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Tock's Takeout Win
The unlikely functionality that pushed the reservations company over the $400 million finish line
In the end, it was takeout that carried the ticketing and reservations company over the proverbial finish line. You could probably argue that Tock’s $400+ million sale to website builder and hosting company Squarespace wouldn’t have happened were it not for Tock To Go, the takeout and later delivery platform recently credited by Fast Company for saving restaurants in the nick of time. (Their words, not mine.)
On Friday, Squarespace filed publicly to go public via direct listing on the New York Stock Exchange. As part of the filing, the company shared some details about the last year of Tock’s business, which was clearly boosted in a big way by the new takeout offering. Tock charges 3 percent plus payment processing fees to restaurants on the to go platform. Restaurant customers who also have a monthly plan to support reservations and table management pay 2 percent per takeout order. Tock’s 2020 revenue totaled $23 million; $9.6 million, or 42 percent of that came via transactions from Tock’s own payment processing system. A smaller amount — $3.4 million, or 15 percent — came via monthly subscription fees. According to that Fast Company piece, Tock doubled the number of businesses on its platform during 2020 to 7,100 restaurants and close to 1,000 wineries. It expects to hit $1 billion in gross merchandising volume in 2021.
It’s an unexpected ending to Tock’s story that once started (and, to be honest, never really finished) as an aggressive rebuttal to 20-year-old OpenTable’s business model. Tock founder and CEO Nick Kokonas was never shy about punching up at his chief competitor, and was even once proudly served a cease and desist letter for registering the url opentablesaurus.com. (The url still redirects to OpenTable’s homepage.)
Kokonas recently tweeted a pre-pandemic Tock office photo that shows a large dinosaur still looming in the background in what appears to be a conference room, so I can’t imagine those early days are easily forgotten. But it was the Covid-era business pivot that made the biggest mark.
Kokonas said this was the moment he told his team they’d be moving to remote work last March. Spot the dino!
In its filing, Squarespace shared some initial details about Tock’s value (they say that these numbers are estimates): It values Tock’s tech at $4 million, its tradename at $6 million. But Tock’s customer relationships are core to its value to Squarespace: $19 million for enterprise customer relationships; $64 million for its relationships with restaurants. Net assets acquired were just over $90 million leaving $336 million of goodwill — an intangible asset that accounts for the difference between acquired assets and fair market value of an acquired company.
For a comparison that is not exactly apples to apples, OpenTable was acquired for $2.6 billion in 2014. Two years later, Priceline, OpenTable’s parent company, took a $941 million write-down on the company against the goodwill it paid. “Priceline's plight shows what can happen when a company pays top dollar for potential growth, which obviously can't be guaranteed,” read a Bloomberg piece published at the time. Priceline paid a 53 percent premium for OpenTable based on its average stock price at the time of the acquisition.
Since then, leaders at Booking Holdings (Priceline’s new corporate name) have said they’ve not moved quickly enough to integrate OpenTable into its other product offerings. A leadership shuffle that’s unfolded slowly over the last few years has OpenTable’s corporate structure positioned under Kayak CEO Steve Hafner’s leadership, though the company does have its own dedicated CEO. Debby Soo joined the company last year, and there are signs that parent Booking is working to leverage its assets across the travel business, including rental cars and restaurants, to create a more holistic user experience. (For example, Booking’s logo showed up in the OpenTable app last year; recent dining-travel marketing emails highlighted the companies’ connection to each other.)
I’d argue that all of this — the slow moves, the rethinking and restructuring — is a relic of the weight that a reservations and restaurant marketing service like OpenTable used to pull. But, as mentioned a few weeks ago, the way we discover and interact with restaurants has changed largely thanks to the social internet. Businesses are further diversifying their offerings beyond just in-person service; the pandemic only expedited that change. The value of a direct customer relationship has been proven.
Indeed, Tock’s value skyrocketed when it became a way for consumers to directly interact with restaurants outside the four walls of a restaurant. It was a perfect storm — Tock’s perceived customer base of mainly higher-end restaurants that typically wouldn’t offer takeout needing to quickly pivot to an offering that felt more personalized than a third party delivery app. Suddenly, it was offering useful functionality but not the sort of walled experience that comes with the exclusivity of a single reservations partner. Any restaurant can use Tock To Go, even if they used someone else — OpenTable included — to power reservations and table management.
That’s not to say that Tock won’t be an incredible asset to Squarespace, who wants to use the technology “to expand the company’s complimentary suite of services available with a platform for reservations, take-out, delivery and events for the hospitality industry.” (I can’t tell if they actually meant to write “complementary” since Tock will, presumably, still cost money to use, but that’s splitting hairs, I suppose.)
In March, Squarespace announced a $300 million investment at a $10 billion valuation. It had a 28 percent growth in revenue in 2020. Its e-commerce business had revenue of $143 million in 2020, a 78 percent increase over the previous year.