OpenTable provides reservation solutions through ERB and the OpenTable website, to reservation-taking restaurants and diners, respectively. The company’s internal estimates suggest 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.

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.

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. The restaurant industry is also inherently local, making 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 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.

The 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.

OpenTable 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.

The company has applied and continues to apply the same fundamental strategy in developing and penetrating other markets. As of March 31, 2009, 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 inception in 1998,

The company intends to augment 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. The currently OpenTable has 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, the company strategy internationally is to replicate the model successfully employed in North America.

In 2004, the company established our European headquarters in London and expanded our North American presence in Canada. In 2006, opened an office in Tokyo and further expanded North American presence in Mexico. In 2007, the company expanded European presence with offices in France, Germany and Spain.

The company’s 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 the company is unfamiliar. The international operations may not prove to be successful in certain markets. For example, in 2008, the company closed offices in France and Spain. In addition, the company has incurred and expects to continue to incur significant expenses in advance of generating material revenues as it attempts to establish presence in particular international markets.

In many international markets the company is not the first entrant and there exists greater competition with stronger brand names than it has faced in North American markets.

For the three months ended March 31, 2009, the company incurred approximately 18% of operating expenses in pounds sterling, euros, yen and other foreign currencies, while most of revenues were denominated in U.S. dollars.

The company expects the competitive environment for solutions to become more intense as additional companies enter our North American markets. Currently, 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.

After the lock-up agreements pertaining to this offering expire and based on shares outstanding as of March 31, 2009, an additional 18,604,587 shares will be eligible for sale in the public market.

As of December 31, 2008, for federal and state tax purposes, the company has $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. The company’s ability to use 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 Internal Revenue Code.