Edgar Filing: OPENTABLE INC

As filed with the Securities and Exchange Commission on April 13, 2009

Registration No. 333-157034

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

OPENTABLE, INC.
(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		7389 (Primary Standard Industrial Classification Code Number)		94-3374049 (I.R.S. Employer Identification Number)

799 Market Street, 4th Floor
San Francisco, CA 94103
(415) 344-4200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Jeffrey D. Jordan
Chief Executive Officer
OpenTable, Inc.
799 Market Street, 4th Floor
San Francisco, CA 94103
(415) 344-4200
(Name, address, including zip code, and telephone number, including area code, of agent for service)


Copies To:
Patrick A. Pohlen, Esq. Latham & Watkins LLP 140 Scott Drive Menlo Park, California 94025 (650) 328-4600		Alan F. Denenberg, Esq. Davis Polk & Wardwell 1600 El Camino Real Menlo Park, California 94025 (650) 752-2000

Approximate date of commencement of the proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý (Do not check if a smaller reporting company)		Smaller reporting company o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion
Preliminary Prospectus dated April 13, 2009

PROSPECTUS

Shares

Common Stock

This is the initial public offering of our common stock. Prior to this offering, there has been no public market for our common stock. We are offering shares of the common stock offered by this prospectus, and the selling stockholders are offering shares. We will not receive any proceeds from the sale of shares to be offered by the selling stockholders. The initial public offering price of our common stock is expected to be between $ and $ per share. We will apply to have our common stock approved for quotation on The Nasdaq Global Market under the symbol " ."

Investing in our common stock involves a high degree of risk. See "Risk Factors" on page 9 of this prospectus.



Public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to OpenTable, Inc.	$	$
Proceeds, before expenses, to the selling stockholders	$	$

The underwriters have a 30-day option to purchase up to an additional shares of common stock from us and up to an additional shares of common stock from the selling stockholders to cover overallotments, if any.

Neither the Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares will be ready for delivery on or about , 2009.


Merrill Lynch & Co.
Allen & Company LLC

Stifel Nicolaus		ThinkEquity LLC

The date of this prospectus is , 2009.

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TABLE OF CONTENTS

		Page

PROSPECTUS SUMMARY		1
THE OFFERING		5
SUMMARY CONSOLIDATED FINANCIAL DATA		6
RISK FACTORS		9
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		24
USE OF PROCEEDS		26
DIVIDEND POLICY		26
CAPITALIZATION		27
DILUTION		28
SELECTED CONSOLIDATED FINANCIAL DATA		30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		33
BUSINESS		54
MANAGEMENT		65
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		92
PRINCIPAL AND SELLING STOCKHOLDERS		93
DESCRIPTION OF CAPITAL STOCK		96
SHARES ELIGIBLE FOR FUTURE SALE		101
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK		103
UNDERWRITING		106
LEGAL MATTERS		110
EXPERTS		110
WHERE YOU CAN FIND MORE INFORMATION		110
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. Neither we, the selling stockholders nor the underwriters have authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing prospectus filed with the Securities and Exchange Commission. We and the selling stockholders are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included in this prospectus and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Our Company

We provide solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. Our solutions for restaurants include our Electronic Reservation Book, or ERB, which combines proprietary software and computer hardware that computerizes restaurant host-stand operations and replaces traditional pen-and-paper reservation books. Our ERB streamlines and enhances a number of business-critical functions and processes for restaurants, including reservation management, table management, guest recognition and email marketing. The ERBs at our restaurant customers connect via the Internet to form an online network of restaurant reservation books. Our solutions for diners include our popular restaurant reservation website, www.opentable.com, which enables diners to find, choose and book tables at restaurants on the OpenTable network in real time, overcoming the inefficiencies associated with the traditional process of reserving by phone. Restaurants pay us a one-time installation fee for onsite installation and training, a monthly subscription fee for the use of our software and hardware and a fee for each restaurant guest seated through online reservations. Our online reservation service is free to diners.

We initially focused on acquiring a critical mass of local restaurant customers in four metropolitan areas: Chicago, New York, San Francisco and Washington, D.C. These markets have since developed into active, local networks of restaurants and diners that continue to grow. We have applied and continue to apply the same fundamental strategy in developing and penetrating our other markets. As of December 31, 2008, the OpenTable network included approximately 10,000 OpenTable restaurant customers spanning all 50 states as well as select markets outside of the United States. Since our inception in 1998, we have seated approximately 90 million diners through OpenTable reservations, and during the twelve months ended December 31, 2008, we seated an average of approximately 2.8 million diners per month. For the twelve months ended December 31, 2007 and 2008, our revenues were $41.1 million and $55.8 million, respectively. For the twelve months ended December 31, 2007 and 2008, our subscription revenues accounted for 55% and 54% of our total revenues, respectively, and our reservation revenues accounted for 41% and 41% of our total revenues, respectively.

Market Opportunity

We target our solutions, by which we mean our ERB and the OpenTable website, to reservation-taking restaurants and diners, respectively. We believe based on our internal estimates that there are approximately 30,000 reservation-taking restaurants in North America that seat approximately 600 million diners through reservations annually, though this number fluctuates with economic and other conditions.

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time-consuming and costly to aggregate the breadth of local restaurant table inventory required to attract a critical mass of diners to make reservations online and create an online restaurant reservation network.

Historically, diners learned about restaurants through word of mouth and local print media, such as dining guides, newspapers and magazines. While diners continue to value personal recommendations, the Internet now puts a wealth of restaurant information at their fingertips. However, the ability to book restaurant reservations has largely been missing from online dining sources. Moreover, reserving by phone remains a highly inefficient and inconvenient process. In order for diners to fully embrace online restaurant reservations, they need real-time access to table inventory across a broad selection of local restaurants and the ability to instantly book confirmed reservations around-the-clock.

We believe the Internet can streamline operations and fill additional seats for reservation-taking restaurants and redefine the reservation experience for diners. In addition, we believe that there is a significant opportunity to provide solutions to reservation-taking restaurants and diners, as the network connecting the two groups is created and expanded.

Our Solution

Reservation-taking restaurants and diners have interconnected needs. Restaurants require cost-effective ways to attract guests and manage their reservations, while diners seek convenient ways to find available restaurants, choose among them and secure reservations. By creating an online network of restaurants and diners that transact with each other through real-time reservations, we have developed a specialized platform for addressing the needs of both.

Essential to this network is building a critical mass of local, computerized restaurant reservation books. We achieve this by offering software that provides important operational benefits for the restaurant, bundling it with computer hardware and installing this solution at the restaurant host stand, thereby creating a compelling solution for restaurants. We provide our solutions to individual restaurants within a market, one by one, via a direct sales force. We believe that we deliver a strong return on investment for our restaurant customers by streamlining their operations, filling additional seats and improving their quality of service. As a result, we have historically enjoyed high customer satisfaction and retention rates.

The OpenTable website gives diners real-time access to tables at restaurants on the OpenTable network. As more local restaurants are added to the network, the utility provided to diners increases and more diners discover the benefits of researching restaurants and making reservations on our website. The more diners who use our website to make their dining decisions, the more value we deliver to our restaurant customers and the more restaurants are attracted to our network.

Benefits of OpenTable to Reservation-Taking Restaurants

In response to the needs of reservation-taking restaurants, we offer the OpenTable ERB, a bundled solution consisting of proprietary OpenTable software, which is installed on a touch-screen computer system and supported by various asset-protection and security tools. Additionally, we provide restaurants with access to diners via our website as well as through reservation links on our partners' websites and on restaurants' own websites. Our solutions help restaurants participating in the OpenTable network to:

•: fill seats that might otherwise remain empty and minimize "no-shows" by offering the convenience of online reservations directly through the OpenTable website as well as indirectly through the websites of our partners and restaurant customers;

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•: create operational efficiencies by replacing the restaurant's pen-and-paper system with a computerized reservation book and helping restaurants maximize seat utilization, facilitate server rotations and improve table turns;
•: boost guest recognition and overall guest service by recording diner preferences and histories and by collecting and delivering feedback from OpenTable diners;
•: computerize their host-stand operations by providing a solution that combines proprietary software and computer hardware and customized, on-site installation, training and technical support; and
•: market to a targeted audience with measurable results by giving restaurants valuable marketing exposure during the diners' decision-making process and requiring payment by restaurants only for those diners whom they ultimately serve.

Benefits of OpenTable to Diners

In response to the needs of diners, we offer the OpenTable website, a destination website for those seeking a convenient way to research restaurants and make reservations. Our website enables diners to:

•: find available tables by allowing diners to search for reservations by location, date, time and party size and view real-time table availability across a variety of restaurants;
•: choose a restaurant by providing diners with restaurant information such as restaurant descriptions, photos and menus as well as lists of restaurants that are most highly rated by OpenTable diners in different categories; and
•: book instantly-confirmed reservations for free by allowing diners to make reservations through the OpenTable website, which are instantly recorded in the ERB located at the restaurant.

Our Strategy

As our network of reservation-taking restaurants and diners grows, the value we deliver grows as well. Because the foundation of our network is building a critical mass of computerized reservation books, we enhance our offering to diners by adding new restaurant customers. In turn, as more diners use the OpenTable website to make their dining decisions and book their reservations, we deliver more value to our restaurant customers by helping them fill more of their seats. In this process, we grow the value of our business. The key elements of this strategy include:

Continue to Build the OpenTable Network in North America

The value of the OpenTable network grows as participation among restaurants and diners grows. Experience in our earliest markets provided a successful model that we have implemented while entering new markets, and, as a result, our newer North American markets have grown relatively predictably over time. We intend to continue to build our North American network in the United States, Canada and Mexico by employing this proven model, which includes the following elements:

•: producing and maintaining superior solutions by continuing to evolve our ERB based on nearly a decade of in-field experience as well as feedback from our installed base of approximately 10,000 restaurant customers, and optimizing our website through insights gained from the experience of seating approximately 90 million diners through online reservations;

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•: providing excellent customer service and support by continuing to employ highly trained operational teams to provide installation and training services for our restaurant customers and continuing to augment our in-house support staff with contract support services to deliver superior customer assistance;
•: leveraging our direct sales force, which is experienced in selling the benefits of OpenTable to reservation-taking restaurants, which operate in a highly fragmented industry; and
•: continuing to attract diners to our website by offering the best reservation experience through enhanced ease of use and restaurant content, thereby increasing market adoption of our solutions, building our brand awareness and driving word-of-mouth referrals to our website.

Expand Internationally

We intend to augment our growing North American business by selectively expanding countries outside of North America that are characterized by large numbers of online consumer transactions and reservation-taking restaurants. We currently have operations in Germany, Japan and the United Kingdom, each supported with a direct sales force and operational staff. We have approximately 1,000 restaurant customers in these markets. In general, our strategy internationally is to replicate the model we have successfully employed in North America. In particular, our initial focus in new international markets is to increase our restaurant customer base, and we believe the localized versions of our software solution will compete favorably against competitive software offerings, enabling us to expand our network of computerized reservation books across a broad selection of local restaurants.

Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled "Risk Factors" immediately following this prospectus summary, that primarily represent challenges we face in connection with the successful implementation of our strategy and the growth of our business. Our limited operating history makes it difficult for us to accurately forecast revenues and appropriately plan our expenses. We expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance. Such factors include deteriorating global economic conditions and our ability to maintain an adequate rate of growth, effectively manage our growth, retain and attract restaurant customers and visitors to our website, provide a high-quality customer experience through our website and ERB and successfully enter new markets and manage our international expansion.

Corporate Information

We were originally incorporated as easyeats.com, Inc., a California corporation, on October 13, 1998. On June 2, 1999, we changed our name to OpenTable.com, Inc. We subsequently reincorporated in Delaware on September 20, 2000 under our current name, OpenTable, Inc. Our principal executive offices are located at 799 Market Street, 4th Floor, San Francisco, California 94103, and our telephone number is (415) 344-4200. Our website address is www.opentable.com. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only. Unless the context requires otherwise, the words "OpenTable," "we," "company," "us" and "our" refer to OpenTable, Inc. and our wholly owned subsidiaries.

OpenTable®, the OpenTable logo and other trademarks or service marks of OpenTable appearing in this prospectus are the property of OpenTable. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of the respective holders.

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THE OFFERING


Common stock offered:
	By OpenTable, Inc.	shares
	By the selling stockholders	shares
Shares outstanding after the offering		shares
Use of proceeds		We expect the net proceeds to us from this offering, after expenses, to be approximately $ million. We intend to use the net proceeds from this offering for general corporate purposes, including working capital, sales and marketing activities, general and administrative matters and capital expenditures. We may also use a portion of the net proceeds to acquire or invest in complementary technologies, solutions or businesses or to obtain rights to such complementary technologies, solutions or businesses. There are no agreements or understandings with respect to such a transaction at this time.
Risk factors		See "Risk Factors" beginning on page 9 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.
Proposed Nasdaq Global Market symbol		" "

The number of shares of our common stock outstanding after this offering is based on 250,299,546 shares outstanding as of February 28, 2009, and excludes:

•: an aggregate of 2,066,545 shares of common stock reserved for issuance under our 1999 Stock Plan;
•: additional shares of common stock, subject to increase on an annual basis, reserved for issuance under our 2009 Incentive Award Plan, which we plan to adopt in connection with this offering;
•: 30,103,038 shares of common stock issuable upon the exercise of outstanding options to purchase our common stock granted pursuant to our 1999 Stock Plan at a weighted average exercise price of $0.59 per share; and
•: 2,275,767 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $0.31 per share.

Except as otherwise indicated, information in this prospectus reflects or assumes the following:

•: that our amended and restated certificate of incorporation, which we will file in connection with the completion of this offering, is in effect;
•: the automatic conversion of all of our outstanding preferred stock into an aggregate of 113,446,799 shares of common stock upon completion of this offering; and
•: no exercise of the underwriters' overallotment option to purchase up to additional shares of our common stock.

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables summarize the consolidated financial data for our business. You should read this summary financial data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes, all included elsewhere in this prospectus.

We derived the consolidated statements of operations data for the years ended December 31, 2006, 2007 and 2008 from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future.

Pro forma basic net income (loss) per share has been calculated assuming the conversion of all outstanding shares of our preferred stock into 113,446,799 shares of common stock upon the completion of this offering. The balance sheet data as of December 31, 2008 is presented:

•: on an actual basis;
•: on a pro forma basis to reflect the automatic conversion of all outstanding shares of our preferred stock into 113,446,799 shares of common stock in connection with the completion of this offering; and
•: on a pro forma as adjusted basis to reflect the pro forma adjustments and the sale by us of shares of common stock offered by this prospectus at an assumed initial public offering price of $ per share after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

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			Years Ended December 31,

			2006			2007			2008
			(In thousands, except per share amounts)
Consolidated Statements of Operations Data:
REVENUES			$	27,168		$	41,148		$	55,844
COSTS AND EXPENSES:
	Operations and support(1)			9,548			12,603			17,760
	Sales and marketing(1)			7,675			11,326			14,830
	Technology(1)			4,024			5,863			9,511
	General and administrative(1)			5,972			12,212			13,117

		Total costs and expenses		27,219			42,004			55,218

Income (loss) from operations				(51	)		(856	)		626
Other income, net				421			951			468

Income before taxes				370			95			1,094
Income tax expense (benefit)				176			(9,121	)		2,118

NET INCOME (LOSS)			$	194		$	9,216		$	(1,024	)

Net income (loss) per share:
	Basic		$	0.00		$	0.08		$	(0.01	)

	Diluted		$	0.00		$	0.04		$	(0.01	)

Weighted average shares outstanding:
	Basic			114,144			119,025			125,196
	Diluted			244,037			250,237			125,196
Pro forma net loss per share—basic and diluted (unaudited)									$	(0.00	)

Pro forma weighted average shares outstanding used in calculating net loss per share—basic and diluted (unaudited)										238,643

(1): Stock-based compensation included in above line items:



Operations and support	$	58	$	290	$	339
Sales and marketing		67		709		878
Technology		64		288		694
General and administrative		520		1,816		2,059

Total	$	709	$	3,103	$	3,970



Other Operational Data:
Installed restaurants (at period end):
	North America	5,583	7,391	9,295
	International	204	470	1,040

	Total	5,787	7,861	10,335
Seated diners (in thousands):
	North America	15,171	24,614	33,636
	International	84	244	542

	Total	15,255	24,858	34,178
Headcount (at period end):
	North America	152	192	238
	International	16	34	59

	Total	168	226	297

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		Years Ended December 31,

		2006			2007			2008
		(In thousands)
Additional Financial Data:
Revenues:
	North America	$	26,654		$	39,601		$	53,065
	International		514			1,547			2,779

	Total	$	27,168		$	41,148		$	55,844
Income (loss) from operations:
	North America	$	3,106		$	4,974		$	9,088
	International		(3,157	)		(5,830	)		(8,462	)

	Total	$	(51	)	$	(856	)	$	626
Depreciation and amortization:
	North America	$	2,029		$	2,817		$	4,026
	International		89			184			350

	Total	$	2,118		$	3,001		$	4,376

	As of December 31, 2008

	Actual		Pro Forma		Pro Forma as Adjusted
			(Unaudited)
	(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	5,528	$	5,528	$
Short-term investments		17,259		17,259
Property and equipment, net		11,125		11,125
Working capital		14,745		14,745
Total assets		50,883		50,883
Dining rewards payable		8,462		8,462
Convertible preferred stock		21,909		—
Total stockholders' equity		26,684		26,684

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this prospectus before making a decision to invest in our common stock. If any of such risks actually occur, our business, operating results or financial condition could be adversely affected. In those cases, the trading price of our common stock could decline and you may lose all or part of your investment.

Risks Related to Our Business

Our limited operating history makes it difficult for us to accurately forecast revenues and appropriately plan our expenses.

We were formed in October 1998 and have a limited operating history. As a result, it is difficult to accurately forecast our revenues and plan our operating expenses. We base our current and future expense levels on our operating forecasts and estimates of future revenues from restaurants, which pay us an installation fee for our Electronic Reservation Book, or ERB, a monthly subscription fee and a fee for each restaurant guest seated through online reservations. Revenues and operating results are difficult to forecast due to the uncertainty of the volume and timing of obtaining new restaurant customers and of diners seated through OpenTable reservations. Some of our expenses are fixed, and, as a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in revenues. This inability could cause our net income in a given quarter to be lower than expected.

The impact of worldwide economic conditions, including the resulting effect on consumer spending, may adversely affect our business, operating results and financial condition.

Our performance is subject to worldwide economic conditions and their impact on levels of consumer spending, which have recently deteriorated significantly and may remain depressed, or be subject to further deterioration, for the foreseeable future. Some of the factors having an impact on discretionary consumer spending include general economic conditions, unemployment, consumer debt, reductions in net worth based on recent severe market declines, residential real estate and mortgage markets, taxation, energy prices, interest rates, consumer confidence and other macroeconomic factors. There can be no assurances that government responses to the disruptions in the financial markets and other factors contributing to the recession we are currently experiencing will restore consumer confidence and positively impact consumer spending.

Consumer purchases of discretionary items generally decline during recessionary periods and other periods in which disposable income is adversely affected. Because spending for restaurant dining is generally considered to be discretionary, declines in consumer spending may have a more negative effect on our business than on those businesses that sell products or services considered to be necessities. In particular, a significant majority of our restaurant customers are fine-dining restaurants which have been particularly affected by economic downturns such as the one we are currently experiencing. We believe that the total number of reservations, including reservations by phone, seated by our restaurant customers has decreased approximately 10% to 15% for the fourth quarter of 2008 from the same period in 2007.

Unfavorable changes in the above factors or in other business and economic conditions affecting our restaurant customers and diners could result in continued reduced traffic in some or all of the restaurants that use our solutions, result in fewer reservations made through our website or the websites of our partners or restaurant customers and lower our profit margins, cause our restaurant customers to go out of business, cause our restaurant customers to terminate their subscriptions to our solutions or default on their payment obligations to us and have a material adverse effect on our financial condition and operating results.

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Moreover, the majority of our restaurant customers are located in major metropolitan areas like New York City and the San Francisco Bay Area, and to the extent any one of these geographic areas experiences any of the above described conditions to a greater extent than other geographic areas, the material adverse effect on our financial condition and operating results could be exacerbated.

We expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.

Our revenues and operating results could vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. In addition to other risk factors discussed in this section, factors that may contribute to the variability of our quarterly and annual results include:

•: our ability to accurately forecast revenues and appropriately plan our expenses;
•: the impact of worldwide economic conditions, including the resulting effect on consumer spending;
•: our ability to maintain an adequate rate of growth;
•: our ability to effectively manage our growth;
•: our ability to attract new restaurant customers;
•: our ability to increase the number of visitors to our website and convert those visitors into diners who reserve a table using our website and then dine with our restaurant customers;
•: our ability to retain existing restaurant customers and diners or encourage repeat reservations;
•: our ability to provide a high-quality customer experience through our website and ERB;
•: our ability to successfully enter new markets and manage our international expansion;
•: the impact of fluctuations in currency exchange rates;
•: the effects of increased competition in our business;
•: our ability to keep pace with changes in technology and our competitors;
•: our ability to successfully manage any future acquisitions of businesses, solutions or technologies;
•: the success of our marketing efforts;
•: changes in consumer behavior and any related impact on the restaurant industry, especially in the geographic markets where we operate;
•: seasonal patterns in restaurant dining;
•: interruptions in service and any related impact on our reputation;
•: the attraction and retention of qualified employees and key personnel;
•: our ability to protect our intellectual property, including our proprietary ERB;
•: costs associated with defending intellectual property infringement and other claims;
•: the effects of natural or man-made catastrophic events;

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•: the effectiveness of our internal controls; and
•: changes in government regulation affecting our business.

