Many review websites, such as Yelp, are based on the premise that the wisdom of the crowds can help a user to select from anywhere and everywhere purely through wading through ratings and reviews. However, it can certainly be the case that when making a selection, the user is looking to specifically avoid crowds, harkening back to the day when recommendations were started with a friend saying “I know this great little place…”

Greatlittleplace.com focuses on identifying locations where “charming and individual is the order of the day.” The company originated as an idea on Facebook to share ideas for spots in the London area, and quickly grew to provide charming choices in close to 50 global cities with around 250,000 followers. The founders point to the viral nature of the concept, content creation, and the catchy name for the explosive growth through only a year and a half of existence. In fact, the company was literally founded on the backs of their users, as the company crowd-sourced funds to start operations rather than approaching VCs or private investors from the start. The users, seeing the value in not having to wade through seas of reviews to find memorable places, quickly responded. However, as they look to take their rebellion against chain restaurants from simple Facebook groups, Twitter feeds, blogs, and a newsletter into a money-making endeavor, they face many challenges, not the least of which is expanding the user base across new markets. The new website will include some new features (geo-location, communities, events), but the brand itself is the only true differentiator.

One of the fundamental issues in growing to scale is that the company relies on co-creation but exists on the strength of its brand. Currently, the company’s website is continuing its organic growth and focused solely on the London area. Around 1% of their base makes suggestions for the next great little place, and the founders work closely to edit suggestions and provide color commentary around each location to protect the brand they have founded. Though the website continues to gain users, it needs to expand its reach outside of the London area in order to hit a mass big enough to monetize.

The other 40+ cities with a “I know this great little place…” group on Facebook are being led by volunteers. Without extensive knowledge of many of the markets, the company’s founders are relying on these selected volunteers to carry on the same charming criteria used for the London site. Since Facebook communities do not expect the same level of editing as a formal website, this model has worked to grow followers. However, the company faces the risk of distilling the brand and knows that it needs to bring on the global communities when it launches the formal website in January. Thus, a key portion of the new website design will be centered on an algorithm to ensure that a highlighted location is indeed a great little place.

Rather than rely on the masses like Yelp, the company will continue to verify each location to match its branding and user expectations. Currently, only 40% of suggestions make it to the site, but the selection process is very manual and the selection criteria are very qualitative. The founders are looking to mechanize the process of capturing user sentiment instead of user ratings. Since their website will be very binary (either the location makes the cut or it doesn’t), they are shying away from a star rating system leveraged by many other sites. Similar to Digg, they envision a holding area for suggested locations wherein a spectrum based rating system will allow users to comment on how memorable and charming they have found the location. In order to make the cut, a location will have to pass some hard metrics (such as a view to review ratio), as well as softer metrics (such as the tone and diction used in the comments). They clearly understand that the website is only as good as the locations it includes, but without knowledge of the entire globe, their very emotional brand is going to rely heavily on a very functional algorithm.

In class, we discussed the relative merits of Groupon versus Restaurant.com. I would like to examine another recent entrant to the restaurant promotion space: Savored.com.

Savored operates a bit like OpenTable, a bit like Restaurant.com, and a bit like Hotels.com. You register on the site and search for restaurants in your area, specifying the date and number of people in your party. Like on OpenTable, you’ll receive a list of restaurants in Savored’s system that have availability. You pay $10 to make your reservation, and in exchange you’ll receive 30% off your entire bill (40% off in Boston because they are just starting out). There’s no need to print out a certificate or code although a gentle reminder to your hostess is encouraged. If you don’t make your $10 back, Savored promises to refund your money.

Still skeptical? Here are a few characteristics that give Savored an edge in both sustainability and marketability:

Better restaurants: A common complaint about discount sites is that discounts aren’t available for restaurants that I want to go to or that minimum purchase requirements are difficult to meet. Savored addresses these problems by targeting relatively high end restaurants (Upstairs on the Square in Harvard Square is a participant) where it’s quite easy to make your $10 back (Dinner for 2 at Upstairs could easily run $150 resulting in savings of $45). By providing greater value to customers who are likely to spend more in restaurants, Savored can attract better restaurants, creating a virtuous cycle.

Fills otherwise empty tables: Unlike both Groupon and Restaurant.com where restaurants have little control over when customers show up, Savored allows restaurants to determine how many tables they would like to make available each night and at each time. In this way, Savored operates as an excess inventory clearinghouse, giving restaurants a way to fill tables that truly would otherwise be empty at prices that should more than cover their marginal costs.

It appears that restaurants are indeed using Savored to fill tables at non-peak times: in Boston 16 restaurants have availability for 2 on Wed 10/26 while 12 restaurants have availability on Sat 10/29. In New York City, the comparable numbers are 177 and 132. Reservations at Upstairs on the Square are only available for 5:30, 6:00, 9:00 and 9:30 – all non-peak times. (Numbers checked on Oct 13, 2011)

Drives incremental customers: Savored has a spiffy, easy-to-use-and-filter website and has partnered with OpenTable (to advertise deals) and Zagat (to provide reviews). They also have a blog and plan to feature recommended restaurant lists from celebrities. These discovery and curation features encourage potential diners to spend more time on the website and to use it for restaurant discovery based on quality, rather than on price.

Encourages incremental spending: By offering a flat percentage off the entire bill, Savored encourages diners to spend more (hey, that bottle of champagne’s 30% off). In contrast, Restaurant.com’s fixed discount encourages diners to spend the minimum where the discount is deepest. Ultimately, restaurants will likely benefit more from the increased spending than they will from having capped the discount.

