Priceline's $2.6 billion deal to buy restaurant-booking app OpenTable is the latest sign that consumer Internet giants have refocused efforts toward local and mobile.
The all-cash offer values OpenTable (OPEN) at 103 a share, a 46% premium to Thursday's closing price.
"The price paid suggests they wanted some shock value ... the appeal for Priceline (PCLN) is that they feel they can bundle this solution with their primary businesses, the booking of hotels and airlines," said Bradley Safalow, an analyst at PAA Research, a firm that had advocated for short positions in OpenTable.
OpenTable stock soared 48% to 104.48 on Friday, above the offer price. Priceline slipped 3%.
Like restaurant-data competitor Yelp (YELP), users can search OpenTable's app and website for nearby eateries. The company collects customer reviews and lets users book reservations.
The acquisition is a shift for Priceline because the audience for OpenTable is mostly locals, a different crowd than the travelers who usually book via Priceline or its Kayak and Booking.com properties.
"Travelers are diners ... and we believe that there's opportunity to cross-promote OpenTable and the rest of the group's brands to the same customer base," Priceline CEO Darren Huston told analysts on a Friday conference call.
Yelp bought OpenTable rival SeatMe in July 2013 and rebranded some of its features as Yelp Reservations in May. But Yelp also lets restaurants put an OpenTable widget on their Yelp pages.
Yelp stock jumped 14% Friday.
As smartphones land in more hands in the U.S. and abroad, tech companies have scrambled to remake themselves as mobile-first, meaning they can attract those mobile users and, hopefully, sell them ads.
Executives at Google (GOOGL), Facebook (FB) and Yahoo (YHOO) all have been vocal this year about wanting to grab a larger chunk of the mobile-ad pie.
Amazon.com (AMZN) reportedly plans to launch a series of local marketplaces for services like plumbing or gardening. Despite the prospect of a huge new rival, Angie's List (ANGI) shares rose 11% in the latest week.
The OpenTable deal "signifies Priceline's move to gain a stronger foothold in competition with Google for search advertising dollars," said Dan Marcec of research firm eMarketer.
Mobile ad sales in the U.S. are expected to jump 39.5% this year and accelerate to 85.9% growth by 2018, says eMarketer.
Ad buyers are expected to spend $4.5 billion on location-targeted mobile ads this year, says research firm BIA/Kelsey. That will jump to $15.7 billion by 2018.
Google is the biggest fish in the local advertising pond with about two-thirds market share, but Yelp and others have been loosening its grip, according to eMarketer data.
OpenTable and Buuteeq — a digital marketing firm acquisition announced by Priceline on Wednesday — are part of a new strategy that "will help us provide some scale to the business for the long term" via local marketing, Priceline CEO Huston told analysts.
The OpenTable deal sparked investor interest in Web companies that deal with restaurants. Online ordering service GrubHub (GRUB) stock rose 7% Friday, while daily deals site Groupon (GRPN) climbed 4%.
San Francisco-based OpenTable finished Q1 with 23,862 North America restaurants. Yelp had some 74,000 active business listings worldwide, not all of which are restaurants.
Room For Growth
OpenTable has struggled overseas vs. rivals like La Fourchette, a French restaurant-booking site being acquired by TripAdvisor (TRIP).
It ended 2013 with 7,729 overseas restaurants, a net gain of just 13 from 2012.
The company has "somewhat underinvested" in growing its international traffic, wrote RBC Capital Markets analyst Rohit Kulkarni, who rates the stock as sector perform, or hold.
It will "clearly benefit from Priceline's expertise, particularly in search marketing efforts overseas," says Kulkarni.
OpenTable will remain an independently run business, but Priceline plans to "really put an accelerator on things like international growth," says CEO Huston.
Both boards OK'd the deal, which is set to close by the end of Q3.