As a result of these and other factors, the results of any prior quarterly or annual periods should not be relied upon as indications of our future operating performance. In addition, our operating results may not meet the expectations of investors or public market analysts who follow our company.

Our recent growth rate will likely not be sustainable and a failure to maintain an adequate growth rate will adversely affect our net income and our business.

Our revenues have grown rapidly, increasing from $27.2 million in 2006 to $41.1 million in 2007 to $55.8 million in 2008, representing a compound annual growth rate of 43%. We do not expect to sustain our recent growth rate in future periods, and you should not rely on the revenue growth of any prior quarterly or annual periods as an indication of our future performance. If we are unable to maintain adequate revenue growth, our net income will be adversely affected, and we may not have adequate resources to execute our business strategy.

Growth may place significant demands on our management and our infrastructure.

We have experienced substantial growth in our business. This growth has placed and may continue to place significant demands on our management and our operational and financial infrastructure. As our operations grow in size, scope and complexity, we will need to improve and upgrade our systems and infrastructure to offer an increasing number of customers enhanced solutions, features and functionality. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and technical resources in advance of an increase in the volume of business, with no assurance that the volume of business will increase. Continued growth could also strain our ability to maintain reliable service levels for our customers, develop and improve our operational, financial and management controls, enhance our reporting systems and procedures and recruit, train and retain highly skilled personnel.

Managing our growth will require significant expenditures and allocation of valuable management resources. If we fail to achieve the necessary level of efficiency in our organization as it grows, our business, operating results and financial condition would be harmed.

If we fail to increase the number of our customers or retain existing customers, our revenues and our business will be harmed.

In 2008, almost all of our revenues were generated by our restaurant customers, which pay us a one-time installation fee, a monthly subscription fee for our ERB and a fee for each restaurant guest seated through online reservations. Our growth depends in large part on increasing the number of our restaurant customers, increasing the number of visitors to our website and then converting those visitors into diners who use our website to make restaurant reservations. Either category of customers may decide not to continue to use our solutions in favor of other means of reserving tables or because of budgetary constraints or other reasons.

To grow our base of restaurant customers, we must convince prospective restaurant customers of the benefits of our ERB and related solutions and encourage them to forego the traditional pen-and-paper reservation book to which they are likely accustomed. Due to the fragmented nature of the restaurant industry, many prospective restaurant customers may not be familiar with our solutions and will generally favor using more traditional methods of taking reservations.

To increase the number of diners who use our website, we must convince them of the value of our solutions. Our ability to do so is driven in large part by increasing the number of restaurant listings

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available on our website and also by making the diner's visit to our website a convenient and user-friendly experience.

We cannot assure you that we will be successful in continuing to expand our restaurant customer base or in continuing to attract diners to make reservations on our website. Our future sales and marketing efforts may be ineffective. If diners choose not to use our solutions or decrease their use of our solutions or we are unable to attract new diners, listings on our website could be reduced, search activity on our website could decline, the usefulness of our solutions could be diminished and we could experience declining revenues.

We may be unable to successfully execute our business strategy if we fail to continue to provide our customers with a high-quality customer experience.

A critical component of our strategy is providing a high-quality customer experience for both restaurants and diners. Accordingly, the effective performance, reliability and availability of our ERB, website and network infrastructure are critical to our reputation and our ability to attract and retain customers. In order to provide a high-quality customer experience, we have invested and will continue to invest substantial resources in our ERB, website development and functionality and customer service operations. If we do not continue to make such investments and as a result, or due to other reasons, fail to provide a high-quality customer experience, we may lose restaurants and diners from our network, which could significantly decrease the value of our solutions to both groups. Moreover, failure to provide our customers with high-quality customer experiences for any reason could substantially harm our reputation and adversely affect our efforts to develop as a trusted website.

We may be unsuccessful in expanding our operations internationally, which could harm our business, operating results and financial condition.

In 2004, we established our European headquarters in London and expanded our North American presence in Canada. In 2006, we opened an office in Tokyo and further expanded our North American presence in Mexico. In 2007, we expanded our European presence with offices in France, Germany and Spain. Our ability to expand internationally involves various risks, including the need to invest significant resources in such expansion, the possibility that returns on such investments will not be achieved in the near future and competitive environments with which we are unfamiliar. Our international operations may not prove to be successful in certain markets. For example, in 2008, we decided to close our offices in France and Spain. In addition, we have incurred and expect to continue to incur significant expenses in advance of generating material revenues as we attempt to establish our presence in particular international markets. Our current and any future international expansion plans we choose to undertake will require management attention and resources and may be unsuccessful. We do not have substantial experience in selling our solutions in international markets or in conforming to the local cultures, standards or policies necessary to successfully compete in those markets, and we must invest significant resources in order to build a direct sales force and operational infrastructure in such markets. Furthermore, in many international markets we are not the first entrant and there exists greater competition with stronger brand names than we have faced in North American markets. Our ability to expand internationally will also be limited by the demand for our solutions and the adoption of the Internet in these markets. Different privacy, censorship and liability standards and regulations and different intellectual property laws in foreign countries may cause our business and operating results to suffer.

Any future international operations may also fail to succeed due to other risks inherent in foreign operations, including:

•: difficulties or delays in acquiring a network of restaurant customers in one or more international markets;

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•: different restaurant preferences and dining patterns than those in North America;
•: varied, unfamiliar and unclear legal and regulatory restrictions;
•: unexpected changes in international regulatory requirements and tariffs;
•: legal, political or systemic restrictions on the ability of U.S. companies to market services or otherwise do business in foreign countries;
•: less extensive adoption of the Internet as a commerce medium or information source and increased restriction on the content of websites;
•: difficulties in staffing and managing foreign operations;
•: greater difficulty in accounts receivable collection;
•: currency fluctuations;
•: potential adverse tax consequences;
•: lack of infrastructure to adequately conduct electronic commerce transactions; and
•: price controls or other restrictions on foreign currency.

As a result of these obstacles, we may find it impossible or prohibitively expensive to expand internationally or we may be unsuccessful in our attempt to do so, which could harm our business, operating results and financial condition.

We face risks associated with currency exchange rate fluctuations.

For the twelve months ended December 31, 2008, we incurred approximately 23% of our operating expenses in pounds sterling, euros, yen and other currencies, while most of our revenues were denominated in U.S. dollars. Conducting business in currencies other than U.S. dollars subjects us to fluctuations in currency exchange rates that could have a negative impact on our reported operating results. Fluctuations in the value of the U.S. dollar relative to other currencies affect our revenues, costs and expenses, and operating margins, and result in foreign currency transaction gains and losses. To date, we have not engaged in exchange rate hedging activities. Even if we were to implement hedging strategies to mitigate this risk, these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the hedging activities and potential accounting implications.

The markets for our solutions in North America may become more competitive, and there can be no certainty that we will maintain our current restaurant customers and diners or attract new restaurants and diners or that our operating margins will not be affected by competition.

We expect that the competitive environment for our solutions may become more intense as additional companies enter our North American markets. Currently, our primary competitors in North America are the pen-and-paper reservation book used by most restaurants and the phone used by diners. Secondary competitors include companies who provide computerized reservation management systems with a variety of technologies, as well as allocation-based reservation-taking websites that offer diners the ability to book reservations for a limited selection of restaurant table inventory. These secondary competitors may enhance their technologies to be more competitive, and additional competitors may enter our markets in North America. Any new competitors could have greater name recognition among restaurants and diners and greater financial, technical and marketing resources. Greater financial resources and product development capabilities may allow these competitors to respond more quickly to new or emerging technologies and changes in restaurant and diner

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requirements that may render our solutions obsolete. These competitors could introduce new solutions with competitive price and performance characteristics or undertake more aggressive marketing campaigns than ours. If we lose existing restaurant customers and diners or fail to attract new restaurants and diners as a result of increased competition, our business, operating results and financial condition could be adversely affected.

Rapid technological changes may render our technology obsolete or decrease the attractiveness of our solutions to our customers.

To remain competitive, we must continue to enhance and improve the functionality and features of our website and ERB. The Internet and the online commerce industry are rapidly changing. If competitors introduce new solutions embodying new technologies, or if new industry standards and practices emerge, our existing website, technology and ERB may become obsolete. Our future success will depend on our ability to:

•: enhance our existing solutions;
•: develop and potentially license new solutions and technologies that address the increasingly sophisticated and varied needs of our prospective customers; and
•: respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis.

Developing our ERB, website and other technology entails significant technical and business risks. We may use new technologies ineffectively, or we may fail to adapt our website, transaction processing systems and network infrastructure to consumer requirements or emerging industry standards. For example, our website functionality that allows searches and displays of reservation availability is a critical part of our service, and it may become out-of-date or insufficient from our customers' perspective or in relation to the search and display functionality of our competitors' websites. If we face material delays in introducing new or enhanced solutions, our customers may forego the use of our solutions in favor of those of our competitors.

Future acquisitions could disrupt our business and harm our financial condition and operating results.

Our success will depend, in part, on our ability to expand our offerings and markets and grow our business in response to changing technologies, customer demands and competitive pressures. In some circumstances, we may determine to do so through the acquisition of complementary businesses, solutions or technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions. Furthermore, even if we successfully complete an acquisition, we may not be able to successfully assimilate and integrate the business, technologies, solutions, personnel or operations of the company that we acquired, particularly if key personnel of an acquired company decide not to work for us. In addition, we may issue equity securities to complete an acquisition, which would dilute our stockholders' ownership and could adversely affect the price of our common stock. Acquisitions may also involve the entry into geographic or business markets in which we have little or no prior experience. Consequently, we may not achieve anticipated benefits of the acquisitions which could harm our operating results.

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We rely on our marketing efforts to attract new customers and must do so in a cost-effective manner; otherwise our operations will be harmed.

A significant component of our business strategy is the promotion of the OpenTable website and ERB. We believe that the attractiveness of our solutions to our current and potential customers, both restaurants and diners, will increase as new restaurants provide additional restaurant listings and diners increasingly use our website to conduct searches and make restaurant reservations. This is because an increase in the number of restaurant listings and the number of diners searching those listings increases the utility of our website and its associated search, listing and reservation services. If we do not continue to grow the use of our website and ERB, we may fail to build the critical mass of both restaurant customers and diners required to substantially increase our revenues.

While our marketing efforts do not currently involve significant expenditures, in the future we may find it necessary to invest more heavily in direct marketing or online or traditional advertising. If we are unable to effectively market our solutions to new customers or are unable to do so in a cost-effective manner, our operating results could be adversely affected.

System interruptions that impair access to our website would damage our reputation and brand and substantially harm our business and operating results.

The satisfactory performance, reliability and availability of our ERB, website and network infrastructure are critical to our reputation, our ability to attract and retain both restaurant customers and diners and our ability to maintain adequate customer service levels. Any systems interruption that results in the unavailability of our website or any restaurant connected to our website could result in negative publicity, damage our reputation and brand and cause our business and operating results to suffer. We may experience temporary system interruptions (either to our website or at our restaurant customer locations) for a variety of reasons, including network failures, power failures, software errors or an overwhelming number of visitors trying to reach our website during periods of strong demand. In addition, our primary data center is hosted by a third party. Because we are dependent in part on third parties for the implementation and maintenance of certain aspects of our systems and because some of the causes of system interruptions may be outside of our control, we may not be able to remedy such interruptions in a timely manner, or at all.

We depend on key and highly skilled personnel to operate our business, and if we are unable to retain our current personnel or hire additional personnel our ability to develop and successfully market our business could be harmed.

We believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, technical, finance, creative and sales and marketing personnel. Moreover, we believe that our future success is highly dependent on the contributions of our named executive officers, as defined in "Management-Executive Compensation." All of our U.S. officers and other employees are at-will employees, which means they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. In addition, the loss of any key employees or the inability to attract or retain qualified personnel could delay the development and introduction of, and harm our ability to sell, our solutions and harm the market's perception of us. Competition for qualified personnel is particularly intense in the San Francisco Bay Area, where our headquarters are located. Further, our principal overseas operations are based in London and Tokyo, which are cities that, similar to our headquarters region, have high costs of living and consequently high compensation standards. Qualified individuals are in high demand, and we may incur significant costs to attract them. We may be unable to attract and retain suitably qualified individuals who are capable of meeting our growing sales, operational and managerial requirements, or may be required to pay increased compensation in order to do so. If we are unable to attract and retain the qualified personnel we need to succeed, our business will suffer.

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Volatility or lack of performance in our stock price may also affect our ability to attract and retain our key employees. Our named executive officers have become, or will soon become, vested in a substantial amount of stock or stock options. Employees may be more likely to leave us if the shares they own or the shares underlying their options have significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or if the exercise prices of the options that they hold are significantly above the market price of our common stock. If we are unable to retain our employees, our business, operating results and financial condition will be harmed.

Failure to adequately protect our intellectual property could substantially harm our business and operating results.

Because our business is heavily dependent on our intellectual property, including our proprietary software, the protection of our intellectual property rights is crucial to the success of our business. We rely on a combination of patent, trademark, trade secret and copyright law and contractual restrictions to protect our intellectual property. These afford only limited protection. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our website features, software and functionality or obtain and use information that we consider proprietary, such as the technology used to operate our website, our content and our trademarks. Moreover, policing our proprietary rights is difficult and may not always be effective. In particular, because we sell our solutions internationally, we may need to enforce our rights under the laws of countries that do not protect proprietary rights to as great an extent as do the laws of the United States.

We have registered "OpenTable" and our other trademarks as trademarks in the United States and in certain other countries. Competitors may adopt service names similar to ours, thereby impeding our ability to build brand identity and possibly leading to customer confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of the term OpenTable or our other trademarks. From time to time, we have acquired Internet domain names held by others when such names were causing consumer confusion or had the potential to cause consumer confusion.

We currently hold the "OpenTable.com" Internet domain name and various other related domain names. Domain names generally are regulated by Internet regulatory bodies. If we lose the ability to use a domain name in a particular country, we would be forced to either incur significant additional expenses to market our solutions within that country, including the development of a new brand and the creation of new promotional materials, or elect not to sell solutions in that country. Either result could substantially harm our business and operating results. The regulation of domain names in the United States and in foreign countries is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may not be able to acquire or maintain the domain names that utilize the name OpenTable in all of the countries in which we currently conduct or intend to conduct business.

Litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary in the future to enforce our intellectual property rights, to protect our patent rights, trade secrets and domain names and to determine the validity and scope of the proprietary rights of others. Our efforts to enforce or protect our proprietary rights may be ineffective and could result in substantial costs and diversion of resources and could substantially harm our operating results.

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Assertions by third parties of infringement by us of their intellectual property rights could result in significant costs and substantially harm our business and operating results.

Other parties have asserted, and may in the future assert, that we have infringed their intellectual property rights. Future litigation may involve patent holding companies or other adverse patent owners who have no relevant product revenue, and therefore our own potential patents may provide little or no deterrence. We cannot predict whether assertions of third party intellectual property rights or claims arising from such assertions will substantially harm our business and operating results. If we are forced to defend against any infringement claims, whether they are with or without merit or are determined in our favor, we may face costly litigation and diversion of technical and management personnel. Furthermore, an adverse outcome of a dispute may require us to pay damages, potentially including treble damages, if we are found to have willfully infringed a party's patent or copyright rights; cease making, licensing or using solutions that are alleged to incorporate the intellectual property of others; expend additional development resources to redesign our solutions; and enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies. Royalty or licensing agreements, if required, may be unavailable on terms acceptable to us, or at all. In any event, we may need to license intellectual property which would require us to pay royalties or make one-time payments.

We depend in part on licenses of technologies from third parties in order to deliver our solutions, and, as a result, our business is dependent in part on the availability of such licenses on commercially reasonable terms.

We currently, and will continue to, license certain technologies from third parties. We cannot be certain that these third-party content licenses will be available to us on commercially reasonable terms or that we will be able to successfully integrate the technology into our solutions. These third-party in-licenses may expose us to increased risk, including risks associated with the assimilation of new technology sufficient to offset associated acquisition and maintenance costs. The inability to obtain any of these licenses could result in delays in solution development until equivalent technology can be identified and integrated. Any such delays in services could cause our business, operating results and financial condition to suffer.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

We have devoted substantial resources to the development of our proprietary technology, including the proprietary software component of our ERB, and related processes. In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with our employees, licensees, independent contractors and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Our failure to protect confidential information of our customers and our network against security breaches could damage our reputation and brand and substantially harm our business and operating results.

Currently, some of our restaurant customers require that diners enter their credit card information to hold a reservation. We rely on encryption and authentication technology licensed from third parties to effect secure transmission of confidential information, including credit card numbers.

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Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in a compromise or breach of the technology used by us to protect customer transaction data. Any such compromise of our security could damage our reputation and brand and expose us to a risk of loss or litigation and possible liability which would substantially harm our business and operating results. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches.

We rely on a third-party customer support service provider for the majority of our customer service calls. If this service provider experiences operational difficulties or disruptions, our business could be adversely affected.

We depend on a U.S.-based third-party customer support service provider to handle most of our routine support cases. While we have a small customer service center in our San Francisco headquarters, if our customer support service provider experienced operational difficulties, our ability to respond to customer service calls in a timely manner and the quality of our customer service would be adversely affected, which in turn could affect our reputation and results of operations. While we have a contract with our customer support service provider, either party may terminate the contract for convenience by providing the other party at least 90 days prior notice of its intent to terminate. If for any reason our relationship with our customer support service provider were to end, it would require a significant amount of time to either scale up our San Francisco call center or to hire and train a new customer support service provider.

We outsource a portion of our software development to a third-party service provider located in India. Any interruption in our relationship with this service provider could adversely affect our business.

If for any reason our relationship with our third-party software development service provider were to end, it would require a significant amount of time to transition the software development work either in-house or to a new third-party service provider. Our contract with this software development service provider has a term ending on January 31, 2010. Either party may terminate the contract at any time by providing the other party at least 30 days prior notice of its intent to terminate. If our third-party software development service provider fails to perform its obligations in a timely manner or at satisfactory quality levels, our ability to bring solutions to market and our reputation could suffer. In addition, our third-party software development service provider is located in India and, as a result, may be subject to geopolitical uncertainty.

We may require additional capital to respond to business opportunities, challenges, acquisitions or unforeseen circumstances and may determine to engage in equity or debt financings.

We may require additional capital to expand our business. However, additional funds may not be available when we need them, on terms that are acceptable to us, or at all. For example, any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we do not have funds available to enhance our solutions, maintain the competitiveness of our technology or pursue business opportunities, we may not be able to service our existing customers or acquire new customers. In addition, if we do not have funds available to make strategic acquisitions, we may not be able to expand our business. The inability to raise additional capital could have an adverse effect on our business, operating results and financial condition.

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If we issue additional shares of common stock to raise capital, it may have a dilutive effect on your investment.

If we raise additional capital through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of us. Moreover, any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock, including shares of common stock sold in this offering.

A further tightening of the credit markets may have an adverse effect on our ability to obtain short-term debt financing.

The recent deterioration of the global economy threatens to cause further tightening of the credit markets, more stringent lending standards and terms and higher volatility in interest rates. Persistence of these conditions could have a material adverse effect on our access to short-term debt and the terms and cost of that debt. As a result, we may not be able to secure additional financing in a timely manner, or at all, to meet our future capital needs which may have an adverse effect on our business, operating results and financial condition.

Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events and to interruption by man-made problems such as computer viruses or terrorism.

Our systems and operations are vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins and similar events. For example, a significant natural disaster, such as an earthquake, fire or flood, could have a material adverse impact on our business, operating results and financial condition, and our insurance coverage may be insufficient to compensate us for losses that may occur. Our U.S. corporate offices and the facility we lease to house our computer and telecommunications equipment are located in the San Francisco Bay Area, a region known for seismic activity. In addition, acts of terrorism, which may be targeted at metropolitan areas which have higher population density than rural areas, could cause disruptions in our or our restaurant customers' businesses or the economy as a whole. Our servers may also be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, loss of critical data or the unauthorized disclosure of confidential customer data. We may not have sufficient protection or recovery plans in certain circumstances, such as natural disasters affecting the San Francisco Bay Area, and our business interruption insurance may be insufficient to compensate us for losses that may occur. As we rely heavily on our servers, computer and communications systems and the Internet to conduct our business and provide high quality customer service, such disruptions could negatively impact our ability to run our business and either directly or indirectly disrupt our restaurant customers' businesses, which could have an adverse affect on our business, operating results and financial condition.