One potential problem is that Savored may accidentally convert its high value customers into discount users. For instance, the very discretion advertised by Savored (no physical coupon) may also appeal to expense account managers looking to reduce business entertainment expenses. Losing expense account diners would be a serious hit to any restaurant’s bottom line. However, it appears that restaurants have been able to ameliorate this problem through date/time restrictions: The Capital Grille on Wall Street only offers Savored reservations on Fridays and Saturdays when businesspeople are unlikely to be around.

Savored seems to have found an untapped niche in the restaurant promotion market. They should stick to their strategy of providing high end customers access to high end restaurants. This isn’t a model that would work for restaurants where the average ticket is $30 or restaurants with primarily walk-in business nor is it a model that works for customers looking for 50%+ deep discounts. It is however a model that could successfully drive traffic to certain types of restaurants while retaining the restaurants’ ability to price discriminate.

Sources:

Carrns, Ann. “VillageVines: Dining Discount Site Tries New Name.” New York Times Online. June 21, 2011. http://bucks.blogs.nytimes.com/2011/06/21/village-vines-dining-discount-site-tries-a-new-name/

Duryee, Tricia. “Savored is a Groupon Competitor That Feeds Off Merchants’ Fears About Groupon.” AlllThingsD. June 21, 2011. http://allthingsd.com/20110621/savored-is-a-groupon-competitor-that-feeds-off-merchants-fears-about-groupon/

Olmsted, Larry. “Get Paid to Eat Out!” Forbes.com. Oct 5, 2011. http://www.forbes.com/sites/larryolmsted/2011/10/05/get-paid-to-eat-out/

Tigar, Lindsay. “Not Just Another Coupon Site.” The New York Enterprise Report. July 5, 2011. http://nyreport.com/articles/80736/not_just_another_coupon_site

Monday, October 3^rd I woke up to a distressing email: “Did you hear the news? We couldn’t be happier to announce that Menupages is becoming part of… Seamless!” As a loyal Menupages user, my first thought was panic – are they going to change my go-to restaurant site?

For a cool $15 million, on September 26^th Seamless, a leader in online food ordering, acquired Menupages, including its proprietary menu transcription technology and database of 35,000 restaurants and 175,000 reviews. Seamless + Menupages may make sense to Seamless, but what about me?!?

I thought about all of the things I loved about Menupages – the ability to find a restaurant in a specific neighborhood, using “find-a-food” to search for exactly what I’m craving, but the most important feature for me is vetting the restaurant by looking at user reviews.

I became hooked on Menupages while living in New York City. There are so many great restaurants to try, but I decided life was too short to waste dinner on a dinner that was less than fabulous. As a result, whenever I would make dinner plans with a friend, finding a restaurant would become my project… and mild distraction from work.

The process requires a balancing of standard variables, such as price and location, but also of more subjective measures, like how interesting is the menu (brie, goat cheese, fig preserve & caramelized onions on a pizza? Yes, please!) and do the reviews describe a place I want to go.

Yes, I pay attention to the number of stars – I like the granularity of the Menupages rating system between food, service, value and atmosphere – but I know that the rating alone will not always tell the whole story. If someone tried a restaurant hoping for a romantic evening but I’m in the mood for a fun night out with a group, a poor review might actually be a positive sign.

Which brings me to my current frustration with Menupages… Though I am clearly a big fan, outside of New York, the review feature hasn’t taken off. Sorting by number of reviews, a search for Italian restaurants in New York yields a restaurant with 198 reviews – more than 10 times the number for Los Angeles (15), Boston (18) and South Florida (18). As I’m currently living in Boston for school, the lack of inputs has severely limited my manual search algorithm.

 By combining the Seamless and Menupages networks, eventually I can tap into a bigger – and therefore better – community of reviewers. My momentary panic has been replaced by cautious optimism.

My caution stems from a note Jonathan Zabusky, CEO of Seamless, sent to his employees announcing the merger and espousing the grand opportunity it presents:

•  Greater breadth, depth and number of cities (and neighborhoods) will allow us to maintain and expand the most complete network of all-things-food that exists to more than 50 cities worldwide. The pairing of two great brands that are already intertwined into the fabric of urban life will create one premium brand: Seamless.
  

Ignoring the intense rhetoric, I still caution you, Mr. Zabusky, to think carefully about what you are providing and where you are providing it. One assertion in particular is troubling: 

• Full completion and closed-loop customer experience: Seamless was already the leader in online and mobile food delivery and pickup, but we were thinking even bigger—we wanted to be relevant for all restaurant meals. People use MenuPages to not only find restaurants for delivery or pickup, but also for sit-down dining experiences, a meal historically out-of-scope on Seamless. Now, Seamless can extend our offering and value-add to new and existing customers, clients and restaurant partners even further.

To me, this is treading into dangerous territory by mixing your customer groups… You must balance the legacy Seamless population – who only want to see restaurants that deliver in their area – with the legacy Menupages population – who often want a sit-down dining experience and don’t care about delivery speed. Without careful sorting mechanisms, these populations may frustrate each other and drive down the usefulness of the site.

Combining these two double sided networks arguably is a can’t miss opportunity: there are by definition more restaurants and more users than their were before. But, digging deeper, the profiles of the restaurants and users of Seamless and Menupages may be different enough that it can never become “the most complete network of all-things-food.”