most influence. Traditional media proved more effective than social media for these consumers. Twenty-seven percent were influenced by newspaper, and 25.4 percent said the same for direct mail.

“People are still eating out and ordering out, but want to make sure they’re spending their money wisely,” said C. Lee Smith, president and CEO of Ad-ology Research. “Restaurant Web sites can really drive traffic by providing menus and prices, plus details like hours and location so consumers feel like they have all the information they need,”

An old study done by Com-score delves further by showing the specific impact that online reviews have for a restaurant.  See the discussion in an earlier post here The findings are no suprise but thought they might be interesting for you to know.

So whats new? The new Skype functionality allows directories to put a link which they or the business pay for instead of the consumer. This is a nice additional business model. This could get even more interesting if and when Skype starts advertising category related either in the call or within the skype software ie you click on a plumber in your area to call them and the skype software also suggests - sponsored listings that the plumber pay a premium for receiving the phone calls.

I also look forward to seeing what kind of reporting metrics the directory can pull in to show the business how many leads they generated for them and whether they have a solution that doesnt involve the customer needing the skype software ie just enter their own phone number and be called.

Exciting times in the voice / web world, especially in local.

The $700 million question is. Can Urbanspoon sell it to restaurateurs. It took Opentable $52 + million in venture funding and 10 years to sign up 10,000 restaurants. Admittedly the market is easier now, restaurants are better informed but still a little over 50% of them have a website are they really going to throw away their paper and pen for any kind of technology. Only if it brings them more business. You have to prove to an owner that it will bring them more business, when only a maximum of 10% of a restaurants reservations currently come from online its a matter of waiting until you prove that to an owner.

If Urbanspoon can prove they will bring the restaurant more business before the restaurant has to commit and come up with a cost effective way to sell to restaurants then I think Open table and its shareholders should be shaking in their boots.  That’s what we see as the opportunity - deliver online reservations without the restaurant having to change any behaviour. Then when we know who is getting the reservations . he proven the restaurant will get more business, we know who is going to be interested in a software as a service reservation system. Whether we are re-selling something like Opentable or Urbanspoon or something of our own development remains to be seen but its critical whoever wins in this market think of a way to take it mainstream and acquires new restaurants cost effectively.

I’ve been thinking about this  a lot and think the best solution is two fold. First some advanced device identification. There is technology that is around at the moment that is mainly used in online fraud detection to identify a particular device ie computer using more than IP address and browser information.  A friend of mine works at a company Threat Metrix that employs this technique to prevent credit card fraud and I think an adaptation of this to manage online reviews would work really well. This could particularly work out if the same device that registered or claimed an account is now leaving a review. Or that this same device has already made a review for this particular venue and you can simply take the most recent as the most relevant.

If you combine this with some verification techniques like did the person redeem a voucher, that they paid for with a credit card or did they make a reservation you have some excellent validation point that the user has the right to leave a rating and you can trust it is real.

In a world where so much trust is being placed in reviews and there is also a growing volume of reviews its the publishers that display the moste credible reviews in the future that will garner the most trust from thier users and in tern retain the most traffic.

• The local search advertising market is huge and there has been some significant growth by industry players such as Yodle, Reach Local, and Local.com
• Being a great sales force is one thing but re-sellers of the major paid search need to find ways to add value. This make sense as a smart business will always be asking what are they paying for and will eventually go direct if they dont see the value.
• The biggest challenge for resellers is churn. Estimates are that 60% of customers leave every 12 months. The biggest reason is that the small businesses not perceiving a return on investment, particularly in the first 90 days.

The reason for this failure is the failure for the re-sellers to clearly understand the amount of business being brought to the small business and clearly and easily communicating that to the owner. To a business owner that has just made thier first purchase of search engine marketing campaign to expect them to immediately understand the value of a click is naive.  If I own a local restaurant do my 500 extra clicks on my website per month result in a good investment of my $500 per month. When they read that i bet most owners dont think it does. If they can show it resulted in 50 new reservations, then it is so much easier for the owner to understand without having to be an SEM expert.