We will incur increased costs as a result of being a public company, which may adversely affect our operating results and financial condition.

As a public company, we will incur significant accounting, legal and other expenses that we did not incur as a private company. We will incur costs associated with our public company reporting requirements. We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, as well as rules implemented by the SEC and The Nasdaq Stock Market. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. Furthermore, these laws and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the

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same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

New laws and regulations as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules adopted by the SEC and by The Nasdaq Stock Market, would likely result in increased costs to us as we respond to their requirements.

Risks Related to Our Industry

Seasonality may cause fluctuations in our financial results.

We generally experience some effects of seasonality due to increases in restaurant dining tied to certain holidays and restaurant industry promotions. Accordingly, the number of reservations made through our system has generally increased at a higher rate in the first and fourth quarters compared to the second and third quarters. Although historically our revenue has increased in each quarter as we have added restaurant customers and diners, in the future this seasonality may cause fluctuations in our financial results. In addition, other seasonality trends may develop and the existing seasonality and consumer behavior that we experience may change.

If use of the Internet, particularly with respect to online restaurant reservations, does not continue to increase as rapidly as we anticipate, our business will be harmed.

Our future net profits are substantially dependent upon the continued use of the Internet as an effective medium of business and communication by our target customers. Internet use may not continue to develop at historical rates, and consumers may not continue to use the Internet and other online services as a medium for commerce. In addition, the Internet may not be accepted as a viable long-term marketplace or resource for a number of reasons, including:

•: actual or perceived lack of security of information or privacy protection;
•: possible disruptions, computer viruses or other damage to Internet servers or to users' computers; and
•: excessive governmental regulation.

Our success will depend, in large part, upon third parties maintaining the Internet infrastructure to provide a reliable network backbone with the speed, data capacity, security and hardware necessary for reliable Internet access and services. Our business, which relies on a contextually rich website that requires the transmission of substantial data, is also significantly dependent upon the availability and adoption of broadband Internet access and other high-speed Internet connectivity technologies.

Government regulation of the Internet is evolving, and unfavorable changes could substantially harm our business and operating results.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet. Existing and future laws and regulations may impede the growth of the Internet or other online services. These regulations and laws may cover taxation, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, broadband residential Internet access and the characteristics and

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quality of services. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet. Unfavorable resolution of these issues may substantially harm our business and operating results.

Risks Related to Owning Our Common Stock

An active, liquid and orderly market for our common stock may never develop or be sustained.

Prior to this offering there has been no market for shares of our common stock. An active trading market for our common stock may never develop or be sustained, which could depress the market price of our common stock and could affect your ability to sell your shares. The initial public offering price will be determined through negotiations between us and the representative of the underwriters and may bear no relationship to the price at which our common stock will trade following the completion of this offering. The trading price of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this prospectus, these factors include:

•: our operating performance and the operating performance of similar companies;
•: the overall performance of the equity markets;
•: the number of shares of our common stock publicly owned and available for trading;
•: threatened or actual litigation;
•: changes in laws or regulations relating to our solutions;
•: any major change in our board of directors or management;
•: publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;
•: large volumes of sales of our shares of common stock by existing stockholders; and
•: general political and economic conditions.

In addition, the stock market in general, and the market for Internet-related companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company's securities. This litigation, if instituted against us, could result in very substantial costs, divert our management's attention and resources and harm our business, operating results and financial condition. In addition, the recent distress in the financial markets has also resulted in extreme volatility in security prices.

Our directors, executive officers and principal stockholders will continue to have substantial control over us after this offering and could delay or prevent a change in corporate control.

After this offering, our directors, executive officers and holders of more than 5% of our common stock, together with their affiliates, will beneficially own, in the aggregate, approximately % of our outstanding common stock, assuming no exercise of the underwriters' option to purchase additional shares of our common stock in this offering. As a result, these stockholders, acting together, would have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, would have the ability to control the

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management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by:

•: delaying, deferring or preventing a change in corporate control;
•: impeding a merger, consolidation, takeover or other business combination involving us; or
•: discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

Future sales of shares of our common stock by existing stockholders could depress the price of our common stock.

If our existing stockholders sell, or indicate an intent to sell, substantial amounts of our common stock in the public market after the 180-day contractual lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline significantly and could decline below the initial public offering price. Based on shares outstanding as of February 28, 2009, upon completion of this offering, we will have outstanding approximately shares of common stock, assuming no exercise of the underwriters' overallotment option. Of these shares, only shares of common stock sold in this offering will be immediately freely tradable, without restriction, in the public market. Merrill Lynch may, in its sole discretion, permit our officers, directors, employees and current stockholders to sell shares prior to the expiration of the lock-up agreements.

After the lock-up agreements pertaining to this offering expire and based on shares outstanding as of February 28, 2009, an additional shares will be eligible for sale in the public market, of which are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements. In addition, the 30,103,038 shares subject to outstanding options under our 1999 Stock Plan, as amended, as of February 28, 2009, and the shares reserved for future issuance under our 2009 Incentive Award Plan will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the price of our common stock could decline substantially.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

Our management will have broad discretion to use the net proceeds to us from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply the net proceeds from this offering in ways that increase the value of your investment. We expect to use the net proceeds to us from this offering for working

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capital and other general corporate purposes, including the funding of our marketing activities and the costs of operating as a public company, as well as further investment in the development of our proprietary technologies. We may also use a portion of the net proceeds for the acquisition of businesses, solutions and technologies that we believe are complementary to our own, although we have no agreements or understandings with respect to any acquisition at this time. We have not allocated the net proceeds from this offering for any specific purposes. Until we use the net proceeds to us from this offering, we plan to invest them, and these investments may not yield a favorable rate of return. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

Certain provisions in our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment.

Our certificate of incorporation and bylaws that will be in effect prior to the closing of this offering will contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors. These provisions will include:

•: a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;
•: no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
•: the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
•: the ability of our board of directors to determine to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•: a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
•: the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
•: advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror's own slate of directors or otherwise attempting to obtain control of us.

We are also subject to certain anti-takeover provisions under Delaware law. Under Delaware law, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

•: our ability to accurately forecast revenues and appropriately plan our expenses;
•: the impact of worldwide economic conditions, including the resulting effect on consumer spending;
•: our ability to maintain an adequate rate of growth;
•: our ability to effectively manage our growth;
•: our ability to attract new restaurant customers;
•: our ability to increase the number of visitors to our website and convert those visitors into diners who reserve a table using our website and then dine with our restaurant customers;
•: our ability to retain existing restaurant customers and diners or encourage repeat reservations;
•: our ability to provide a high-quality customer experience through our website and ERB;
•: our ability to successfully enter new markets and manage our international expansion;
•: the impact of fluctuations in currency exchange rates;
•: the effects of increased competition in our business;
•: our ability to keep pace with changes in technology and our competitors;
•: our ability to successfully manage any future acquisitions of businesses, solutions or technologies;
•: the success of our marketing efforts;
•: interruptions in service and any related impact on our reputation;
•: the attraction and retention of qualified employees and key personnel;
•: our ability to protect our intellectual property, including our proprietary ERB;
•: costs associated with defending intellectual property infringement and other claims;
•: the effects of natural or man-made catastrophic events;
•: the effectiveness of our internal controls;
•: changes in government regulation affecting our business; and
•: other risk factors included under "Risk Factors" in this prospectus.

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In addition, in this prospectus, the words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "predict," "potential" and similar expressions, as they relate to our company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Forward-looking statements speak only as of the date of this prospectus. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of the shares of common stock offered by us will be approximately $ million, or approximately $ million if the underwriters' overallotment option is exercised in full, based on an assumed initial public offering price of $ per share and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of common stock by the selling stockholders.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, or approximately $ million if the underwriters' overallotment option is exercised in full, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We currently intend to use the net proceeds to us from this offering primarily for general corporate purposes, including working capital, sales and marketing activities, general and administrative matters and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business. We have no present understandings, commitments or agreements to enter into any acquisitions or investments. Our management will have broad discretion over the uses of the net proceeds in this offering. Pending these uses, we intend to invest the net proceeds from this offering in short-term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government.

By establishing a public market for our common stock, this offering is also intended to facilitate our future access to public markets.

DIVIDEND POLICY

We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our common stock. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

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CAPITALIZATION

The following table shows:

•: our capitalization as of December 31, 2008;
•: our capitalization as of December 31, 2008, on a pro forma basis, giving effect to the automatic conversion of all outstanding preferred stock into an aggregate of 113,446,799 shares of common stock as if such conversions had occurred on December 31, 2008; and
•: our capitalization as of December 31, 2008, on a pro forma as adjusted basis, giving effect to the sale by us of shares of common stock in this offering, at an assumed initial public offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

			As of December 31, 2008

			Actual			Pro Forma			Pro Forma, as Adjusted(1)
						(Unaudited)
			(In thousands)
Cash, cash equivalents and short-term investments			$	22,787		$	22,787		$
Stockholders' equity:
	Convertible preferred stock			21,909			—
	Common stock			13			25
	Additional paid-in capital			64,048			85,945
	Treasury stock			(647	)		(647	)
	Accumulated other comprehensive loss			(296	)		(296	)
	Accumulated deficit			(58,343	)		(58,343	)

	Total stockholders' equity			26,684			26,684

		Total capitalization	$	49,471		$	49,471		$

(1): A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the amount of additional paid-in capital, total stockholders' equity and total capitalization by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The outstanding share information set forth above is as of December 31, 2008 and excludes:

•: an aggregate of 1,991,703 shares of common stock reserved for issuance under our 1999 Stock Plan;
•: additional shares of common stock, subject to increase on an annual basis, reserved for issuance under our 2009 Incentive Award Plan, which we plan to adopt in connection with this offering;
•: 30,223,330 shares of common stock issuable upon the exercise of outstanding options to purchase our common stock granted pursuant to our 1999 Stock Plan at a weighted average exercise price of $0.58 per share; and
•: 2,275,767 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $0.31 per share.

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DILUTION

If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock immediately after the offering.

The historical net tangible book value of our common stock as of December 31, 2008 was $26.7 million, or $0.20 per share. Historical net tangible book value per share is determined by dividing the net tangible book value by the number of shares of outstanding common stock. If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock.

After giving effect to the (i) automatic conversion of our outstanding preferred stock into common stock in connection with this offering and (ii) receipt of the net proceeds from our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2008 would have been approximately $ million, or $ per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors purchasing common stock in this offering.

The following table illustrates this dilution on a per share basis to new investors:


Assumed initial public offering price			$
Net tangible book value per share as of December 31, 2008	$	0.20
Increase per share attributable to conversion of preferred stock
Pro forma net tangible book value before this offering
Increase per share attributable to this offering

Pro forma net tangible book value, as adjusted to give effect to this offering

Dilution in pro forma net tangible book value per share to new investors in this offering			$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the pro forma net tangible book value, as adjusted to give effect to this offering, by $ per share and the dilution to new investors by $ per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated expenses payable by us.

The table below summarizes as of December 31, 2008, on a pro forma as adjusted basis described above, the number of shares of our common stock, the total consideration and the average price per share (i) paid to us by existing stockholders and (ii) to be paid by new investors purchasing our common stock in this offering at an assumed initial public offering price of $ per share.

	Shares Purchased				Total Consideration

	Shares Purchased				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent			Average Price Per Share
Existing stockholders				%	$			%	$
New investors

Total			100.0	%	$		100.0	%

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The above discussion and tables are based on 250,254,096 shares of common stock issued and outstanding as of December 31, 2008 and excludes:

•: an aggregate of 1,991,703 additional shares of common stock reserved for issuance under our 1999 Stock Plan;
•: additional shares of common stock, subject to increase on an annual basis, reserved for issuance under our 2009 Incentive Award Plan, which we plan to adopt in connection with this offering;
•: 30,223,330 shares of common stock issuable upon the exercise of outstanding options to purchase our common stock granted pursuant to our 1999 Stock Plan at a weighted average exercise price of $0.58 per share; and
•: 2,275,767 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $0.31 per share.

Sales by the selling stockholders in this offering will cause the number of shares held by existing stockholders to be reduced to shares or % of the total number of shares of our common stock outstanding after this offering. If the underwriters' overallotment option is exercised in full, the number of shares held by the existing stockholders after this offering would be reduced to , or % of the total number of shares of our common stock outstanding after this offering, and the number of shares held by new investors would increase to or % of the total number of shares of our common stock outstanding after this offering.

To the extent that any outstanding options or warrants are exercised, new investors will experience further dilution.

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SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected historical consolidated financial data below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements, related notes and other financial information included in this prospectus. The selected consolidated financial data in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by the consolidated financial statements and related notes included in this prospectus.

The consolidated statements of operations data for the years ended December 31, 2006, 2007 and 2008 and the consolidated balance sheets data as of December 31, 2007 and 2008 are derived from our audited consolidated financial statements included in this prospectus. The consolidated statements of operations data for the years ended December 31, 2004 and 2005 and the consolidated balance sheets data as of December 31, 2004, 2005 and 2006 are derived from our audited consolidated financial statements not included in this prospectus. We have prepared the unaudited information on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial information set forth in those statements. Historical results are not necessarily indicative of the results to be expected in the future.

Pro forma basic net loss per share has been calculated assuming the conversion of all outstanding shares of our preferred stock into 113,446,799 shares of common stock upon the completion of this offering.

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			Years Ended December 31,

			2004			2005			2006			2007			2008
			(In thousands, except per share amounts)
Consolidated Statements of Operations Data:
REVENUES			$	10,142		$	16,715		$	27,168		$	41,148		$	55,844
COSTS AND EXPENSES:
	Operations and support(1)			5,588			8,016			9,548			12,603			17,760
	Sales and marketing(1)			4,944			6,529			7,675			11,326			14,830
	Technology(1)			2,165			2,969			4,024			5,863			9,511
	General and administrative(1)			2,898			4,191			5,972			12,212			13,117

		Total costs and expenses		15,595			21,705			27,219			42,004			55,218

Income (loss) from operations				(5,453	)		(4,990	)		(51	)		(856	)		626
Other income, net				(3	)		323			421			951			468

Income (loss) before taxes				(5,456	)		(4,667	)		370			95			1,094
Income tax expense (benefit)				—			—			176			(9,121	)		2,118

NET INCOME (LOSS)			$	(5,456	)	$	(4,667	)	$	194		$	9,216		$	(1,024	)

Net income (loss) per share:
	Basic		$	(0.06	)	$	(0.04	)	$	0.00		$	0.08		$	(0.01	)

	Diluted		$	(0.06	)	$	(0.04	)	$	0.00		$	0.04		$	(0.01	)

Weighted average shares outstanding:
	Basic			93,701			106,085			114,144			119,025			125,196
	Diluted			93,701			106,085			244,037			250,237			125,196
Pro forma net loss per share—basic and diluted (unaudited)															$	(0.00	)

Pro forma weighted average shares outstanding used in calculating net loss per share—basic and diluted (unaudited)																238,643

(1): Stock-based compensation included in above line items:


Operations and support	$	31	$	23	$	58	$	290	$	339
Sales and marketing		50		36		67		709		878
Technology		30		50		64		288		694
General and administrative		76		187		520		1,816		2,059

Total	$	187	$	296	$	709	$	3,103	$	3,970

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		Years Ended December 31,

		2004		2005		2006		2007		2008
Other Operational Data:
Installed restaurants (at period end):
	North America		2,423		3,873		5,583		7,391		9,295
	International		—		71		204		470		1,040

	Total		2,423		3,944		5,787		7,861		10,335

Seated diners (in thousands):
	North America		4,574		8,322		15,171		24,614		33,636
	International		—		10		84		244		542

	Total		4,574		8,332		15,255		24,858		34,178

Headcount (at period end):
	North America		128		143		152		192		238
	International		3		9		16		34		59

	Total		131		152		168		226		297



		(In thousands)
Additional Financial Data:
Revenues:
	North America	$	10,142		$	16,618		$	26,654		$	39,601		$	53,065
	International		—			97			514			1,547			2,779

	Total	$	10,142		$	16,715		$	27,168		$	41,148		$	55,844

Income (loss) from operations:
	North America	$	(5,326	)	$	(3,373	)	$	3,106		$	4,974		$	9,088
	International		(127	)		(1,617	)		(3,157	)		(5,830	)		(8,462	)

	Total	$	(5,453	)	$	(4,990	)	$	(51	)	$	(856	)	$	626

Depreciation and amortization:
	North America	$	645		$	1,260		$	2,029		$	2,817		$	4,026
	International		—			21			89			184			350

	Total	$	645		$	1,281		$	2,118		$	3,001		$	4,376

	As of December 31,

	2004		2005		2006		2007		2008
	(In thousands)
Consolidated Balance Sheets Data:
Cash and cash equivalents	$	2,475	$	8,076	$	10,264	$	21,661	$	5,528
Short-term investments		12,000		504		—		—		17,259
Property and equipment, net		2,316		4,619		6,019		8,378		11,125
Working capital		12,456		5,389		5,655		9,759		14,745
Total assets		19,816		17,248		21,124		45,814		50,883
Dining rewards payable		1,224		2,021		3,499		5,836		8,462
Convertible preferred stock		21,909		21,909		21,909		21,909		21,909
Total stockholders' equity		12,552		8,324		8,907		22,485		26,684

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in "Risk Factors."

Overview

We provide solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. Our solutions include our proprietary Electronic Reservation Book, or ERB, for restaurant customers and www.opentable.com, a popular restaurant reservation website for diners. The OpenTable network includes approximately 10,000 OpenTable restaurant customers spanning all 50 states as well as select markets outside of the United States. Since our inception in 1998, we have seated approximately 90 million diners through OpenTable reservations; during the twelve months ended December 31, 2008, we seated an average of approximately 2.8 million diners per month. Restaurants pay us a one-time installation fee for onsite installation and training, a monthly subscription fee for the use of our software and hardware and a fee for each restaurant guest seated through online reservations. Our online restaurant reservation service is free to diners. For the twelve months ended December 31, 2007 and 2008, our net revenues were $41.1 million and $55.8 million, respectively. For the twelve months ended December 31, 2007 and 2008, our subscription revenues accounted for 55% and 54% of our total revenues, respectively, and our reservation revenues accounted for 41% and 41% of our total revenues, respectively.

In 2004, we began to selectively expand outside of North America into countries that are characterized by large numbers of online consumer transactions and reservation-taking restaurants. To date, we have concentrated our international efforts in Germany, Japan and the United Kingdom. Our revenues outside of North America for the twelve months ended December 31, 2007 and 2008, were $1.5 million and $2.8 million, respectively, or 4% and 5% of our total revenues, respectively. We intend to continue to incur substantial expenses in advance of recognizing material related revenues as we attempt to further penetrate our existing international markets and selectively enter new markets. Some international markets may fail to meet our expectations, and we may decide to realign our focus, as we did when we closed our offices in Spain and France in the fourth quarter of 2008.

Basis of Presentation

General

We report consolidated operations in U.S. dollars and operate in two geographic segments: North America and International. The North America segment is comprised of all of our operations in the United States, Canada and Mexico, and the International segment is comprised of all non-North America operations, which includes operations in Europe and Asia.

Revenues

We generate substantially all of our revenues from our restaurant customers; we do not charge any fees to diners. Our revenues include installation fees for our ERB (including training), monthly subscription fees and a fee for each restaurant guest seated through online reservations. Installation fees are recognized on a straight-line basis over an estimated customer life of approximately seven years. Subscription revenues are recognized on a straight-line basis during the contractual period over which the service is delivered to our restaurant customers. Revenues from online reservations are

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recognized on a transaction basis as the diners are seated by the restaurant. Revenues are shown net of redeemable Dining Points issued to diners as described below in "Dining Rewards Loyalty Program." See "Critical Accounting Policies and Estimates—Dining Rewards Loyalty Program" below.

Costs and Expenses

Operations and support. Our operations and support expenses consist primarily of payroll and related costs, including bonuses and stock-based compensation, for those employees associated with installation, support and maintenance for our restaurant customers, as well as costs related to our outsourced call center. Operations and support expenses also include restaurant equipment costs, such as depreciation on restaurant-related hardware, shipping costs related to restaurant equipment, restaurant equipment costs that do not meet the capitalization threshold, referral payments and website connectivity costs. Operations and support expenses also include amortization of capitalized website and development costs (see "Critical Accounting Policies and Estimates—Website and Software Development Costs" below). Also included in operations and support expenses are travel and related expenses incurred by the employees providing installation and support services for our restaurant customers, plus allocated facilities costs.

Sales and marketing. Our sales and marketing expenses consist primarily of salaries, benefits and incentive compensation for sales and marketing employees, including stock-based compensation. Also included are expenses for trade shows, public relations and other promotional and marketing activities, travel and entertainment expenses and allocated facilities costs.

Technology. Our technology expenses consist primarily of salaries and benefits, including bonuses and stock-based compensation, for employees and contractors engaged in the development and ongoing maintenance of our website, infrastructure and software, as well as allocated facilities costs.

