Facebook (FB) recently announced that it has entered into a partnership with OpenTable Inc. (OPEN), which will allow users to book a restaurant table over mobile web. The company said that the app will be available to approximately 20,000 OpenTable customers in North America.
The partnership comes at an opportune time for Facebook as the company continues to focus on driving customer engagement for its mobile apps. On the other hand, the deal will help OpenTable to counter growing competition from the likes of Groupon (GRPN) and Yelp (YELP) in the online restaurant reservation industry.
Both Groupon and Yelp have consolidated their position in the industry through acquisitions. While Groupon acquired free online reservation start-up Savored in September last year, Yelp grabbed SeatMe in July this year. OpenTable also tried to strengthen its position by acquiring RezBook early this month.
Nevertheless, we believe that Facebook’s massive user base will boost OpenTable’s clientele within a very short span of time. The partnership will also help Facebook to attract new mobile users, which is expected to boost advertising revenues.
Lately, mobile has become the primary focus of Facebook to attract advertisers. To boost customer engagement in mobile, Facebook launched Twitter-like hashtags (#), Facebook Home and Instagram’s video application.
These offerings have significantly improved its customer base as monthly mobile active users (MAUs) jumped 51.0% from the year-ago quarter to 819 million in the recently concluded second quarter.
More importantly, mobile ad revenues contributed 41% of total ad revenues. We believe that this is a significant achievement for Facebook within a very short span of time. Facebook did not report any mobile revenues at the time of its IPO.
We believe that Facebook’s massive mobile user base represents tremendous growth potential. We also expect the company to continue to pursue strategic acquisitions that will help it to further monetize this huge user base.
Moreover, its upcoming products such as the Reader and television-like spot offerings for advertisers (reportedly for $2.5 million a day) are expected to drive top-line growth going forward. Additionally, improving customer engagement will help it to aggressively compete in the ad market.
Currently, Facebook has a Zacks Rank #2 (Buy).
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