Tracking online reservations and calls sent to a business is the only way to determine the true effectiveness of a local search marketing campaign and until the business models and sales commission structures are based around that then there will always be some misalignment between the business, the local search directory and their users. The industry isnt there yet and its because half of the 100,000 sales people selling to these businesses are yellow pages and local newspaper people so its the history of those industries that are still leaving thier legacy.

If you are interested in learning how to re-align your online directories to be more inline with business owners and users get in touch with dean (at)bookingangel (dot) com or follow me on twitter

There is no doubt that there is a worldwide meme in online reservations /bookings and Open Table has benefited from this. Check out Google Trends to see what I mean. People trained in booking their travel online now understand the convenience of organizing their  life online and want to be able to do it in other areas of their life.  There is no doubt consumers like online reservations, as they become more trusted they will continue to grow. The question is how do you get restaurants to adopt it and how do you make money. Sarah Lacy wrote some interesting points in a recent article. Its a good article along with some of the other articles she links to and I agree with some but not all of her points

She highlights how difficult the sales model is. It has taken Open Table $48million in funding and 10 years to enable  9000* restaurants with their technology, most of which are in the Bay area and New York.  Thats a pretty expensive cost of acquisition and its because they have to convince a restaurant owner to completely change their behaviour, to throw away the restaurant diary which worked pretty well and replace it with a complicated computer terminal that all of the staff will have to be retrained on and that will inevitably, like all technology go down. Tough sell.

I dont think local has to be hard to monetize its just about understanding that business just want more business. If you are selling them more business, they will pay for it. Its just when you try to sell them a monthly subscription that offers them no benefit that it gets difficult. Business owner in the past have all been ripped off by some advertsing / yellow pages sales person that sold them ads or services that didnt bring them business but if you can prove to bring them business they will pay.

I understood from being in the tech industry for 5 years before buying a share in a bar and restaurant that the problem is not that local / small business people are luddites, its that they are so damn busy working in their business. As a restaurant owner I was pitched advertising / new business opportunites 3 or 4 times a day. The only things that got any of my attention where things that guaranteed me more business at a reasonable cost.

That is what we realised in the beginning with Booking Angel.  You get maxium adoption with the least friction when you fit in with the way that restaurants work today, make technology work for the business.  You can then slowly start to bring them more business and only offer them more advanced technology solutions when they are needed and not before.

Compare the stats.

Open Table Funding prior to IPO $48 million - restaurants enabled 9000
Booking Angel funding to date $250,000 restaurants enabled 27,000

Its exciting times ahead for this industry. Opentable proves there is a large market and services like ours prove there is an easier way to approach it.

*(There are over 220,000 full service dining resaurants in the US according to the National Restaurant Association)

Do you know more people search for “restaurants” than “travel” on the internet? Millions of potential customers are walking past your virtual front door every day. Are you really open for business on the internet? How do you make sure you get this business instead of the restaurant down the road. Its all about understanding your customers better and talking to their goals in a relevant and succint way.

Who visits your restaurant and why? Who do you want to visit your restaurant? Maybe the competition attracts a type of client that you don’t or you have identified an untapped market you want to focus on. These need to be explored. Try and categorise these people into groups and understand their needs. Who are your most important customers? Rank them. Are your clients mostly tourists, business people or locals? Why are they there? Is it casual dining with friends, entertaining clients, holding a function, just a quick easy meal or walking past? When you know this you can prioritise their goals and focus your site, not just its layout but its language and style as well. For example you might conclude that the most important customer group for your restaurant is business people entertaining clients.

Customer Groups >>> Business People              Tourists                      Locals

Customer Goals
Entertaining clients
Holding a function
Quick easy meal
Walking past
Casual dining
Special night out.