General and administrative. Our general and administrative costs consist primarily of salaries and benefits, including stock-based compensation, for general and administrative employees and contractors involved in executive, finance, accounting, risk management, human resources and legal roles. In addition, general and administrative costs include consulting, legal, accounting and other professional fees. Bad debt, third party payment processor, credit card, bank processing fees and allocated facilities costs are also included in general and administrative expenses.

Headcount consists of full-time equivalent employees, as well as full-time equivalent contractors, in all of the sections noted below.

Other Income, Net

Other income, net consists primarily of the interest income earned on our cash accounts. Foreign exchange gains and losses are also included in other income, net.

Income Taxes

We are subject to tax in the United States as well as other tax jurisdictions or countries in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to current U.S. income tax.

As of December 31, 2008, for federal and state tax purposes, we had $10.4 million of federal and $9.8 million of state net operating loss carryforwards available to reduce future taxable income. These net operating loss carryforwards begin to expire in 2023 and 2009 for federal and state tax purposes, respectively. Our ability to use our net operating loss carryforwards to offset any future taxable income will be subject to limitations attributable to equity transactions that resulted in a change of ownership as defined by Section 382 of the Internal Revenue Code of 1986, as amended, or the

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Internal Revenue Code. We have $15.0 million in unrecognized tax benefits primarily as a result of the limitations on our net operating loss carryforwards. In the event that any unrecognized tax benefits are recognized, the effective tax rate will be affected. Approximately $14.3 million of the unrecognized tax benefit would impact the effective tax rate if recognized. Our policy is to classify interest accrued or penalties related to unrecognized tax benefits as a component of income tax expense. No such interest or penalties have been recorded to date.

Our net deferred tax assets consist primarily of net operating loss carryforwards generated before we achieved profitability. During the fourth quarter of 2007, we concluded that it was more likely than not that we would be able to realize the benefit of these deferred tax assets in the future. Consequently, we recognized a net tax benefit of $9.4 million in the fourth quarter of 2007 resulting primarily from the release of substantially all of the net deferred tax valuation allowance. We based this conclusion on historical and projected operating performance, as well as our expectation that our operations will generate sufficient taxable income in future periods to be able to realize a portion of the tax benefits associated with the deferred tax assets. We will continue to assess the need for a valuation allowance on the deferred tax asset by evaluating both positive and negative evidence that may exist. Any adjustment to the deferred tax asset valuation allowance would be recorded in the income statement of the periods that the adjustment is determined to be required.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the assumptions and estimates associated with revenue recognition, the points-based loyalty program, website and software development costs, income taxes and stock-based compensation have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, please see Note 2 of the accompanying notes to our consolidated financial statements.

Revenue Recognition

Our revenues include installation fees for our ERB (including training), monthly subscription fees and a fee for each restaurant guest seated through online reservations. We provide our application as a service, and follow the provisions of SEC Staff Accounting Bulletin No. 104, Revenue Recognition (SAB No. 104) and FASB Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables (EITF No. 00-21). We recognize revenue when all of the following conditions are met: there is persuasive evidence of an arrangement; the service has been provided to the customer; the collection of the fees is reasonably assured; and the amount of fees to be paid by the customer is fixed or determinable. Amounts paid by the customer include the right to use our hardware during the service period. Proportionate revenue related to the right to use our hardware accounts for less than 10% of revenues for the periods presented.

Revenues from the installation of our ERB are recognized on a straight-line basis over the estimated customer life, commencing with customer acceptance. The estimated customer life is approximately seven years, based on historical restaurant customer termination activity. Estimates made by us may differ from actual customer lives. These differences may materially impact installation and other revenue by increasing or decreasing revenue, depending on whether the estimated customer life

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decreases or increases. A change in the estimated customer life by one year in either direction would have a minimal impact to total revenue of less than 1%. Subscription revenues are recognized on a straight-line basis during the contractual period over which the service is delivered. Reservation revenues (or per seated diner fees) are recognized on a transaction-by- transaction basis as diners are seated by our restaurant customers. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenues or revenues, depending on whether the revenue recognition criteria have been met. Revenues are shown net of redeemable Dining Points issued to diners (as described below).

Dining Rewards Loyalty Program

We provide a points-based loyalty program, OpenTable Dining Rewards, to registered diners who book and honor reservations through the OpenTable website. OpenTable Dining Rewards involves the issuance of "Dining Points," which can be accumulated and redeemed for "Dining Cheques." The standard award is 100 points per reservation, but diners can earn 1,000 points for reservations during featured times under the OpenTable Dining Rewards program. When a diner accumulates a minimum of 2,000 points, he or she may redeem them for a $20 Dining Cheque. Every 100 Dining Points is equal to one dollar. Diners may present Dining Cheques at any OpenTable restaurant and their bill is reduced by the cheque amount. The restaurant then deposits the Dining Cheque to its bank.

If a diner does not make a seated reservation within any 12-month period, then his or her account is considered inactive and the Dining Points balance is reset to zero. As is typical with points-based incentive programs, many Dining Points expire unused. In addition, some Dining Cheques are never used. The recorded expense is an estimate of the eventual cash outlay related to the issued Dining Points and is booked at the time the points are earned by the diner (i.e., when the diner is "seated" by the restaurant). We estimate the cost of the issued Dining Points by analyzing historical patterns of redemption and cheque cashing activity. These historical patterns are evaluated in light of any current or proposed program changes that may impact future point redemption. Actual redemption rates could differ from our estimates used in assessing the contra-revenue amounts and corresponding liability. These differences could materially impact reservation revenues. For example, an increase of 10% in the redemption rate as of December 31, 2008 would result in a reduction in revenues of $1.5 million and an increase in the dining rewards payable liability of 18%.

We recognize the cost and a corresponding liability associated with Dining Points as contra-revenue in accordance with EITF Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products) (EITF 01-09) and EITF Issue No. 00-22, Accounting for "Points" and Certain Other Time- or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to be Delivered in the Future (EITF 00-22).

Website and Software Development Costs

Costs related to website and internal-use software are accounted for in accordance with American Institute of Certified Public Accountants Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use (SOP 98-1) and EITF Issue No. 00-2, Accounting for Website Development Costs (EITF 00-2). Such software is primarily related to our website, including support systems. In accordance with SOP 98-1 and EITF 00-2, we capitalize our costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding and it is probable that the project will be completed and the software will be used as intended. Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally estimated between two to four years. Costs incurred prior to meeting these criteria are expensed as incurred. Costs incurred for enhancements that are expected to result in additional features or functionality are capitalized and expensed over the estimated useful life of the enhancements.

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We follow the guidance in Statement of Financial Accounting Standard No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (SFAS 86) in accounting for costs incurred in connection with development of the software contained in the ERB used by all restaurant customers, and in a limited number of certain transactions we sell reservation systems that do not include our ongoing service. All costs incurred to establish the technological feasibility of a computer product to be sold, leased or otherwise marketed are expensed as incurred. Costs incurred subsequent to establishing technological feasibility and through general product release are capitalized and amortized over the estimated product life. The period between technological feasibility and general product release is extremely short for us, and the costs incurred during this stage are not considered to be material and are expensed as incurred.

Income Taxes

We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, generally all expected future events other than enactments or changes in the tax law or rates are considered. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.

We operate in various tax jurisdictions and are subject to audit by various tax authorities. We provide for tax contingencies whenever it is deemed probable that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or changes in tax laws. Tax contingencies are based upon their technical merits, relevant tax law and the specific facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the amounts recorded for such tax contingencies.

On January 1, 2007, we adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (FIN 48), which supplements FASB Statement No. 109 by defining the confidence level that a tax position must meet in order to be recognized in the financial statements. FIN 48 requires that the tax effects of a position be recognized only if it is "more likely than not" to be sustained based solely on its technical merits as of the reporting date. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

With the adoption of FIN 48, companies are required to adjust their financial statements to reflect only those tax positions that are more likely than not to be sustained. Any necessary adjustment would be recorded directly to retained earnings and reported as a change in accounting principle as of the date of adoption. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.

Stock-based Compensation

Prior to January 1, 2006, we accounted for stock-based employee compensation arrangements using the intrinsic value method of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations, and complied with the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123) as amended by SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure, an amendment to SFAS Statement No. 123 (SFAS 148). Under APB 25 compensation expense for employees is based on the excess, if any, of the fair value of our common stock over the exercise price of the option on the date of grant.

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Effective January 1, 2006, we adopted SFAS No. 123R, Share-Based Payment (SFAS No. 123R), which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on fair value. SFAS No. 123R revises SFAS No. 123, as amended, and supersedes APB 25. We adopted SFAS No. 123R using the modified prospective method. Under modified prospective application, SFAS No. 123R applies to new awards and to awards modified, repurchased or cancelled after the required effective date. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered that are outstanding as of the required effective date are recognized as the requisite service is rendered on or after the required effective date. The compensation expense for that portion of awards is based on the grant-date fair value of those awards. The compensation expense for awards with grant dates prior to January 1, 2006, are attributed to periods beginning on or after the effective date using the attribution method that was used under SFAS No. 123, except that the method of recognizing forfeitures only as they occur is not continued.

We are using the graded vesting attribution method prescribed by SFAS No. 123R, over the option vesting period, for all options granted on or after January 1, 2006. All options granted prior to 2006 are being amortized using a straight-line method.

The fair values of the common stock underlying stock options granted during the fourth quarter of 2007 and 2008 were estimated by our board of directors, which intended all options granted to be exercisable at a price per share not less than the per share fair value of our common stock underlying those options on the date of grant. In the absence of a public trading market, our board of directors considered numerous objective and subjective factors to determine its best estimate of the fair market value of our common stock as of the date of each option grant, including but not limited to, the following factors: (i) the rights, preferences and privileges of our preferred stock relative to the common stock; (ii) our performance and stage of development; (iii) valuations of our common stock; and (iv) the likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an initial public offering or sale of our company, given prevailing market conditions. The assumptions we use in the valuation model are based on subjective future expectations combined with management judgment. If any of the assumptions used in the Black-Scholes model changes significantly, stock-based compensation for future awards may differ materially compared with the awards granted previously.

In April 2008, in connection with the preparation of our consolidated financial statements, we performed a retrospective analysis to reassess the fair value of our common stock at certain option grant dates for financial reporting purposes. We performed a retrospective valuation analysis as of December 2007 and March 2008. The valuation analysis consisted of two major steps: the estimation of the aggregate value of the entire company (referred to as Business Enterprise Value, or BEV) and the allocation of this aggregate value to each element of the contemporary capital structure (preferred stock, common stock, options and warrants). As described below, the BEV was estimated using a combination of income and market-based methods. The allocation of the BEV to equity classes was performed using an option-based method as of each valuation date.

Significant Factors, Assumptions and Methodologies Used in Determining Fair Value

In determining the fair value of our BEV and common stock, we used a combination of the income approach and the market approach to estimate our aggregate BEV at each valuation date: December 2007 and March 2008.

The income approach is an estimate of the present value of the future monetary benefits expected to flow to the owners of a business. It requires a projection of the cash flows that the business is expected to generate over a forecast period and an estimate of the present value of cash flows beyond that period, which is referred to as residual value. These cash flows are converted to present

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value by means of discounting, using a rate of return that accounts for the time value of money and the appropriate degree of risks inherent in the business. The market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a peer group of companies. These multiples are then applied to our financial metrics to derive an indication of value.

Our indicated BEV at each valuation date was then allocated to the shares of redeemable convertible preferred stock, warrants to purchase shares of redeemable convertible preferred stock, and common stock, using a contingent claim methodology. This methodology treats the various components of our capital structure as a series of call options on the proceeds expected from the sale of the company or the liquidation of our assets at some future date. These call options are then valued using the Black-Scholes option pricing model. This model defines the securities' fair values as functions of the current fair value of the company and assumptions based on the securities' rights and preferences. As a result, the option-pricing method requires assumptions regarding the anticipated timing of a potential liquidity event, such as an initial public offering, and the estimated volatility of our equity securities. The anticipated timing of a liquidity event utilized in these valuations was based on then current plans and estimates of our board of directors and management regarding an initial public offering. Estimates of the volatility of our stock were based on available information on the volatility of capital stock of comparable publicly traded companies.

Common Stock Valuations

We granted stock options with the following exercise prices during the twelve months ended December 31, 2008:

Option Grant Dates	Number of Shares Underlying Options		Exercise Price Per Share		Fair Market Value Per Underlying Share as of Grant Date		Intrinsic Value

March 2008	$	4,980,600	$	0.62	$	0.85	$	0.23
May 2008		600,000		0.85		0.85		—
December 2008		1,442,500		0.85		0.85		—

In determining the fair value of our BEV and common stock, we conducted retrospective valuations using the approaches mentioned above. These valuations resulted in estimated fair value of our common stock for accounting purposes of $0.85 per share at March 2008.

Under SFAS No. 123R, the fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. We determined weighted average valuation assumptions as follows:

•: Volatility. As we do not have a trading history for our common stock, the expected stock price volatility for our common stock was estimated by taking the median historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of several public companies in the technology industry similar in size, stage of life cycle and financial leverage. We did not rely on implied volatilities of traded options in our industry peers' common stock because the volume of activity was relatively low.
•: Expected term. The expected term was estimated using the simplified method allowed under SEC Staff Accounting Bulletin No. 107, Share-Based Payment.
•: Risk free rate. The risk free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.

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•: Forfeiture rate. We estimated the forfeiture rate using our historical experience with forfeitures. We review the estimated forfeiture rates each period end and make changes as factors affecting the forfeiture rate calculations and assumptions change.
•: Dividend yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

The following table summarizes the assumptions relating to our employee options for the year ended December 31, 2008:

		Year Ended December 31, 2008

Dividend yield			0%
Volatility			55%
Risk free interest rate			1.54%-3.34%
Expected term, in years			5.92-6.53

Using the Black-Scholes option pricing model, we recorded non-cash stock-based compensation expenses related to employee stock options granted of approximately $4.0 million in 2008, in accordance with the requirements of SFAS No. 123R.

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Results of Operations

The following tables set forth our results of operations for the periods presented and as a percentage of our revenues for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

			Years Ended December 31,

			2006			2007			2008
			(In thousands, except per share amounts)
REVENUES			$	27,168		$	41,148		$	55,844
COSTS AND EXPENSES:
	Operations and support(1)			9,548			12,603			17,760
	Sales and marketing(1)			7,675			11,326			14,830
	Technology(1)			4,024			5,863			9,511
	General and administrative(1)			5,972			12,212			13,117

		Total costs and expenses		27,219			42,004			55,218

Income (loss) from operations				(51	)		(856	)		626
Other income, net				421			951			468

Income before taxes				370			95			1,094
Income tax expense (benefit)				176			(9,121	)		2,118

NET INCOME (LOSS)			$	194		$	9,216		$	(1,024	)

Net income (loss) per share:
	Basic		$	0.00		$	0.08		$	(0.01	)

	Diluted		$	0.00		$	0.04		$	(0.01	)

Weighted average shares outstanding:
	Basic			114,144			119,025			125,196
	Diluted			244,037			250,237			125,196

(1): Stock-based compensation included in above line items:


Operations and support	$	58	$	290	$	339
Sales and marketing		67		709		878
Technology		64		288		694
General and administrative		520		1,816		2,059

Total	$	709	$	3,103	$	3,970

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			Years Ended December 31,

			2006		2007		2008
Other Operational Data:
	Installed restaurants (at period end):
		North America		5,583		7,391		9,295
		International		204		470		1,040

		Total		5,787		7,861		10,335

	Seated diners (in thousands):
		North America		15,171		24,614		33,636
		International		84		244		542

		Total		15,255		24,858		34,178

	Headcount (at period end):
		North America		152		192		238
		International		16		34		59

		Total		168		226		297



			(In thousands)
Additional Financial Data:
	Revenues:
		North America	$	26,654		$	39,601		$	53,065
		International		514			1,547			2,779

		Total	$	27,168		$	41,148		$	55,844

	Income (loss) from operations:
		North America	$	3,106		$	4,974		$	9,088
		International		(3,157	)		(5,830	)		(8,462	)

		Total	$	(51	)	$	(856	)	$	626

	Depreciation and amortization:
		North America	$	2,029		$	2,817		$	4,026
		International		89			184			350

		Total	$	2,118		$	3,001		$	4,376

			Years Ended December 31,

			2006			2007			2008
			(As a percentage of revenue)
REVENUES				100	%		100	%		100	%
COSTS AND EXPENSES:
	Operations and support			35			31			32
	Sales and marketing			28			27			27
	Technology			15			14			17
	General and administrative			22			30			23

		Total costs and expenses		100			102			99

Income (loss) from operations				(0	)		(2	)		1
Other income, net				2			2			1

Income before taxes				2			0			2
Income tax expense (benefit)				1			(22	)		4

NET INCOME (LOSS)				1	%		22	%		(2	)%

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Years ended December 31, 2006, 2007 and 2008

Revenues

		Years Ended December 31,

		Years Ended December 31,									2006 to 2007% Change			2007 to 2008% Change
		2006			2007			2008			2006 to 2007% Change			2007 to 2008% Change
		(Dollars in thousands)
Installed restaurants (at period end):
	North America		5,583			7,391			9,295			32	%		26	%
	International		204			470			1,040			130			121

	Total		5,787			7,861			10,335			36	%		31	%

Seated diners (in thousands):
	North America		15,171			24,614			33,636			62	%		37	%
	International		84			244			542			190			122

	Total		15,255			24,858			34,178			63	%		37	%

Revenues by type:
	Subscription	$	15,454		$	22,434		$	30,293			45	%		35	%
	Reservation		10,664			17,010			23,135			60			36
	Installation and other		1,050			1,704			2,416			62			42

	Total	$	27,168		$	41,148		$	55,844			51	%		36	%

Percentage of revenues by type:
	Subscription		57	%		55	%		54	%
	Reservation		39			41			41
	Installation and other		4			4			5

	Total		100	%		100	%		100	%

Revenues by location:
	North America	$	26,654		$	39,601		$	53,065			49	%		34	%
	International		514			1,547			2,779			201			80

	Total	$	27,168		$	41,148		$	55,844			51	%		36	%

Percentage of revenues by location:
	North America		98	%		96	%		95	%
	International		2			4			5

	Total		100	%		100	%		100	%

2007 compared to 2008. Total revenues increased $14.7 million, or 36%, from 2007 to 2008. Subscription revenues increased to $30.3 million in 2008 from $22.4 million in 2007, an increase of $7.9 million, or 35%. Subscription revenues increased due to the increase in installed restaurants. Reservation revenues increased to $23.1 million in 2008 from $17.0 million in 2007, an increase of $6.1 million, or 36%. Reservation revenues increased as a result of an increase in seated diners.

2006 compared to 2007. Total revenues increased $14.0 million, or 51%, from 2006 to 2007. Subscription revenues increased to $22.4 million in 2007 from $15.5 million in 2006, an increase of $7.0 million, or 45%. Subscription revenues increased due to the increase in installed restaurants. Reservation revenues increased to $17.0 million in 2007 from $10.7 million in 2006, an increase of $6.3 million, or 60%. Reservation revenues increased as a result of an increase in seated diners.

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Costs and Expenses

Operations and Support

		Years Ended December 31,

		Years Ended December 31,						2006 to 2007 % Change			2007 to 2008 % Change
		2006		2007		2008		2006 to 2007 % Change			2007 to 2008 % Change
		(Dollars in thousands)
Operations and support		$	9,548	$	12,603	$	17,760		32	%		41	%
Headcount (at period end):
	North America		58		63		78		9			24
	International		5		16		28		220			75

	Total		63		79		106		25	%		34	%

2007 compared to 2008. Operations and support expenses for the year ended December 31, 2008 were $17.8 million compared to $12.6 million for the year ended December 31, 2007, an increase of $5.2 million, or 41%. The increase in operations and support expenses was primarily attributable to a $1.9 million increase in headcount related expenses, including a $0.4 million increase in cost at our outsourced customer support center, plus a $1.6 million increase in restaurant equipment costs, including depreciation on restaurant hardware, equipment and shipping costs in connection with the increase in the installed base of restaurants.

2006 compared to 2007. Operations and support expenses for the year ended December 31, 2007 were $12.6 million compared to $9.5 million for the year ended December 31, 2006, an increase of $3.1 million, or 32%. The increase in operations and support expenses was primarily attributable to a $1.6 million increase in headcount related expenses related to our expansion into international markets, including a $0.5 million increase in capacity at our outsourced customer support center, plus a $0.7 million increase in depreciation on restaurant hardware in connection with the increase in the installed customer base. The increase in both internal and external resources was a result of increasing capacity to meet the growth of new restaurant customers and an increase in the number of customers with more complex implementation requirements.

