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Priceline Buying OpenTable for $2.6 Billion

Priceline Buying OpenTable for $2.6 Billion
By Brandon Bailey

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The acquisition of online reservation service OpenTable by online travel company Priceline may lead the way for even more consolidation in the online hospitality sector. And as more consumers use their mobile phones to book rooms, tables and other amenities, the newly combined companies could pose a growing threat to Google.

Priceline, the big Internet travel company, said Friday that it's buying OpenTable, the San Francisco-based restaurant reservation service, in a $2.6 billion deal that may herald further consolidation in the online hospitality sector.

And as more consumers use their mobile phones to book rooms, tables and other amenities, analysts said the newly combined companies could pose a growing competitive threat to Google, the current king of Internet search, which has been beefing up its own travel offerings.

"As people get more comfortable using mobile devices to search online, they're going to use more specialized services and apps," said Daniel Marcec of the industry research firm eMarketer. That could draw users and advertisers away from Google's search service, he added.

Google, which had almost $60 billion in sales last year, dominates virtually every segment of the online advertising market. But with the proliferation of competing mobile services and apps, including Facebook and smaller companies, eMarketer projects Google's share of mobile search advertising dollars in the United States will fall from 83 percent in 2012 to about 67 percent this year.

Priceline Group, as it's officially known, has expanded its holdings in recent years while gaining pop-culture status for a goofy promotional campaign featuring the actor William Shatner. It bought the hotel service in 2005 and paid $1.8 billion last year for Kayak, a site that lets users search for flights, hotels and rental cars.

OpenTable, founded in 1998, has also seen rapid growth in recent years, after its stock market debut in 2009. With revenue of $190 million last year, the company says it works with more than 31,000 restaurants and is used by 15 million people every month. The service is free to diners, while restaurants pay OpenTable a fee for bookings.

In a statement, OpenTable CEO Matt Roberts praised Priceline's online marketing expertise "across devices," and indicated the company hopes to expand further under new ownership.

Priceline boasts that a million people stay in accommodations booked through its services every night. In a statement, CEO Darren Huston said OpenTable represents "a natural extension into restaurant marketing services" for his company.

"Travelers are diners," Huston said on a conference call Friday, according to The Associated Press. "It's the same customers. There's opportunity to cross-promote brands."

OpenTable will keep its current management and remain headquartered in San Francisco, according to Priceline, which is based in Norwalk, Conn.

Priceline is paying $103 per share for OpenTable, in an all-cash deal scheduled to close later this year. That's a 46 percent premium over OpenTable's closing share price of $70.43 on Thursday. (continued...)

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