The objective of your website should be to provide the most pertinent information to the right people at the right time. You will understand what type of customer already visits your restaurant and you should have an idea of the type of customers that visit your competition. That will help define how you structure your site.  Dont get caught in the mistake of trying to be relevant to everyone because you will find on the web you will be relevant to nobody.

You can download the full whitepaper here that talks about 9 easy steps to creating a restaurant website that will get you more reservations

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• That mobile web and search is being lead by the prolific uptake of smartphones particularly the iPhone and that the focus of usage has a partcularly “Local” focus
• The share of total mobile search that is local is going to increase 27.8% of total searches in 2008 to 35.1%. What was fascinating though is that local search’s share of revenue is expected to be over 56.1% of mobile search revenue.
• Mobile ad revenues although small in size relative to other mediums will experience exponential growth (85% CAGR)

The highlights for me were what exactly people are searching and are doing on their mobiles, how to monetize these opporunites and how effective the early results are for mobile ads.

• People are searching for local products and services. Restaurants and bars is the most popular category with 43.4% of people searching.
• Mobile ad click thru rates are great according to Verizon (2%) compared to web (0.25%)
• Mobile ad recall ratesof 33% (41% for iPhones) - and half of these people actually responding to the ads
• There was discussion of other monetization methods: Cost per acquisition ie online reservations,  affiliate models etc

I think this steers to a point I have been talking about for years. Cost per acquisition business models will be what makes local search explode. Why? Small business dont track their clicks and understand thier cost of acquisition online, they are lucky if they have a website. We have to make it simpler to get mainstream adoption. ie they are only paying a fixed fee for each new customer and dont ask them to change the way they already operate. Make the web and mobile work for them!

In the next post I’ll talk about some of the problems with implementing CPA models in local and some of our solutions

Firstly the Internet is all about engagement and transactions. How many eyeballs do you need to attract who will transact with you and how much will you earn. If you are a blog running adwords your transaction is someone clicking on an ad and as such you need to attract alot of eyeballs to make it successful. If you are social network like facebook who have struggled in the past to convince people visiting there to click on an ad, you therefore have to attract a lot more people or work out some way to convince them to click.

Not everything is ad supported there are subscriptions and product sales but it doesn’t really matter the success of a startup is roughly described by the graph below. If you wanted to put it in a formula the survival metric for internet companies in the next year is

Eyeballs x Conversion x $ Transaction > Expenses

In thinking about the companies that are making the real money on the Internet they have enabled other people to make money and have shared in their success. They are the business models and enablers of the Internet. Why is this cool? Its obvious you have other people working on attracting eyeballs for you. Google has been most successful because they have done it without needing the consumer to actually transact ie pull out a credit card and hand over money, all they have to do is click. There is also some argument that Google ads provide some user benefit because theier text ads are in context and relevant.

Imagine if someone came up with a widget that was distributed in a similar way to adwords that actually provided some real user benefit right at the most appropriate time. Imagine visiting your favourite review site, reading a review on a few businesses and then this widget is right there allowing you to make an online reservation, imagine if you were the owner of this website and this useful widget earned you $$ every time a user did it. Now go one step further and imagine you owned the business that was being read about on that website and you only paid for confirmed appointments or reservations made through this widget…. Isn’t that a perfect simple beautiful world. We think so.

I know I have been a bit slack on the blogging. The Always On conference was interesting. I found the companies and the networking much more interesting than the content this year. Some interesting sessions I saw on location based services (you can also view all sessions online) There was a lot of talk about Video, which suprised me a bit. Mobile was of course a hot topic. The other Australian companies represented there did us proud. They were all companies I had not met before (except for Martin from Red Bubble) but are making real progress with some awesome technologies. You can see the presentations here.

The companies were”

Contivio - Call centre functionailty in a browser
Loop 9 - SMS travel concierge
Greatest Asset - Health management programs for large companies
Red Bubble - Community for artists to create, sell and connect
SmackBiz - Corporate Video Storage

I also got interviewed by some bloggers at the event. See below. Lucky it wasnt a bit later once the martinis they were handing out kicked in