Sales and Marketing

		Years Ended December 31,

		Years Ended December 31,						2006 to 2007 % Change			2007 to 2008 % Change
		2006		2007		2008		2006 to 2007 % Change			2007 to 2008 % Change
		(Dollars in thousands)
Sales and marketing		$	7,675	$	11,326	$	14,830		48	%		31	%
Headcount (at period end):
	North America		35		40		50		14			25
	International		7		15		24		114			60

	Total		42		55		74		31	%		35	%

2007 compared to 2008. Sales and marketing expenses for the year ended December 31, 2007 were $14.8 million compared to $11.3 million for the year ended December 31, 2007, an increase of $3.5 million, or 31%. The increase in sales and marketing expenses was primarily attributable to a $2.5 million increase in headcount related costs, consistent with the increase in headcount. Also included in headcount and related costs was an increase in commissions of $0.3 million consistent with the increase in newly contracted restaurant customers compared to the prior year.

2006 compared to 2007. Sales and marketing expenses for the year ended December 31, 2007 were $11.3 million compared to $7.7 million for the year ended December 31, 2006, an increase of $3.7 million, or 48%. The increase in sales and marketing expenses was primarily attributable to a

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$3.1 million increase in headcount related costs, consistent with the increase in headcount. Also included in headcount and related costs was an increase in commissions of $1.0 million consistent with the increase in newly contracted restaurant customers compared to the prior year.

Technology

		Years Ended December 31,

		Years Ended December 31,						2006 to 2007 % Change			2007 to 2008 % Change
		2006		2007		2008		2006 to 2007 % Change			2007 to 2008 % Change
		(Dollars in thousands)
Technology		$	4,024	$	5,863	$	9,511		46	%		62	%
Headcount (at period end):
	North America		35		59		67		69			14
	International		—		—		—

	Total		35		59		67		69	%		14	%

2007 compared to 2008. Technology expenses for the year ended December 31, 2008 were $9.5 million compared to $5.9 million for the year ended December 31, 2007, an increase of $3.6 million, or 62%. The increase in technology expenses was primarily attributable to a $3.2 million increase in headcount related costs, consistent with the increase in headcount that began in the second half of 2007.

2006 compared to 2007. Technology expenses for the year ended December 31, 2007 were $5.9 million compared to $4.0 million for the year ended December 31, 2006, an increase of $1.8 million, or 46%. The increase in technology expenses was primarily attributable to a $1.6 million increase in headcount related costs, consistent with the increase in headcount. We significantly increased the size of our technology team during 2007 to support website and ERB enhancements, the international expansion of our solutions and website, and system control enhancements.

General and Administrative

		Years Ended December 31,

		Years Ended December 31,						2006 to 2007 % Change			2007 to 2008 % Change
		2006		2007		2008		2006 to 2007 % Change			2007 to 2008 % Change
		(Dollars in thousands)
General and administrative		$	5,972	$	12,212	$	13,117		104	%		7	%
Headcount (at period end):
	North America		24		30		43		25			43
	International		4		3		7		(25	)		133

	Total		28		33		50		18	%		52	%

2007 compared to 2008. General and administrative expenses for the year ended December 31, 2008 were $13.1 million compared to $12.2 million for the year ended December 31, 2007, an increase of $0.9 million, or 7%. The increase in general and administrative expenses was primarily the result of an increase of $1.6 million in headcount related costs and a $0.6 million increase in bad debt expense. These amounts were offset by a one-time legal settlement in the amount of $1.6 million included in the 2007 period.

2006 compared to 2007. General and administrative expenses for the year ended December 31, 2007 were $12.2 million compared to $6.0 million for the year ended December 31, 2006, an increase of $6.2 million, or 104%. The increase in general and administrative expenses was primarily the result of an increase of $2.3 million in headcount related costs, as a result of increased headcount, and an increase in professional services of $1.7 million to support international accounting efforts. A one-time $1.6 million legal settlement was also included in the 2007 period. Excluding the one-time

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legal settlement costs, general and administrative costs increased as a result of the growth of our financial and accounting resources.

Other Income, Net

	Years Ended December 31,

	Years Ended December 31,						2006 to 2007 % Change			2007 to 2008 % Change
	2006		2007		2008		2006 to 2007 % Change			2007 to 2008 % Change
	(Dollars in thousands)
Other income, net	$	421	$	951	$	468		126	%		(51	)%

2007 compared to 2008. Other income, net for the year ended December 31, 2008 was $0.5 million compared to $1.0 million for the year ended December 31, 2007, a decrease of $0.5 million, or 51%. The decrease in other income, net was primarily the result of a $0.2 million decrease in interest income earned on cash, cash equivalents and short-term investments as a result of experiencing lower short-term borrowing interest rates, and a $0.3 million increase in foreign exchange transaction loss.

2006 compared to 2007. Other income, net for the year ended December 31, 2007 was $1.0 million compared to $0.4 million for the year ended December 31, 2006, an increase of $0.5 million, or 126%. The increase in other income, net was primarily the result of a $0.4 million increase in interest income earned on cash, cash equivalents and short-term investments. Cash increased $11.4 million from 2006 to 2007, which together with higher short-term interest rates during the first half of 2007 resulted in significantly higher interest income.

Income Taxes

	Years Ended December 31,

	2006		2007			2008
	(Dollars in thousands)
Income tax expense (benefit)	$	176	$	(9,121	)	$	2,118

2007 compared to 2008. Income tax expense for the year ended December 31, 2008 was $2.1 million compared to an income tax benefit of $9.1 million for the year ended December 31, 2007. Our income tax expense in 2008 was higher than the amount using the expected statutory rate by $1.6 million due to permanent differences, the largest of which was non-deductible stock-based compensation. The income tax benefit in 2007 was primarily the result of releasing substantially all of the valuation allowance against our deferred tax asset.

2006 compared to 2007. In 2006, we recorded income taxes that were principally attributable to foreign taxes and other minimum corporate taxes. In those periods, we offset our taxable income through the utilization of net operating loss carryforwards. In the fourth quarter of 2007, we determined that it would be more likely than not that the cumulative net operating losses and other deferred tax benefits would be realizable by us, creating a $9.1 million income tax benefit due to the deferred tax asset recorded on our balance sheet at the end of 2007.

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Quarterly Results of Operations Data

The following tables set forth our unaudited quarterly consolidated statements of operations data and our unaudited statements of operations data as a percentage of revenues for each of the eight quarters in the period ended December 31, 2008. We have prepared the quarterly data on a consistent basis with the audited consolidated financial statements included in this prospectus, and the financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. The results of historical periods are not necessarily indicative of the results of operations for a full year or any future period.

			For the Three Months Ended

			Mar 31, 2007		Jun 30, 2007		Sep 30, 2007			Dec 31, 2007			Mar 31, 2008			Jun 30, 2008			Sep 30, 2008			Dec 31, 2008
			(In thousands, except per share amounts)
REVENUES			$	9,133	$	9,743	$	10,484		$	11,788		$	13,263		$	13,858		$	14,181		$	14,542
COSTS AND EXPENSES:
	Operations and support(1)			2,776		3,080		3,194			3,553			4,012			4,333			4,580			4,835
	Sales and marketing(1)			2,465		2,620		2,892			3,349			3,591			3,719			3,755			3,765
	Technology(1)			1,238		1,368		1,414			1,843			2,175			2,404			2,467			2,465
	General and administrative(1)			2,165		2,299		4,549			3,199			3,144			3,412			3,449			3,112

		Total costs and expenses		8,644		9,367		12,049			11,944			12,922			13,868			14,251			14,177

Income (loss) from operations				489		376		(1,565	)		(156	)		341			(10	)		(70	)		365
Other income, net				144		222		332			253			180			143			117			28

Income (loss) before taxes				633		598		(1,233	)		97			521			133			47			393
Income tax expense (benefit)				61		63		63			(9,308	)		608			(95	)		337			1,268

NET INCOME (LOSS)			$	572	$	535	$	(1,296	)	$	9,405		$	(87	)	$	228		$	(290	)	$	(875	)

Net income (loss) per share:
	Basic		$	0.00	$	0.00	$	(0.01	)	$	0.08		$	(0.00	)	$	0.00		$	(0.00	)	$	(0.01	)

	Diluted		$	0.00	$	0.00	$	(0.01	)	$	0.04		$	(0.00	)	$	0.00		$	(0.00	)	$	(0.01	)

Weighted average shares outstanding:
	Basic			116,076		118,481		119,868			121,599			123,130			124,532			125,883			127,229
	Diluted			246,321		249,410		119,868			257,221			123,130			262,505			125,883			127,229

(1): Stock-based compensation is included in above line items:


Operations and support	$	74	$	80	$	69	$	67	$	77	$	96	$	89	$	77
Sales and marketing		192		199		149		169		228		238		215		197
Technology		66		74		69		79		132		229		188		145
General and administrative		198		188		857		573		547		584		492		436

Total	$	530	$	541	$	1,144	$	888	$	984	$	1,147	$	984	$	855

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		For the Three Months Ended

		Mar 31, 2007			Jun 30, 2007			Sep 30, 2007			Dec 31, 2007			Mar 31, 2008			Jun 30, 2008			Sep 30, 2008			Dec 31, 2008
Other Operational Data:
Installed restaurants (at period end):
	North America		5,956			6,426			6,819			7,391			7,823			8,350			8,788			9,295
	International		243			314			384			470			581			764			921			1,040

	Total		6,199			6,740			7,203			7,861			8,404			9,114			9,709			10,335

Seated diners (in thousands):
	North America		5,545			5,733			6,185			7,151			8,395			8,454			8,272			8,515
	International		42			50			61			91			123			130			120			169

	Total		5,587			5,783			6,246			7,242			8,518			8,584			8,392			8,684

Headcount (at period end):
	North America		159			166			176			192			206			219			234			238
	International		20			21			28			34			42			49			58			59

	Total		179			187			204			226			248			268			292			297

		(In thousands)
Additional Financial Data:
Revenues by location:
	North America	$	8,876		$	9,417		$	10,047		$	11,261		$	12,667		$	13,156		$	13,431		$	13,811
	International		257			326			437			527			596			702			750			731

	Total	$	9,133		$	9,743		$	10,484		$	11,788		$	13,263		$	13,858		$	14,181		$	14,542

Revenues by type:
	Subscription	$	4,887		$	5,348		$	5,824		$	6,375		$	6,887		$	7,417		$	7,854		$	8,135
	Reservation		3,904			4,002			4,218			4,886			5,830			5,836			5,669			5,800
	Installation and other		342			393			442			527			546			605			658			607

	Total	$	9,133		$	9,743		$	10,484		$	11,788		$	13,263		$	13,858		$	14,181		$	14,542

Income (loss) from operations:
	North America	$	1,506		$	1,690		$	(359	)	$	2,137		$	2,409		$	2,171		$	2,187		$	2,321
	International		(1,017	)		(1,314	)		(1,208	)		(2,291	)		(2,068	)		(2,181	)		(2,257	)		(1,956	)

	Total	$	489		$	376		$	(1,567	)	$	(154	)	$	341		$	(10	)	$	(70	)	$	365

Depreciation and amortization:
	North America	$	604		$	671		$	733		$	809		$	877		$	959		$	1,060		$	1,130
	International		40			35			44			65			74			86			92			98

	Total	$	644		$	706		$	777		$	874		$	951		$	1,045		$	1,152		$	1,228

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			For the Three Months Ended

			Mar 31, 2007			Jun 30, 2007			Sep 30, 2007			Dec 31, 2007			Mar 31, 2008			Jun 30, 2008			Sep 30, 2008			Dec 31, 2008
REVENUES				100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%
COSTS AND EXPENSES:
	Operations and support			30			32			31			30			30			31			32			33
	Sales and marketing			27			27			28			28			28			27			27			27
	Technology			14			14			13			16			16			17			17			17
	General and administrative			24			23			43			27			24			25			24			21

		Total costs and expenses		95			96			115			101			98			100			100			97

Income (loss) from operations				5			4			(15	)		(1	)		2			0			0			3
Other income, net				2			2			3			2			2			1			0			0

Income (loss) before taxes				7			6			(12	)		1			4			1			0			3
Income tax expense (benefit)				1			1			0			(79	)		5			(1	)		2			9

NET INCOME (LOSS)				6	%		5	%		(12	)%		80	%		(1	)%		2	%		(2	)%		(6	)%

Revenue has increased sequentially as a result of adding more installed restaurants each quarter. As the number of installed restaurants increases, subscription revenues increase. As the number of restaurants on our network increases, the number of diners using our services generally increases, and reservation revenues tend to increase. While we generally experience some seasonality in our reservation revenues, typically peaking during the holiday season from November through February (Valentine's Day), we have historically been able to consistently increase our revenues in each quarter. We expect that reservation revenues, as a percentage of total revenues, will continue to increase as our installed base of restaurants and seated diners increases over time.

Our operations and support expenses have increased sequentially in absolute dollars, and have remained generally consistent as a percentage of revenues over time. We expect operations and support expenses to continue to increase in absolute dollars as we add more restaurant customers to our network.

Our sales and marketing expenses have increased sequentially in absolute dollars, and have remained generally consistent as a percentage of revenues over time. We expect sales and marketing expenses to increase in absolute dollars as we increase our headcount to support further growth in North American and international markets.

Our technology expenses have increased sequentially in absolute dollars, and increased as a percentage of revenues beginning in the fourth quarter of 2007 when we significantly increased technology headcount focused on projects related to website and ERB enhancements, internationalization and system control enhancements. We expect technology expenses to modestly increase in absolute dollars as we slow our recent rate of headcount growth in the future.

Excluding a one-time legal settlement for $1.6 million in the third quarter of 2007, our general and administrative expenses have increased sequentially in absolute dollars, and have remained generally consistent as a percentage of revenues over time, as we increased our financial and accounting resources and headcount focused on our international efforts. We expect general and administrative expenses to modestly increase in absolute dollars in the future.

In the fourth quarter of 2007, we determined that it would be more likely than not that our cumulative net operating losses and other deferred tax benefits would be realizable by us, creating a $9.4 million income tax benefit due to the deferred tax asset recorded on our balance sheet at the end of 2007. In the short term, we will experience high effective tax rates as a result of stock-based compensation amounts not being deductible as an expense for tax purposes and being sizable compared to our overall income (loss) before taxes.

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Liquidity and Capital Resources

		Years Ended December 31,

		2006			2007			2008
		(In thousands)
Consolidated Statements of Cash Flows Data:
Purchases of property and equipment		$	3,606		$	5,449		$	7,203
Depreciation and amortization
	North America		2,029			2,817			4,026
	International		89			184			350

	Total depreciation and amortization		2,118			3,001			4,376
Cash flows provided by operating activities		$	5,903		$	11,158		$	8,544
Cash flows used in investing activities			(3,039	)		(5,025	)		(24,330	)
Cash flows provided by (used in) financing activities			(618	)		5,269			(80	)

As of December 31, 2008, we had cash and cash equivalents of $5.5 million and short-term investments of $17.3 million. Cash and cash equivalents consist of cash, money market accounts, certificates of deposit and commercial paper. Short-term investments consist of U.S. government agency securities, commercial paper and certificates of deposit. To date, we have experienced no loss or lack of access to our invested cash, cash equivalents or short-term investments; however, we can provide no assurances that access to our invested cash, cash equivalents and short-term investments will not be impacted by adverse conditions in the financial markets.

Amounts deposited with third party financial institutions exceed the Federal Deposit Insurance Corporation, or FDIC, and Securities Investor Protection Corporation, or SIPC, insurance limits, as applicable. These cash, cash equivalents and short-term investment balances could be impacted if the underlying financial institutions fail or are subjected to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to our cash, cash equivalents or short-term investments.

We have a $3.0 million line of credit to fund working capital under which we have no amounts drawn down as of December 31, 2008. This line of credit expires in July 2009.

Prior to 2005, we financed our operations and capital expenditures through private sales of preferred stock, lease financing, the use of a bank-provided line of credit and operations. Since 2005, we have been able to finance our operations, including international expansion, through cash from operating activities and proceeds from the exercise of vested and unvested employee stock options. We had cash and cash equivalents of $5.5 million at December 31, 2008, which is down $16.1 million from December 31, 2007, due to the investment of $17.3 million into short-term investments as of December 31, 2008. We believe we will have sufficient cash to support our operating activities for at least the next twelve months.

Operating Activities

In 2008, operating activities provided $8.5 million in cash, as a result of a net loss of $1.0 million, offset by $4.4 million in depreciation and amortization and $4.0 million in stock-based compensation. These amounts were offset by a cash usage of $2.2 million as a result of an increase in accounts receivable.

In 2007, operating activities provided $11.2 million in cash as a result of net income of $9.2 million, depreciation and amortization amounts of $3.0 million and stock-based compensation amounts of $3.1 million, combined with sources of cash from a $2.8 million increase in accounts payable and accrued expenses, a $2.3 million increase in the Dining Points payable, and a $1.1 million

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increase from deferred revenues. These amounts were offset by deferred taxes of $9.4 million and a cash usage of $1.8 million resulting from the increase in accounts receivable.

In 2006, operating activities provided $5.9 million in cash as a result of $0.2 million net income, $2.1 million in depreciation and amortization, increases in the Dining Points payable of $1.5 million, increases in deferred revenues of $1.0 million and $0.7 million in stock-based compensation.

Investing Activities

Our primary investing activities have consisted of purchases and sales of short-term investments and purchases of property and equipment. We expect to have ongoing capital expenditure requirements to support our growing restaurant installed base and other infrastructure needs. We expect to fund this investment with our existing cash, cash equivalents and short-term investments.

Financing Activities

Our financing activities have consisted primarily of net proceeds from the issuance and repurchase of common stock in each of the periods presented. During 2006, we repurchased 2,588,095 common shares from a common stockholder for total proceeds of $0.6 million, which resulted in net cash used of $0.6 million for the year. In 2007, proceeds from the issuance of common stock were $5.4 million, resulting from the exercise of employee stock options. In 2008, financing activities included the payment of $0.2 million in offering costs associated with the proposed initial public offering.

Quantitative and Qualitative Disclosure About Market Risk

We are exposed to market risks in the ordinary course of our business. These risks include primarily interest rate, foreign exchange risks and inflation.

Interest Rate Fluctuation Risk

We do not have any long-term borrowings.

Our investments include cash, cash equivalents and short-term investments. Cash and cash equivalents consist of cash, money market accounts, certificates of deposit and commercial paper. Short-term investments consist of U.S. government agency securities. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to be materially affected to any degree by a sudden change in market interest rates.

Foreign Currency Exchange Risk

We have foreign currency risks related to our revenues and operating expenses denominated in currencies other than the U.S. dollar, principally the British pound sterling, the euro and the Japanese yen. We do not believe movements in the foreign currencies in which we transact will significantly affect future net earnings. Foreign currency risk can be quantified by estimating the change in cash flows resulting from a hypothetical 10% adverse change in foreign exchange rates. We believe such a change would not have a material impact on our results of operations.

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Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Off Balance Sheet Arrangements

As of December 31, 2008, we did not have any off balance sheet arrangements.

Contractual Obligations

We lease our primary office space in San Francisco, California and other locations under various non-cancelable operating leases that expire between 2009 and 2013. We have no debt obligations, other than a $3.0 million line of credit for working capital, which to date has not had any borrowings under it. This credit facility expires in July 2009. Additionally, all property and equipment have been purchased for cash, and accordingly we have no capital lease obligations. Finally, we have no material long-term purchase obligations outstanding with any vendors or third parties.

		Payments Under Operating Leases

		(In thousands)
Year ending December 31:
	2009	$	1,458
	2010		1,305
	2011		1,312
	2012		1,347
	2013		456

Total		$	5,878

Recent Accounting Pronouncements

Effective January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements (SFAS No. 157). In February 2008, the FASB issued a staff position, FSP No. 157-2, that delays the effective date of SFAS No. 157 for all non-financial assets and liabilities except for those recognized or disclosed in the financial statements at fair value at least annually. Therefore, we have adopted the provision of SFAS No. 157 with respect to our financial assets and liabilities only. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is defined under SFAS No. 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under SFAS No. 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The adoption of this statement required additional disclosures of assets and liabilities measured at fair value; it did not have a material impact on our consolidated results of operations and financial condition.

Effective January 1, 2008, we adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159) which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. We did not elect to adopt the fair value option under SFAS No. 159 as this Statement is not expected to have a material impact on our consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 141(Revised 2007), Business Combinations (SFAS No. 141(R)). SFAS No. 141(R) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS No. 141(R) also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. We are required to adopt SFAS No. 141(R) for the fiscal year beginning January 1, 2009. We do not expect the adoption of SFAS 141(R) to have an impact on our historical financial position or results of operations at the time of adoption.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements (SFAS No. 160) which amends Accounting Research Bulletin No. 51, Consolidated Financial Statements (ARB No. 51), to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity separate and apart from the parent's equity in the consolidated financial statements. In addition to the amendments to ARB No. 51, this statement amends SFAS No. 128, Earnings Per Share, so that earnings per share data will continue to be calculated the same way those data were calculated before this statements was issued. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We are currently evaluating the impact, if any, of adopting SFAS No. 160 on our results of operations and financial position.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of General Accepted Accounting Principles (SFAS No. 162). This statement documents the hierarchy of the various sources of accounting principles and the framework for selecting the principles used in preparing financial statements. This statement shall be effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. We do not expect the adoption of SFAS No. 162 to have a material impact on our results of operations and financial position.

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BUSINESS

Overview

We provide solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. Our solutions include our proprietary Electronic Reservation Book, or ERB, for restaurant customers and www.opentable.com, a popular restaurant reservation website for diners. The OpenTable network includes approximately 10,000 OpenTable restaurant customers spanning all 50 states as well as select markets outside of the United States. Since our inception in 1998, we have seated approximately 90 million diners through OpenTable reservations, and during the twelve months ended December 31, 2008, we seated an average of approximately 2.8 million diners per month. Restaurants pay us a one-time installation fee for onsite installation and training, a monthly subscription fee for the use of our software and hardware and a fee for each restaurant guest seated through online reservations. Our online restaurant reservation service is free to diners. For the twelve months ended December 31, 2007 and 2008, our net revenues were $41.1 million and $55.8 million, respectively. For the twelve months ended December 31, 2007 and 2008, our subscription revenues accounted for 55% and 54% of our total revenues, respectively, our reservation revenues accounted for 41% and 41% of our total revenues, respectively, and our installation and other revenues accounted for 4% and 5% of our total revenues, respectively.

The OpenTable ERB combines proprietary software and computer hardware to deliver a solution that computerizes restaurant host-stand operations and replaces traditional pen-and-paper reservation books. Our ERB streamlines and enhances a number of business-critical functions and processes for restaurants, including reservation management, table management, guest recognition and email marketing. This enables restaurants to manage all of their reservations—those booked by phone or online as well as walk-in diners—in one unified system. The ERB also automatically accepts online reservations in real time directly from the OpenTable website as well as from websites of our partners and restaurant customers. The ERBs at our restaurant customers connect via the Internet to form an online network of restaurant reservation books. We also operate the OpenTable website, which enables diners to quickly and conveniently find, choose and book tables at restaurants on the OpenTable network, overcoming the inefficiencies associated with the traditional process of reserving by phone. Diners appreciate the convenience of being able to secure a reservation at any time, even when the restaurant is closed, and the time savings of being able to instantly find and reserve available tables without having to call restaurants one by one until they find an available reservation that suits their needs. Online visitors come to the OpenTable website directly, via natural search engine results and via our partners' and restaurant customers' websites. During the twelve months ended December 31, 2008, less than 1% of reservations made through our website were attributable to paid-search advertising.

We initially focused on acquiring a critical mass of local restaurant customers in four metropolitan areas: Chicago, New York, San Francisco and Washington, D.C. These markets have since developed into active, local networks of restaurants and diners that continue to grow. We have applied and continue to apply the same fundamental strategy in developing and penetrating our other markets in the United States, Canada and Mexico. In 2004, we began to selectively expand into countries outside of North America that are characterized by large numbers of online consumer transactions and reservation-taking restaurants. To date, we have concentrated our international efforts in Germany, Japan and the United Kingdom. Our revenues outside of North America for the twelve months ended December 31, 2007 and 2008, were $1.5 million and $2.8 million, respectively, or 4% and 5% of our total revenues, respectively.

Restaurant Industry Background

The commercial restaurant industry is broadly divided into "quick-service" and "full-service" segments. We target our offerings to full-service restaurants that accept reservations. We believe based on our internal estimates that there are approximately 30,000 reservation-taking restaurants in North

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America that seat approximately 600 million diners through reservations annually, though this number fluctuates with economic and other conditions.

The ability of the restaurant industry to leverage the power of the Internet for reservation transactions has been inhibited by two key characteristics. First, the reservation-taking restaurant industry has been slow to computerize host-stand operations. During the last decade, other reservation-taking industries, such as airlines and hotels, have experienced a dramatic shift in consumer behavior as reservations have migrated from the phone to the Internet. In contrast, given the restaurant industry's relatively basic transaction needs, generally requiring only the diner's name and phone number and no advance payment, restaurant reservations historically have been largely handled by the traditional pen-and-paper reservation book, despite the inherent operational inefficiencies and potential for error. Second, the reservation-taking restaurant industry is highly fragmented, with independent restaurants and small, local restaurant groups comprising a significant majority of restaurant locations. Unlike other industries in which suppliers can deliver goods and services to customers around the world, the restaurant industry is inherently local. These conditions make it time-consuming and costly to aggregate the breadth of local restaurant table inventory required to attract a critical mass of diners to make reservations online and to create an online restaurant reservation network.

In addition, reservation-taking restaurants generally share the following operational challenges:

•: Profitability is dependent on filling seats. Because restaurants typically have a high fixed cost structure, restaurant profitability is heavily dependent on filling as many seats as possible. Similar to hotel rooms and airplane seats, restaurant table inventory is highly perishable, with unfilled seats representing a significant lost revenue opportunity.
•: Prospective business is lost due to the inefficiencies of reserving by phone. Most restaurants are not staffed to answer the phone until late morning or early afternoon, and many are only open six days per week. As a result, they lose potential business when prospective guests are not able to secure reservations by phone at their convenience. Additionally, restaurants experience costly "no-shows" when guests fail to cancel their reservations because of the inconvenience of doing so over the phone.
•: Managing and preserving guest information is difficult. One of the ways in which restaurants compete is by providing exceptional, personalized service, for example, by recognizing repeat diners and recalling their preferences or special occasions. Guest histories and preferences are typically stored in the memories of the maitre d' or host, and therefore the implications of losing a staff member who is familiar with a restaurant's best and most frequent guests are considerable. In an industry characterized by a high rate of employee turnover, the ability to preserve and transfer this information is critical.
•: Information technology resources to install and support computer-based systems are limited. Few restaurants have the technical knowledge, resources or time to install computer systems and troubleshoot problems with computer systems or Internet connectivity. At the same time, the fast pace of business operations means that restaurants cannot tolerate service interruptions from an equipment or networking failure.
•: Marketing opportunities with measurable results are limited. Typically, restaurants promote themselves through magazines and newspapers as well as online dining guides and directories. However, restaurants generally do not have the ability to track the number of people who ultimately dine in response to their advertisements, nor are the costs of these advertisements tied to the number of diners they attract. Therefore, restaurants usually are unable to measure or compare the effectiveness of these marketing channels.

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Diner Behavior and Trends

For many diners, part of the appeal of dining out is experiencing a variety of restaurants. Therefore, diners value sources that help them discover new restaurants and provide information about these restaurants. Historically, diners learned about restaurants through word of mouth and local print media, such as dining guides, newspapers and magazines. While diners continue to value personal recommendations, the Internet now puts a wealth of restaurant information at their fingertips. However, arguably the most important piece of information—what restaurants can accommodate a dining party—has been missing from online dining sources. As a result, when it comes to booking a restaurant reservation, diners have had to use the phone instead of the Internet.

Reserving by phone can be a highly inefficient and inconvenient process, requiring diners to call one restaurant at a time until they find an available reservation that meets their needs, and then make a reservation without knowing the full range of available choices. Phone reservations can only be secured during the restaurant's business hours. Diners who call when a restaurant is closed or during peak service hours oftentimes must leave a voicemail message and wait for the restaurant to call back. Diners who do get through to a reservationist may be put on hold or informed that there are no available tables at the desired time, requiring them to call another restaurant and repeat the process until they find a suitable reservation. Diners who need to change or cancel an existing reservation experience similar difficulties in doing so by phone.

The Internet has the potential to redefine the reservation experience for diners and streamline the operations and increase the return on marketing spend for reservation-taking restaurants. In order for diners to fully embrace online restaurant reservations, they need real-time access to table inventory across a broad selection of local restaurants and the ability to instantly book confirmed reservations around-the-clock.

Our Solution

Essential to this network is building a critical mass of local, computerized restaurant reservation books. We achieve this by offering software that provides important operational benefits for the restaurant, bundling it with computer hardware and installing this solution at the restaurant host stand, thereby creating a compelling solution for restaurants. We sell our solutions to individual restaurants within a market, typically one by one, via a direct sales force. We believe that we deliver a strong return on investment for our restaurant customers by streamlining their operations, filling additional seats and improving their quality of service. As a result, we have historically enjoyed high customer satisfaction and retention rates.

Benefits of OpenTable to Reservation-Taking Restaurants

In response to the needs of reservation-taking restaurants, we offer the OpenTable ERB, an integrated solution consisting of proprietary OpenTable software which is installed on a touch-screen computer system and supported by various asset-protection and security tools. Additionally, we provide

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restaurants with access to diners via our website as well as through our partners' websites. Participation in the OpenTable network helps restaurants:

•: Fill seats that might otherwise remain empty. We help restaurants fill their seats and minimize "no-shows" by offering the convenience of online reservations directly through the OpenTable website as well as indirectly through the websites of our partners and restaurant customers, all of which are stored in the ERB. In addition, restaurants may elect to be featured in OpenTable marketing programs, which drive incremental business to participating restaurants through enhanced listings on the OpenTable website. Participating restaurants pay OpenTable a premium per-seated diner fee for diners seated in response to these special listings.
•: Create operational efficiencies by automating reservations and table management. The reservation module of the ERB replaces the restaurant's pen-and-paper system with a computerized reservation book that records and tracks all reservations (online, phone and walk-in) in the same system, thereby improving accuracy and efficiency. Floor management capabilities improve operational efficiencies by helping restaurants maximize seat utilization, facilitate server rotations and improve table turns.
•: Boost guest recognition and overall guest service. The integrated guest-management database included in the ERB enables restaurant staff to record diner preferences and histories in order to recognize repeat diners and provide them with personalized service. The ERB also includes email capabilities which provide restaurants with a cost-effective channel to reach and attract repeat diners. Additionally, we help restaurants monitor customer satisfaction by collecting and delivering guest feedback from OpenTable diners.
•: Computerize host-stand operations with customized, on-site installation and training and technical support. We install our ERB, which combines proprietary software and computer hardware, at the restaurant, verifying Internet connectivity, configuring the system for the restaurant's unique needs and training staff members on its use. We monitor Internet connectivity and assist the restaurant in resolving connectivity issues. Additionally, we perform nightly data backups that enable us to restore the reservation book if necessary, and we provide around-the-clock technical support.
•: Market to a targeted audience with measurable results. Our website enables diners to find restaurants that can accommodate them, giving restaurants valuable marketing exposure during the diners' decision-making process. Moreover, restaurants pay OpenTable only for those diners whom they ultimately serve, unlike other marketing channels such as magazines, newspapers and online dining guides and directories. Consequently, restaurants know the number of diners acquired through OpenTable and the costs of acquiring each of these diners.

Benefits of OpenTable to Diners

•: Find available tables. Diners can search for reservations by location, date, time and party size and view table availability across a variety of restaurants. Because our website connects directly to the thousands of ERBs residing at OpenTable restaurants, reservation search results reflect real-time availability.
•: Choose a restaurant. In response to their searches on our website, diners are presented with a list of restaurants with available reservations at their desired dining times. Diners may also click on a restaurant listing to view additional information, including restaurant descriptions,

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photos and menus. While making their restaurant choices, diners may also consult the OpenTable Diners' Choice lists that highlight restaurants that are most highly rated by OpenTable diners, for example, Best Overall, Best Italian, Most Romantic or Good for Groups.

•: Book instantly confirmed reservations for free. When a diner reserves through the OpenTable website, the reservation is instantly recorded in the ERB located at the restaurant—the same system in which the host would record a phone reservation. Diners can also change or cancel reservations online as well as invite guests via email. Diners receive on-screen and email messages confirming their reservation details. Additionally, registered diners can earn Dining Reward Points when they make and honor OpenTable reservations. Points can be redeemed for Dining Cheques that are accepted at OpenTable restaurant customers.

Our Strategy

Continue to Build the OpenTable Network in North America

The value of the OpenTable network grows as participation among restaurants and diners grows. Experience in our earliest markets provides a successful model that we have implemented while entering new markets, and, as a result, our newer markets in North America have grown relatively predictably over time. We intend to continue to build our North American network by employing this proven model.

•: Produce and maintain superior solutions. We continue to evolve our ERB based on nearly a decade of in-field experience as well as feedback from our installed base of approximately 10,000 restaurant customers. Additionally, we will continue to optimize our website through insights gained from the experience of seating approximately 90 million diners through online reservations.
•: Leverage our direct sales force. Over the last ten years, we have expended considerable resources to build a direct sales force skilled at selling the benefits of OpenTable to reservation-taking restaurants, which operate in an industry that is highly fragmented. We will continue to leverage our skilled direct sales force to add more restaurants to the network.
•: Provide excellent customer service and support. We believe that our superior customer service is an integral component of high satisfaction rates among our restaurant customers and provides us with a deep understanding of restaurant needs and general industry trends. We will continue to employ highly trained operational teams to provide installation and training services for our restaurant customers and augment our in-house support staff with contract support services to deliver superior customer assistance.
•: Continue to attract diners to our website by offering the best reservation experience. We believe that providing the best diner reservation experience increases market adoption of our services, builds our brand awareness and drives word-of-mouth referrals to our website. We continue to enhance our website for ease of use and augment it with unique, helpful restaurant content. For example, we have begun to leverage the collective feedback of OpenTable diners to publish user-generated content that diners use while making restaurant

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choices. We will continue to evolve the diner reservation experience on our website through usability testing and website analytics.

Expand Internationally

We intend to augment our growing North American business by selectively expanding into countries outside of North America that are characterized by large numbers of online consumer transactions and reservation-taking restaurants. We currently have operations in Germany, Japan and the United Kingdom, each supported with a direct sales force and operational staff. We have approximately 1,000 restaurant customers in these markets. In general, our strategy internationally is to replicate the model we have successfully employed in North America. In particular, our initial focus in new international markets is to increase our restaurant customer base, and we believe the localized versions of our software solution will compete favorably against competitive software offerings, enabling us to expand our network of computerized reservation books across a broad selection of local restaurants.

Our Products

We have created a proprietary technology system comprised of stand-alone client-server applications located at each restaurant that connect via the Internet to our central servers which host our website. The distributed nature of this system design enables us to provide real-time solutions to our restaurant customers and to diners.

Restaurant Software and Hardware and Related Solutions

The ERB is an integrated solution consisting of proprietary OpenTable software that is installed on a dedicated, touch-screen computer system at the restaurant's host stand and supported by various asset-protection and security tools. The ERB supports reservation management, table and floor management, guest management, marketing and a number of other business processes. This functionality has evolved through seven major software releases over nine years based on feedback from and experience with thousands of restaurant customers. The software is built on a foundation that supports rapid translation into local languages.

We provide on-site installation, training and round-the-clock customer support for the ERB as part of our monthly subscription fee. We monitor Internet connectivity to the ERB, alerting restaurants when they are offline and working with them to resolve any problems we detect. We also provide data protection services, including managing firewalls and virus scanning software on all computers on our network to protect restaurants from harmful intrusions and performing nightly backups of each restaurant's database to prevent data loss in the event of a hardware failure. Our restaurant customers also receive a hardware replacement, populated with the restaurant's backed-up data, in the event of a computer failure, and software upgrades and updates, which are deployed automatically via the Internet to each ERB, requiring minimal interference with the restaurant's operations.

OpenTable Website

We design, build and operate the OpenTable website in North America and the United Kingdom as well as websites localized for Germany and Japan. Our system is a real-time reservation system with a patent pending on our high-speed inventory tracking and search technology. The OpenTable website maintains around-the-clock communications with restaurants on our online reservation network. As a result, any change made at the restaurant to the table inventory that affects the OpenTable website is updated on the website in real time, and diners using the website get current inventory information on every search request, typically in a few seconds.

In addition to the OpenTable website, we offer versions of the OpenTable website optimized for use on mobile devices.

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OTRestaurant Website

We design, build and operate the OTRestaurant website, which serves as an information and services portal for our restaurant customers. The website provides restaurant customers with secure access to client-specific materials including detailed online reservation reports, online invoicing and feedback forms from recent diners. In addition, a restaurant can visit the OTRestaurant website to learn about upcoming OpenTable promotions, submit date-specific information such as Valentine's Day menus and update the profile information displayed on the OpenTable website, for example, restaurant description and hours of operation. The OTRestaurant website serves as a two-way communication channel between us and our restaurant customers, which ultimately improves the support we provide and drives increased operational efficiencies.

Sales and Marketing

Sales and Marketing to Restaurants

We employ a direct sales force of regional account executives. Our sales and marketing efforts focus on identifying qualified sales leads, communicating the benefits of computerizing the restaurant reservation book and filling seats through online reservations. Our marketing activities include lead generation, direct marketing, public relations and participation in trade shows and conferences.

Marketing to Diners

We enjoy significant word-of-mouth referrals and natural-search traffic to our website. We encourage repeat usage through our points-based loyalty program, OpenTable Dining Rewards, which allows diners to earn Dining Points when they make and honor OpenTable reservations. We also optimize our website to improve our positioning in natural search engine results. To date, we have found limited value in print, broadcast, online or paid-search advertising, and, as a result, we do not purchase a material amount of marketing from those channels.

In addition to operating our own destination website, we work with hundreds of partners to enhance their restaurant listings with OpenTable online reservation capabilities. We also encourage our restaurant customers to incorporate OpenTable reservation capabilities into their own websites, which not only introduces diners to the convenience of online reservations but also helps restaurants fill more seats by providing around-the-clock reservation capabilities.

Customer Support

One of the reasons we enjoy high satisfaction among our restaurant customers is the quality of the solutions we provide. These solutions include the following:

Implementation Services for Restaurants

Once the customer agreement is signed, an OpenTable Project Coordinator, or PC, contacts the restaurant to begin the implementation process. The PC works with a contact at the restaurant to schedule and plan for successful system installation and training. This includes the completion of a site survey to gather restaurant-specific information such as table layouts, reservation timeslot configuration, network and Internet connectivity setup, and other information necessary to properly set up the OpenTable system. Armed with a completed site survey, a Field Operations Specialist, or FOS, configures the OpenTable system for the restaurant prior to the on-site installation.

During a typical installation, the FOS loads the software onto the computer system provided by OpenTable, establishes proper network connectivity and checks the system by entering a test reservation from the OpenTable website. Working with the restaurant manager, the FOS then uses the administrative functionality of the ERB software to configure and optimize the restaurant's

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computerized reservation book. The FOS also provides training to restaurant staff on using the various modules in the ERB.

Ongoing Restaurant Relationship Management

Each of our restaurant customers is assigned to an OpenTable Client Relations Manager, or CRM, who is the primary contact for that restaurant and owns the post-implementation restaurant relationship. CRMs encourage maximum utilization of the ERB to ensure that the restaurant realizes the full value of the system. For example, the CRM assists restaurants in adjusting their reservation books to maximize capacity utilization, reservation-enabling their websites, tracking guest preferences and marketing to their diners.

Restaurant Telephone Support

After the initial installation and training, restaurants may contact OpenTable via a toll-free number to receive technical support and follow-up training as part of our monthly service fee. Live telephone support is available 14 hours per day, seven days a week, with emergency support available around-the-clock.

All customer contacts are tracked in our proprietary Restaurant Operations Management System, or ROMS, to ensure cases are resolved quickly and completely. Cases are categorized by reason and sub-reason codes to identify trends and support root-cause analyses. These analyses provide important feedback to drive future process improvements and solutions enhancements.

Most routine support cases are handled by a U.S.-based third-party customer support partner. When necessary, the support partner escalates calls to our in-house support team located at our headquarters in San Francisco. Our support partner receives equivalent training and access to the same tools as the San Francisco support team.

Consumer Support for Website Users

Diners with questions about the OpenTable reservation network or the OpenTable website can access an online list of dynamically ordered frequently asked questions, or FAQs. If none of the FAQs address the concern, a diner can email our support team via a web-based form. We use a third-party email management system to queue, assign, track, categorize and report on these email inquiries. Emails are categorized to support analysis for website enhancement and continuous process improvement.

Technology

Our technology infrastructure supports the network of restaurants and diners critical to our business.

Data Centers and Network Access

Our primary data center is hosted by a leading provider of hosting services in Santa Clara, California. Backup systems in our corporate headquarters in San Francisco can be brought online in the event of a failure at the primary data center. We are in the process of bringing up a second data center site at a facility outside of California. The site will enable additional fault tolerance and will support our continued growth.

The data center hosts the OpenTable website, the OTRestaurant website and intranet applications that are used to manage the website content. The websites are designed to be fault-tolerant, with a collection of identical web servers connecting to an enterprise database. The design also includes load balancers, firewalls and routers that connect the components and provide connections to

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the Internet. The failure of any individual component is not expected to affect the overall availability of our website.

Our system also includes a proprietary method of accessing website-relevant, real-time restaurant inventory from the data center, providing very fast response times. The system is designed to scale to accommodate the foreseeable growth in the number of restaurants and diners on our network.

Network Security

The data center and restaurant systems maintain real-time communication with proprietary, encrypted message protocols. We also use leading commercial antivirus, firewall and patch-management technology to protect and maintain the systems located at the data center and at each restaurant.

Internal Management Systems

We have developed proprietary systems to ensure rapid, high-quality customer service, software development and website updates. ROMS is a system-integrated customer support application that gives us unique customer resource management tools designed specifically for the restaurant industry. It houses detailed restaurant customer information encompassing the entire customer lifecycle, including initiating a contract, installing the OpenTable system, issuing monthly bills, tracking restaurant inventory and providing ongoing support. In addition, ROMS leverages system-integrated tools allowing for remote technical diagnosis and repair, while operating under multi-tiered security protocols to ensure restaurant customer information is protected. The Customer Help and Restaurant Management system, or CHARM, is a proprietary web content management and consumer support tool that enables rapid website customization. Restaurant profiles, descriptions, maps, partner reviews, restaurant messaging and reservation parameter configurations are all driven out of CHARM.

Development

We devote a substantial portion of our resources to developing new solutions and enhancing existing solutions, conducting product testing and quality assurance testing, improving core technology and strengthening our technological expertise in the restaurant table management and reservation market. As of December 31, 2008, our technical group consisted of 67 employees, who are focused on new feature development for existing solutions and the design of new solutions. We also outsource a portion of our software development to a third-party service provider located in India. For the twelve months ended December 31, 2006, 2007 and 2008, technology expenses totaled $4.0 million, $5.9 million and $9.5 million, respectively.

Intellectual Property

Our success depends upon our ability to protect our core technology and intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including trade secrets, patents, copyrights and trademarks, as well as contractual restrictions. We enter into confidentiality and proprietary rights agreements with our employees, consultants and business partners, and we control access to and distribution of our proprietary information.

We have one issued patent which expires in 2020 and four patent applications pending in the United States. We have one patent application pending in India. We intend to pursue corresponding patent coverage in additional countries to the extent we believe such coverage is appropriate and cost effective.

Our registered trademarks in the United States and Japan include "OpenTable" and the OpenTable logo. "OpenTable" is also registered in Canada, Mexico, Australia and the European Union. "OpenTable.com" is also registered in the European Union. We have filed other trademark applications in the United States and certain other countries.

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We are the registrant of the Internet domain name for our websites, www.opentable.com, www.otrestaurant.com and our international websites.

In addition to the foregoing protections, we generally control access to and use of our proprietary software and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers and partners. Our software is protected by United States and international copyright laws.

Competition

Competition for Reservation-Taking Restaurants

The primary competitor for the OpenTable ERB is the traditional pen-and-paper reservation book. Paper-based reservation books enjoy the advantage of being extremely familiar and simple; however, they are also time-consuming, error-prone, manual and not easily reproduced in case of loss or damage. Through our sales efforts, we explain the benefits of automation to restaurants including greater operational efficiency, superior guest recognition and service and the ability to fill additional seats by offering reservations over the Internet. Other companies attempt to address restaurant needs for computerized reservation management with a variety of technologies.

We believe the principal competitive factors in the market for computerized restaurant reservation management solutions include:

•: comprehensive reservation, table and guest management functionality;
•: ability to fill incremental seats for the restaurant;
•: ability to deliver strong return on investment for restaurant customers;
•: system responsiveness and ease-of-use;
•: on-site, custom system installation and training;
•: robust support; and
•: security, reliability and data protection.

In international markets that we entered more recently and where we have not yet achieved a high degree of penetration, we face more intense competition from local software-development and application service provider, or ASP, vendors. We believe that, over time, the advantages that have established us as a leading provider in North America will help us as we compete in international markets.

Competition for Diners

Our primary competitor for diners making reservations is the phone. The phone enjoys two inherent advantages over online reservations. First, every restaurant and diner has a phone. Second, making reservations by phone is a familiar, ingrained experience for diners.

In order to compete effectively with the phone, the OpenTable website must offer diners a critical mass of restaurants from which to choose and access to reservation inventory comparable to that available by phone. When combined with the growing number of restaurant customers, the OpenTable online reservation network achieves these requirements by communicating directly and in real time with the ERB maintained at each restaurant. Additionally, we offer diners all the conveniences and time savings associated with booking reservations online, including the ability to: book reservations around-the-clock, even when restaurants are closed; find available tables in real time across a selection of local restaurants; receive immediate confirmation of the reservation via email;

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change or cancel reservations online; and earn Dining Reward Points, redeemable for Dining Cheques accepted by our restaurant customers.

Secondary competition comes from allocation-based reservation-taking websites that offer diners the ability to book reservations for a limited selection of restaurant table inventory. Participating restaurants identify specific reservations, generally at non-peak and unpopular times, which can be offered for booking via these allocation sites. Unlike OpenTable reservations which are immediately recorded in the ERB residing at the restaurant host stand, these allocation reservations are communicated to the restaurant by traditional phone and fax systems, email or web-based accounts that restaurants can check to access reservation requests. These methods are prone to errors, such as lost or double-booked reservations, and require additional effort on the part of restaurants. We believe the limited reservation inventory and unreliable reservation processing methods associated with these allocation-based websites limit their value proposition for diners.

Employees

As of December 31, 2008, we had 297 full-time employees including 106 in operations and support, 74 in sales and marketing, 67 in technology and 50 in general and administrative functions. None of our employees are covered by collective bargaining agreements. In addition, as of December 31, 2008, we had five contractors who are full-time equivalents, including three in operations and support and two in general and administrative functions.

Facilities

Our principal executive offices are located in San Francisco, California, in a 34,236-square-foot facility, under a lease expiring on April 30, 2013. We also have regional offices in Chicago, Illinois; Frankfurt, Germany; New York, New York; London, England; Mexico City, Mexico; and Tokyo, Japan.

Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently involved in any legal proceeding in which the outcome, if determined adversely to us, would be expected to have a material adverse effect on our business, operating results or financial condition.

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MANAGEMENT

The following table provides information regarding our executive officers and directors as of February 28, 2009:

Name		Position(s)

Jeffrey Jordan	50	Chief Executive Officer, Director
Matthew Roberts	40	Chief Financial Officer
Joel Brown	47	Senior Vice President, Operations
Michael Dodson	50	Senior Vice President, Sales
Charlie McCullough	57	Senior Vice President, Engineering
A. George "Skip" Battle(1)(2)	65	Director
Adam R. Dell	39	Director
J. William Gurley(2)	42	Director
Thomas H. Layton	46	Director
Danny Meyer(2)	50	Director
Michelle Peluso(1)	37	Director
Paul Pressler(1)	52	Director

(1): Member of the audit committee
(2): Member of the compensation committee

Executive Officers

Jeffrey Jordan has served as our chief executive officer since June 2007 and as a member of our board of directors since July 2007. From October 2004 to September 2006, Mr. Jordan served as the president of PayPal, the Internet-based payment system owned by eBay, Inc. For five years prior to that, Mr. Jordan served as senior vice president and general manager for eBay North America. From September 1998 to September 1999, Mr. Jordan served as chief financial officer for Hollywood Entertainment Corporation, a video rental company, and then president of its subsidiary, Reel.com. Previously, Mr. Jordan served in various capacities at The Walt Disney Corporation for eight years, most recently as senior vice president and chief financial officer of The Disney Store Worldwide. Before that, he worked for The Boston Consulting Group. Mr. Jordan holds a Master of Business Administration degree from the Stanford Graduate School of Business and a Bachelor of Arts degree from Amherst College.

Matthew Roberts has served as our chief financial officer since June 2005. Mr. Roberts was chief financial officer of E-LOAN, Inc., a provider of loans, from December 2000 to May 2005 and vice president of finance of E-LOAN, Inc. from January 1999 to November 2000. Mr. Roberts previously served as corporate controller of NetDynamics, Inc., an enterprise software company, and held a general manager position with Berkeley Systems, Inc., a consumer entertainment software company. Mr. Roberts is a Certified Public Accountant and holds a Bachelor of Science degree in Accounting from Santa Clara University.

Joel Brown has served as our senior vice president of operations since November 2001. From March 2000 to May 2001, Mr. Brown served as executive vice president of Charitableway, Inc., an application service provider linking businesses and the nonprofit sector. From April 1992 to March 2000, Mr. Brown served as vice president and general manager of the financial supplies group and the employer services group at Intuit, Inc., a provider of Internet and desktop finance solutions for consumers and small businesses. Mr. Brown holds a Master of Business Administration degree from the Harvard Business School and a Bachelor of Science degree in Industrial Engineering and Operations Research from the University of Michigan.

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Michael Dodson has served as our senior vice president of sales since March 2002. From June 2000 to December 2001, Mr. Dodson served as a principal at The Destination Group, a private equity firm. From September 1997 to June 2000, Mr. Dodson served as vice president/general manager in the establishment services division of American Express, Inc. Mr. Dodson holds a Master of Business Administration degree from New York University's Stern School and a Bachelor of Science degree in Finance from Florida State University.

Charlie McCullough has served as our senior vice president, engineering since October 2003. From August 1998 to November 2002, Mr. McCullough served as executive vice president of engineering and operations of Wink Communications, Inc., an interactive television technology company. Mr. McCullough holds a Bachelor of Science degree in Software Engineering from the University of the State of New York, Regents College.

Board of Directors

A. George "Skip" Battle has served on our board of directors since December 2006. From January 2004 to July 2005, Mr. Battle served as executive chairman of Ask Jeeves, Inc., an Internet search engine company, and from December 2000 to January 2004 he served as chief executive officer of Ask Jeeves, Inc. From December 1995 to January 2006, Mr. Battle served as a member of the board of directors for PeopleSoft, Inc., an enterprise software company, and from August 1996 to June 2002 he served as a member of the board of directors for Barra, Inc., a software company. From 1968 until his retirement in 1995, Mr. Battle served in management roles at Arthur Andersen LLP and then Andersen Consulting LLP (now Accenture), where he became worldwide managing partner of market development and a member of the firm's executive committee. Mr. Battle is currently the chairman of the board of directors for Fair Isaac Corporation, an analytic products company, and is also a member of the board of directors for Netflix, Inc., an online DVD rental company, Expedia, Inc., an online travel reservations provider, and Advent Software, Inc., a software and consulting company, and a member of the board of the Masters Select family of mutual funds. Mr. Battle is also a member of the board of directors of Workday, Inc., a private company, and Berkeley Community Fund, a not-for-profit organization, and a member of the board of trustees of the United States Olympic Cycling Development Foundation. Mr. Battle holds a Master of Business Administration from the Stanford Graduate School of Business and a Bachelor of Arts degree in Economics from Dartmouth College.

Adam R. Dell has served on our board of directors since January 2000. Since January 2000, Mr. Dell has been the managing general partner of Impact Venture Partners, a venture capital firm focused on information technology investments. Prior to this time, Mr. Dell was a partner with Crosspoint Venture Partners in Northern California and a senior associate with Enterprise Partners in Southern California. Prior to becoming a venture capitalist, Mr. Dell worked as a corporate attorney in Austin, Texas, with the law firm of Winstead, Sechrest & Minick. Mr. Dell also founded and served as chairman of the board of MessageOne, which was acquired by Dell, Inc. in 2008. He currently serves on the board of directors of XO Communications and BagBorrowOrSteal and is a member of the Board of Trustees of the Santa Fe Institute. Mr. Dell holds a law degree from the University of Texas School of Law and a Bachelor of Arts degree in Political Economy from Tulane University.

J. William Gurley has served on our board of directors since October 2000. Mr. Gurley is a general partner of Benchmark Capital, a venture capital firm, which he joined in March 1999. Prior to joining Benchmark Capital, Mr. Gurley was a partner with Hummer Winblad Venture Partners, a venture capital firm, and a research analyst for Credit Suisse First Boston, an investment bank. Mr. Gurley is currently a member of the boards of directors of Fanbase, Linden Lab, Red5, Modern Feed, Nanosolar, Inc., Ruba, Tropos Networks Inc., Vudu and Zillow.com, all private companies. Mr. Gurley holds a Master of Business Administration degree from the University of Texas and a Bachelor of Science degree in Computer Science from the University of Florida.

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Thomas H. Layton has served on our board of directors since May 1999. From September 2001 to June 2007, Mr. Layton served as our chief executive officer. Mr. Layton is currently the chief executive officer of Metaweb Technologies, Inc., an Internet technology company. From November 1995 to June 1999, Mr. Layton served as president and chief operating officer and was co-founder of CitySearch, Inc., a company that provided online city guides, which later merged with Ticketmaster, Inc., an event ticketing agency. Prior to his experience at CitySearch, Mr. Layton served as chief financial officer of Score Learning Corporation, an educational services company, from April 1994 to October 1995, and as president and chief operating officer from March 1995 to October 1995. From January 1989 to August 1992, Mr. Layton served as vice president and general manager of MicroFinancial Corporation, an equipment leasing company. From 1986 to 1988, Mr. Layton was an associate consultant with The Boston Consulting Group. Mr. Layton is a member of the board of directors of oDesk Corporation, a private company, and a co-founder and member of the board of directors of MAPLight.org, a non-profit organization. Mr. Layton holds a Master of Business Administration degree from the Stanford Graduate School of Business and a Bachelor of Science degree from the University of North Carolina at Chapel Hill.

Danny Meyer has served on our board of directors since February 2000. Mr. Meyer has been the president of Union Square Hospitality Group ("USHG") since 1996. USHG owns and operates a number of restaurants including Union Square Café, Eleven Madison Park, Gramercy Tavern, Tabla and The Modern, which have been featured in the Michelin Guide, The New York Times and Zagat Surveys. Mr. Meyer is currently a member of the board of directors of the following not-for-profit organizations: Share Our Strength, City Harvest, Irving Harris Foundation and New Yorkers for Parks. Mr. Meyer is also a member of the executive committees of the Madison Square Park Conservancy, Union Square Partnership and NYC & Co. Mr. Meyer holds a Bachelor degree in Political Science from Trinity College.

Michelle Peluso has served on our board of directors since March 2008. From December 2003 to February 2009, Ms. Peluso served as chief executive officer of Travelocity Global, an Internet travel company. From April 2002 to November 2003, Ms. Peluso served as Travelocity's chief operating officer and as senior vice president of product strategy and distribution. Prior to Travelocity, Ms. Peluso served as chief executive officer and founder of Site59, an Internet travel site purchased by Travelocity, from November 1999 to March 2002. Ms. Peluso is currently a member of the board of directors of the following non-profit organizations: Pembroke College NA Foundation, Christa House and TechnoServe. Ms. Peluso holds a Master's degree in Economics, Politics and Philosophy from Pembroke College at Oxford University and a Bachelor of Science degree from the Wharton School of Business at the University of Pennsylvania.

Paul Pressler has served on our board of directors since March 2008. Mr. Pressler was president and chief executive officer of Gap, Inc. from September 2002 to January 2007. Mr. Pressler also served on Gap, Inc.'s board of directors from October 2002 until January 2007. Prior to joining Gap, Inc., Mr. Pressler was with The Walt Disney Company where he was chairman of the company's global theme park and resorts division from January 1999 to September 2002, president of Disneyland from January 1995 to January 1999, president of The Disney Stores from September 1992 to January 1995, and senior vice president of consumer products from January 1987 to September 1992. Mr. Pressler is currently a member of the board of directors for Avon Products, Inc., a beauty products company, and Overture Acquisition Corporation, a blank check company formed for the purpose of completing a business combination transaction. Mr. Pressler holds a Bachelor of Science degree in Business Economics from the State University of New York at Oneonta.

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Board Composition

Upon completion of this offering, our board of directors will consist of eight members, six of whom will qualify as "independent" according to the rules and regulations of The Nasdaq Stock Market.

In accordance with our amended and restated certificate of incorporation, immediately after this offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual general meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors will be divided among the three classes as follows:

•: The Class I directors will be , and , and their terms will expire at the annual general meeting of stockholders to be held in 2010;
•: The Class II directors will be , and , and their terms will expire at the annual general meeting of stockholders to be held in 2011; and
•: The Class III directors will be , and , and their terms will expire at the annual general meeting of stockholders to be held in 2012.

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

Board Committees

Our board of directors has or plans to establish the following committees: an audit committee, a compensation committee, a nominating and corporate governance committee and a disclosure committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board.

Audit Committee

Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, the audit committee evaluates the independent auditors' qualifications, independence and performance; determines the engagement of the independent auditors; reviews and approves the scope of the annual audit and the audit fee; discusses with management and the independent auditors the results of the annual audit and the review of our quarterly consolidated financial statements; approves the retention of the independent auditors to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent auditors on the OpenTable engagement team as required by law; reviews our critical accounting policies and estimates; oversees our internal audit function and annually reviews the audit committee charter and the committee's performance. The current members of our audit committee are A. George "Skip" Battle, who is the chair of the committee, Michelle Peluso and Paul Pressler. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and The Nasdaq Stock Market. Our board has determined that Mr. Battle is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of The Nasdaq Stock Market. Mr. Battle, Ms. Peluso and Mr. Pressler are independent directors as defined under the applicable rules and regulations of the SEC and The Nasdaq Stock Market. The audit committee will operate under a written charter that will satisfy the applicable standards of the SEC and The Nasdaq Stock Market.

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Compensation Committee

Our compensation committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The compensation committee reviews and approves corporate goals and objectives relevant to compensation of our chief executive officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and sets the compensation of these officers based on such evaluations. The compensation committee will also administer the issuance of stock options and other awards under our stock plans. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter. The current members of our compensation committee are J. William Gurley, A. George "Skip" Battle and Danny Meyer, with Mr. Gurley serving as the chair of the committee. All of the members of our compensation committee are independent under the applicable rules and regulations of the SEC, The Nasdaq Stock Market and the Internal Revenue Code.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee will be responsible for making recommendations regarding candidates for directorships and the size and composition of our board. In addition, the nominating and corporate governance committee will be responsible for overseeing our corporate governance guidelines and reporting and making recommendations concerning governance matters. The nominating and corporate governance committee will be comprised of all of the members of our board of directors. Potential candidates will be discussed by the entire board, and director nominees will be subject to the approval of the independent members of the board.

There are no family relationships among any of our directors or executive officers.

Disclosure Committee

Our disclosure committee will assist our senior officers in fulfilling their responsibility to oversee and ensure the accuracy and timeliness of our public disclosures. Our disclosure committee will be responsible for:

•: designing and establishing controls and other procedures to ensure that information disclosed to the SEC and the investment community is recorded, processed, summarized and reported accurately and on a timely basis and information is accumulated and communicated to management, including the company's senior officers, as appropriate to allow timely decisions regarding such required disclosure;
•: monitoring the integrity and effectiveness of our disclosure controls;
•: reviewing and supervising the preparation of our periodic and current reports, proxy statements, registration statements and any other information filed with the SEC, press releases containing financial information, earnings guidance, information about collaborations, regulatory matters, product developments, material acquisitions or dispositions or other information material to our stockholders and presentations to analysts and the investment community;
•: evaluating the effectiveness of our disclosure controls as of the end of the period covered by our annual report on Form 10-K and each quarterly report on Form 10-Q;
•: discussing all relevant information with respect to our proceedings, the preparation of any disclosure statements and the committee's evaluation of the effectiveness of our disclosure controls; and

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•: providing certifications as may be requested by our senior officers in connection with the filing of our annual and quarterly reports with the SEC.

Our disclosure committee will have full access to our books, records, facilities and personnel, including our internal auditors.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is or has at any time during the past year been an officer or employee of ours. None of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board or compensation committee.

Code of Business Conduct and Ethics

Prior to the completion of this offering, we will adopt a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. The code of business conduct and ethics will be available on our website at www.opentable.com. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website.

Director Compensation

We do not currently provide any cash compensation to our non-employee directors. From time to time, we have granted stock options to our non-employee directors as compensation for their services, but we do not have a formal policy in place with respect to such awards. Our directors who are also employees are compensated for their service as employees and do not receive any additional compensation for their service on our board.

The following table sets forth information regarding compensation earned by our directors who are not named executive officers during the fiscal year ended December 31, 2008.

Name	Option Awards(1)		All Other Compensation		Total

A. George Battle(2)	$	46,703	$	—	$	46,703
Adam Dell		—		—		—
J. William Gurley		—		—		—
Thomas H. Layton		—		—		—
Danny Meyer(3)		100,092		—		100,092
Michelle Peluso(4)		96,346		—		96,346
Paul Pressler(4)		96,346		—		96,346

(1): Amount reflects the total compensation expense for the year ended December 31, 2008 calculated in accordance with SFAS No. 123R. The valuation assumptions used in determining such amounts are described in Note 2 to our financial statements included in this prospectus.
(2): As of December 31, 2008, Mr. Battle held 332,029 shares of our common stock subject to repurchase by us at the original purchase price, all of which were acquired upon the exercise of stock options prior to vesting. The shares of common stock held by Mr. Battle vest as to 1/48th of the shares subject to the option on each monthly anniversary of the vesting commencement date, subject to his continued service as a member of our board of directors.

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(3): On March 27, 2008, we granted Mr. Meyer an option to purchase 400,000 shares of our common stock having an exercise price per share equal to $0.62 and a grant date fair value of $209,880. This option vests as to 1/48th of the shares subject to the option on each monthly anniversary of February 12, 2008, subject to Mr. Meyer's continued service as a member of our board of directors. This option remained outstanding as of December 31, 2008. The grant date fair value of this option was computed in accordance with SFAS No. 123R using the valuation assumptions set forth in Note 2 to our consolidated financial statements included in this prospectus.
(4): In connection with the appointment of Ms. Peluso and Mr. Pressler to our board of directors, on March 27, 2008, we granted each an option to purchase 400,000 shares of our common stock having an exercise price per share equal to $0.62 and a grant date fair value of $209,880. Each option vests as to 1/48th of the shares subject to the option on each monthly anniversary of the date of grant, subject to the director's continued service as a member of our board of directors. Each of these options remained outstanding as of December 31, 2008. The grant date fair value of each option was computed in accordance with SFAS No. 123R using the valuation assumptions set forth in Note 2 to our consolidated financial statements included in this prospectus.

Executive Compensation

Compensation Discussion and Analysis

This section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers who are named in the "2008 Summary Compensation Table" and the most important factors relevant to an analysis of these policies and decisions. These "named executive officers" for 2008 include Jeffrey Jordan, president and chief executive officer; Matthew Roberts, chief financial officer; Joel Brown, senior vice president, operations; Michael Dodson, senior vice president, sales; and Charlie McCullough, senior vice president, engineering.

Overview

We recognize that the ability to excel depends on the integrity, knowledge, imagination, skill, diversity and teamwork of our employees. To this end, we strive to create an environment of mutual respect, encouragement and teamwork that rewards commitment and performance and that is responsive to the needs of our employees. The principles and objectives of our compensation and benefits programs for our employees generally, and for our named executive officers specifically, are to:

•: attract, engage and retain individuals of superior ability, experience and managerial talent enabling us to be an employer of choice in the highly-competitive and dynamic information technology industry;
•: ensure compensation is closely aligned with our corporate strategies, business and financial objectives and the long-term interests of our stockholders;
•: motivate and reward executives whose knowledge, skills and performance ensure our continued success; and
•: ensure that total compensation is fair, reasonable and competitive.

Most of our compensation components simultaneously fulfill one or more of these principles and objectives. These components consist of (1) base salary, (2) performance bonuses, (3) equity incentives, (4) retirement savings opportunity, (5) perquisites and health and welfare benefits and (6) post-termination benefits. We view each component of executive compensation as related but

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distinct, and we also review total compensation of our executive officers to ensure that our overall compensation objectives are met. Not all elements are provided to all named executive officers. Instead, we determine the appropriate level for each compensation component based in part, but not exclusively, on our understanding of the market based on the experience of members of our board of directors and consistent with our recruiting and retention goals, our view of internal equity and consistency, the length of service of our executives, our overall performance and other considerations we deem relevant.

Our philosophy is to make a greater percentage of an executive officer's compensation tied to stockholder returns and to keep cash compensation to a nominally competitive level while providing the opportunity to be well-rewarded through equity if we perform well over time. We believe that because the achievement of our business and financial objectives will be reflected in the value of our equity, our executive officers will be incentivized to achieve these objectives when a portion of their compensation is tied to the value of our equity. To this end, we use stock options as a significant component of compensation because we believe that this best ties individual compensation to the creation of stockholder value. While we offer competitive base salaries, we believe stock-based compensation is a significant motivator in attracting employees for Internet-related and other technology companies. Except as described below, we have not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid out compensation, between cash and non-cash compensation or among different forms of non-cash compensation.

Each of the primary elements of our executive compensation program is discussed in more detail below. While we have identified particular compensation objectives that each element of executive compensation serves, our compensation programs are designed to be flexible and complementary and to collectively serve all of the executive compensation objectives described above. Accordingly, whether or not specifically mentioned below, we believe that, as a part of our overall executive compensation policy, each individual element, to a greater or lesser extent, serves each of our objectives.

Compensation Determination Process

Compensation for our named executive officers historically has been highly individualized, resulted from arm's-length negotiations and has been based on a variety of informal factors including, in addition to the factors listed above, our financial condition and available resources, our need for that particular position to be filled, our board of directors' evaluation of the competitive market based on the experience of the members of our board of directors with other companies and their review of anonymous private company compensation surveys, the length of service of an executive and the compensation levels of our other executive officers, each as of the time of the applicable compensation decision. In years past, our president and chief executive officer, and, with respect to our president and chief executive officer, our board of directors, reviewed the performance of each named executive officer, generally on an annual basis, and based on this review and the factors described above, set the executive compensation package for him or her for the coming year. However, there was no predetermined time of year for such review. In 2008, there were no increases in compensation for our named executive officers. Upon consummation of this offering, the compensation committee will take on the responsibility for this annual review and decision-making process.

Historically, our board of directors has reviewed anonymous private company compensation surveys in setting the compensation of our named executive officers. In 2008, however, neither our president and chief executive officer nor our board of directors reviewed market compensation data in setting named executive officer compensation. In 2009, our compensation committee intends to engage Radford, a management consulting firm providing executive compensation advisory services, as a compensation consultant to help evaluate our compensation philosophy and provide guidance in administering our compensation program in the future. Following the completion of this offering, we

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anticipate that our compensation committee will determine executive compensation, at least in part, by reference to the compensation information for the executives of a peer group of comparable companies, although no such peer group has yet been determined. Our compensation committee plans to have our compensation consultant provide market data on a peer group of companies in the technology sector on an annual basis, and we intend to review this information and other information obtained by the members of our compensation committee in light of the compensation we offer to help ensure that our compensation program is competitive. We anticipate that our compensation committee may make adjustments in executive compensation levels in the future as a result of this more formal market comparison process.

We strive to achieve an appropriate mix between equity incentive awards and cash payments in order to meet our objectives. Any apportionment goal is not applied rigidly and does not control our compensation decisions, and our compensation committee does not have any policies for allocating compensation between long-term and short-term compensation or cash and non-cash compensation. Our mix of compensation elements is designed to reward recent results and motivate long-term performance through a combination of cash and equity incentive awards. We believe the most important indicator of whether our compensation objectives are being met is our ability to motivate our named executive officers to deliver superior performance and retain them to continue their careers with us on a cost-effective basis.

The compensation levels of the named executive officers reflect to a significant degree the varying roles and responsibilities of such executives, as well as the length of time those executives have served our company. As a result of our board of directors' assessment of our president and chief executive officer's roles and responsibilities within our company, there is a significant compensation differential between his compensation levels and those of our other named executive officers.

Base Salaries

In general, base salaries for our named executive officers are initially established through arm's-length negotiation at the time the executive is hired, taking into account such executive's qualifications, experience and prior salary. Base salaries of our named executive officers are approved and reviewed periodically by our president and chief executive officer, and in the case of our president and chief executive officer's base salary, by our board of directors, and adjustments to base salaries are based on the scope of an executive's responsibilities, individual contribution, prior experience and sustained performance. Decisions regarding salary increases may take into account the executive officer's current salary, equity ownership and the amounts paid to an executive officer's peers inside our company by conducting an internal analysis, which compares the pay of each executive officer to other members of the management team. In making decisions regarding salary increases, we may also draw upon the experience of members of our board of directors with other companies and have historically reviewed anonymous private company compensation surveys when setting base salaries. Base salaries are also reviewed in the case of promotions or other significant changes in responsibility. No formulaic base salary increases are provided to our named executive officers. This strategy is consistent with our intent of offering base salaries that are cost-effective while remaining competitive.

None of our named executive officers received an increase in base salary during 2008, as our president and chief executive officer and our board of directors determined that prior increases in equity compensation better aligned the interests of our executives with our stockholders for 2008.

The actual base salaries paid to all of our named executive officers are set forth in the "2008 Summary Compensation Table."

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Annual Cash Bonuses

In addition to base salaries, annual cash bonus opportunities have been awarded to our named executive officers when our board of directors or our president and chief executive officer has determined that such an incentive is necessary to align our corporate goals with the cash compensation payable to an executive. Historically, such annual cash bonus opportunities have been awarded to two of our named executive officers, namely Mr. Dodson, our senior vice president, sales and Mr. McCullough, our senior vice president, engineering.

In 2008, Mr. Dodson was eligible to receive an incentive bonus under a sales commission plan based on the number of new restaurant customers acquired during 2008. The target incentive bonus for Mr. Dodson was set at $200,000, which we determined was necessary to align his individual incentives with corporate sales objectives and to maintain competitive total compensation for his position in light of his lower base salary as compared to other senior vice presidents in our company. Mr. Dodson achieved new restaurant customer sales in 2008 that were 106% of the objective under his sales commission plan. As such, Mr. Dodson was awarded $212,787, or 106% of his target incentive. There is currently a similar 2009 incentive arrangement in place for Mr. Dodson. For both 2008 and 2009, Mr. Dodson's sales objectives were set at levels we determined to be challenging and requiring substantial effort on the part of Mr. Dodson to achieve. The objectives will not be achieved by average or below average performance by Mr. Dodson. For example, in order to achieve these objectives, Mr. Dodson must manage sales in a manner that increases the number of new restaurant customers at a rate that exceeds current projections.

During 2008, Mr. McCullough was eligible to receive an annual cash incentive bonus of up to $30,000, based upon his individual performance, as measured using qualitative goals related to network reliability and product deliverables. Mr. McCullough received his full bonus of $30,000 for 2008. Under a similar bonus arrangement established for Mr. McCullough for 2009, the qualitative goals have been mutually agreed upon between Mr. McCullough and our president and chief executive officer. These goals were set in a manner to challenge Mr. McCullough and require him to achieve system performance improvements and new product developments at higher than historic levels.

The foregoing bonuses paid to our named executive officers are set forth in the "2008 Summary Compensation Table."

Long-Term Equity Incentives

The goals of our long-term, equity-based incentive awards are to align the interests of our named executive officers with the interests of our stockholders. Because vesting is based on continued employment, our equity-based incentives also encourage the retention of our named executive officers through the vesting period of the awards. In determining the size of the long-term equity incentives to be awarded to our named executive officers, we take into account a number of internal factors, such as the relative job scope, the value of existing long-term incentive awards, individual performance history, prior contributions to us and the size of prior grants. Although our board of directors did not refer to any competitive market data during 2008, historically, our board of directors has reviewed anonymous private company compensation surveys and drawn upon the experience of its members in determining long-term equity incentive awards. Based upon these factors, our board of directors determines the size of the long-term equity incentives at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value. In addition, our board of directors has historically allowed our named executive officers to exercise their awards prior to vesting, with any shares issued upon such exercise subject to repurchase by us at the exercise price in the event the executive terminates his or her employment with us. We have not granted any equity awards other than stock options to our named executive officers to date. Following the completion of this offering, we expect our compensation committee to oversee our long-term equity incentive program.

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To reward and retain our named executive officers in a manner that best aligns employees' interests with stockholders' interests, we use stock options as the primary incentive vehicles for long-term compensation. We believe that stock options are an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying the value of the stock options to our future performance. Because employees are able to profit from stock options only if our stock price increases relative to the stock option's exercise price, we believe stock options provide meaningful incentives to employees to achieve increases in the value of our stock over time.

We use stock options to compensate our named executive officers both in the form of initial grants in connection with the commencement of employment and additional or "refresher" grants. To date there has been no set program for the award of refresher grants, and our board of directors retains discretion to make stock option awards to employees at any time, including in connection with the promotion of an employee, to reward an employee, for retention purposes or for other circumstances recommended by management.

The exercise price of each stock option grant is the fair market value of our common stock on the grant date. For 2008, the determination of the appropriate fair market value was made by the board of directors. In the absence of a public trading market, the board considered numerous objective and subjective factors to determine its best estimate of the fair market value of our common stock as of the date of each option grant, including but not limited to, the following factors: (i) the rights, preferences and privileges of our preferred stock relative to our common stock; (ii) our performance and stage of development; (iii) valuations of our common stock; and (iv) the likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an initial public offering or sale of our company, given prevailing market conditions. Initial stock option awards to our named executive officers typically vest over a four-year period as follows: 25% of the shares underlying the option vest on the first anniversary of the date of the vesting commencement date, which is typically the date of hire, and the remainder of the shares underlying the option vest in equal monthly installments over the remaining 36 months thereafter. Other than as described below for February 5, 2007 stock option grants, refresher grants vest in equal monthly installments over four years from the vesting commencement date, typically the date of grant or the date the employee was promoted. We believe these vesting schedules appropriately encourage long-term employment with our company while allowing our executives to realize compensation in line with the value they have created for our stockholders. We do not have any security ownership requirements for our named executive officers.

Our board of directors typically provides for the acceleration of vesting of stock options in the event of a change in control of our company. In the event of a change in control, if our stock options are not assumed or substituted for by a successor, the vesting of the options fully accelerates. In the event stock options are assumed or substituted for, then typically the options immediately vest with respect to that percentage of the shares of the option, up to 100%, that equals (A)(i) six months plus (ii) the number of complete months the named executive officer has provided continuous service to us; divided by (B) the total number of months of the original vesting schedule for the shares, with any remaining unvested shares continuing to vest in accordance with the original vesting schedule. With respect to options granted to Mr. Roberts in 2005 and Mr. McCullough in 2004, vesting acceleration for options assumed or substituted for in a change in control is limited to 25% of the unvested shares subject to the option as of the date of the change in control and an additional 25% in the event Mr. Roberts or Mr. McCullough is terminated without cause or otherwise constructively terminated following the change in control. We believe that these acceleration opportunities further align the interests of our executives with those of our stockholders by providing our executives an opportunity to benefit alongside our stockholders in a corporate transaction.

On February 5, 2007, our board of directors granted each of our named executive officers, other than Mr. Jordan who was not yet employed by us, an option to purchase shares of our common stock that is subject to vesting terms different from that described above and not subject to accelerated

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vesting. These option grants were provided as a special incentive to our named executive officers to encourage further short-term and long-term growth of our company. The vesting schedule of each option is detailed in the section entitled "—Outstanding Equity Awards at 2008 Fiscal Year-End."

As a privately owned company, there has been no market for our common stock. Accordingly, in 2008, we had no program, plan or practice pertaining to the timing of stock option grants to executive officers coinciding with the release of material non-public information. The compensation committee intends to adopt a formal policy regarding the timing of grants in connection with this offering.

Retirement Savings

All of our full-time employees in the United States, including our named executive officers, are eligible to participate in our 401(k) plan. Pursuant to our 401(k) plan, employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit, which was $15,500 in 2008, and to have the amount of this reduction contributed to our 401(k) plan. We currently match up to the first $500 of employee contributions under our 401(k) plan.

Perquisites

Historically, from time to time, our board of directors has provided certain of our named executive officers with perquisites that we believe are reasonable. We do not view perquisites as a significant element of our comprehensive compensation structure, but do believe they can be useful in attracting, motivating and retaining the executive talent for which we compete. We believe that these additional benefits may assist our executive officers in performing their duties and provide time efficiencies for our executive officers in appropriate circumstances, and we may consider providing additional perquisites in the future.

As the result of arm's-length negotiations in connection with the offer letter we entered into with Mr. Jordan in June 2007, Mr. Jordan is entitled to payment of, or reimbursement for, all expenses reasonably incurred by him in connection with his option to use a third party car service for his commute, along with the payment of any taxes incurred by him related to that car service. As the result of the same arm's-length negotiation, we have also agreed to reimburse Mr. Jordan for any taxes he might incur in connection with Section 409A of the Internal Revenue Code as the result of the options we have granted to him.

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In the future, we may provide additional perquisites to our executive officers as an element of their overall compensation structure. We do not expect these perquisites to be a significant element of our compensation structure. All future practices regarding perquisites will be approved and subject to periodic review by our compensation committee.

Termination-Based Compensation

As the result of arm's-length negotiations in connection with the offer letter we entered into with Mr. Jordan, we have agreed to provide Mr. Jordan severance benefits if his employment is terminated by the company without cause at any time or if he is constructively terminated by us within twelve months following a change in control of our company. In such an event, Mr. Jordan is entitled to continued payment of his base salary for twelve months, continued health benefits coverage for twelve months, and six months', or in the case of a termination within twelve months following a change in control, twelve months', vesting acceleration with respect to the options granted to him in connection with his commencement of employment with us. Mr. Jordan must execute and not revoke a general release of all claims against us and our affiliates in order to receive any severance benefits. For a further description of Mr. Jordan's offer letter, see "—Offer Letter Agreements" below.

We intend to enter into change in control severance agreements with our other named executive officers because our board of directors has determined that severance benefits are essential to help us fulfill our objective of attracting and retaining key managerial talent and promoting internal parity following the completion of this offering. These agreements are intended to be competitive within our industry based on our company size and to attract highly qualified individuals and encourage them to be retained by us. In determining the benefits to be payable pursuant to the change in control severance agreements, our board of directors will consider the input of our president and chief executive officer as to what our executives expect and what level of severance benefits would be sufficient to retain our current executive team and to recruit talented executives in the future. We expect these agreements to provide severance benefits if an executive's employment is terminated by the company without cause at any time or if the executive is constructively terminated by us within twelve months following a change in control of our company. The benefits to be provided include the continuation of base salary for months, continued health benefits for months and months', or in the case of a termination within twelve months following a change in control, months', vesting acceleration for stock options and other equity awards.

We have routinely granted and will continue to grant our named executive officers stock options under our equity incentive plans. For a description of the change in control provisions in such equity incentive plans applicable to these stock options, see "—Employee Benefit and Stock Plans—2009 Equity Incentive Award Plan" and "—Amended and Restated 1999 Stock Plan" below. The estimated value of these benefits, along with the benefits payable to Mr. Jordan upon a termination of his employment, is set forth below in the section entitled "Potential Payments Upon Change in Control and Upon Termination Following Change in Control."

Tax Considerations

Our board of directors has considered the potential future effects of Section 162(m) of the Internal Revenue Code on the compensation paid to our executive officers. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in any taxable year for our president and chief executive officer and each of the other named executive officers (other than our chief financial officer), unless compensation is performance based. As we are not currently publicly-traded, our board of directors has not previously taken the deductibility limit imposed by Section 162(m) into consideration in setting compensation. We expect that our compensation committee, however, will adopt a policy that, where reasonably practicable, we will seek to qualify the variable compensation paid to our executive officers for an exemption from the

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deductibility limitations of Section 162(m). As such, in approving the amount and form of compensation for our executive officers in the future, our compensation committee will consider all elements of the cost to our company of providing such compensation, including the potential impact of Section 162(m). However, our compensation committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.

2008 Summary Compensation Table

The following table summarizes the compensation that we paid to our chief executive officer, chief financial officer and each of our three other most highly compensated executive officers during the year ended December 31, 2008. We refer to these officers in this prospectus as our named executive officers.

Name and Principal Position		Salary ($)		Option Awards ($)(1)		Non-Equity Incentive Plan Compensation ($)		All Other Compensation ($)(2)		Total ($)

Jeffrey Jordan, President and Chief Executive Officer	2008	$	360,000	$	1,146,592	$	—	$	19,578	$	1,526,170
Matthew Roberts, Chief Financial Officer	2008		225,000		124,828		—		500		350,328
Joel Brown, Senior Vice President, Operations	2008		225,000		93,627		—		500		319,127
Michael Dodson, Senior Vice President, Sales	2008		175,000		84,305		212,787		500		472,592
Charlie McCullough, Senior Vice President, Engineering	2008		235,000		100,764		30,000		500		366,264

(1): The amounts included in the "Option Awards" column represent the compensation cost that was recognized by us in the year ended December 31, 2008, determined in accordance with SFAS No. 123R. The valuation assumptions used in determining such amounts are described in Note 2 to our consolidated financial statements included in this prospectus.
(2): Represents a $500 401(k) matching contribution made by us for each of our named executive officers. Mr. Jordan's amount includes $12,887 for the provision of a car and driver and $6,191 for the reimbursement of taxes incurred by him for the provision of such benefit.

Grants of Plan-Based Awards in 2008 Table

The following table provides information regarding grants of non-equity incentive plan-based awards made during the year ended December 31, 2008, to each of our named executive officers.

Name	Estimated Future Payouts Under Non-Equity Incentive Plan Awards Target ($)(1)

Michael Dodson	$	200,000
Charlie McCullough		30,000

(1): Represents the annual cash bonus opportunity for 2008 for Mr. Dodson and Mr. McCullough.

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Outstanding Equity Awards at 2008 Fiscal Year-End

The following table shows grants of stock options outstanding on December 31, 2008, the last day of our fiscal year, to each of our named executive officers. The unvested stock awards listed below reflect options exercised by our named executive officers prior to vesting.

	Option Awards													Stock Awards

Name	Date of Grant			Vesting Commencement Date		Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date		Number of Shares of Stock That Have Not Vested (#)		Market Value of Shares of Stock That Have Not Vested ($)
Jeffrey Jordan		7/9/2007	(1)		6/1/2007		—		—		—		—		5,997,627	$	5,097,983
		7/9/2007	(1)		6/1/2007		1,542,247		2,570,411		1.87		7/8/2017		—		—