oliver-twist-007

Remember back in May 2009, when OpenTable went public? At the time, there was a lot of skepticism surrounding the company, mostly because it had recently swung from a history of losses to two quarters of operating profit. Some called investing in OpenTable a “tough call.” Others suggested investors think twice before buying into the IPO.

The reasons were straightforward enough, or at least they were back then. It wasn’t just the last stages of the dot-com hangover. It was that investors were shell-shocked from the Great Recession and only interested in companies with proven business models. Especially business models built on the web.

Outside of Google’s IPO five years earlier, most of the Internet companies that were going public in the US were based in China like Baidu, or involved in back-end services like Rackspace, or had unsettling business models like Vonage or Orbitz. OpenTable was closer to the Internet IPO as founders and VCs imagined it to be: a company moving from loss to profit, hopefully poised for years of profit growth.

OpenTable turned out to be just that. Some even saw OpenTable’s IPO as a warming up a frigid tech IPO market. The company’s operating profit grew handsomely – from $626,000 in 2008 to $18 million in 2010 – and its stock price surged along with it. The company debuted at $20 a share and briefly rose as high as $118 a share two years later. At one point in 2010, OpenTable had a historical PE above 600. Of course, it couldn’t last, and the company’s shares fell back to $31 a share over a matter of months.

Four years after OpenTable began to pave the way for consumer-web startups like Zillow, Zynga, Facebook and, soon, Twitter to glide into the public market, things are looking very different. Twitter is positioned for a $12.8 billion IPO despite mounting losses, and some see that value surpassing $20 billion after it begins trading.

And OpenTable? The good news is it’s risen 43 percent to $70 a share so far this year as many consumer-web companies have rallied thanks to mobile monetization. The bad news is that, compared to its peers, this isn’t so hot. Facebook and Groupon have doubled this year. Padora has tripled, and Yelp has nearly quadrupled. Even troubled Zynga has outperformed OpenTable with a 54-percent gain year to date.

There are a couple of reasons why OpenTable is lagging. One is that the company’s growth is slowing. Revenue growth slowed from 41 percent in 2011 to 16 percent last year. Profit growth declined from 53 percent to 11 percent over the same periods. While revenue has slowed even more in the first half of 2013 to 15 percent, profit growth rebounded to 46 percent as the company scaled up the number of customers it’s seating. But recently Morgan Stanley said any gains in this area had been priced into OpenTable’s stock, and downgraded it two notches to Underperform.

The other long-term threat facing OpenTable has been competition from upstarts like Europe-based Eveve and the Food Network-backed CityEats, to sites and apps that have encroached onto OpenTable’s turf like Foursquare and Yelp to companies like Groupon and Urbanspoon that bought or built their own reservation systems.

Over the past year, however, OpenTable has done a good job of partnering with current or would-be rivals. A year ago, the company partnered with Foursquare to integrate its reservation technology into Foursquare’s dining recommendations. When Yelp bought Seattle-based reservation startup SeatMe, it made it clear the deal would only affect small establishments and that its partnership with OpenTable would continue.

In July, OpenTable bought Urbanspoon’s Rezbook system and said it would handle its onetime rival’s reservations in North America. A few weeks later, Facebook agreed to let its users book reservations through the Facebook app, similar to a deal OpenTable reached with Google and Zagat.

OpenTable has quietly become the most prominent back-end reservation system to the apps most likely to be used when people are looking for or researching local restaurants. Even as it’s broadened its reach, it’s starting to deepen its engagement with diners. Three months ago, it began testing a service that let diners pay for the meals they’ve reserved through OpenTable.

Another analyst, Piper Jaffray’s Michael Olson, raised his rating on OpenTable to Overweight because of this growing potential for diner engagement. “OpenTable’s growth strategy is shifting toward a renewed focus on consumer marketing and mobile growth,” Olsen wrote, citing recent marketing hires and the likelihood of increased mobile advertising. This will “help drive an acceleration in OpenTable adoption during 2014-15 which we believe will lead to an inflection point similar to what occurred for online travel during the early 2000s.”

If that strategy works, OpenTable could become a more visible brand in the consumer web, building on a network of partnerships that have eased the competitive threat it faced not long ago. The stock is still pricey – it’s trading at 37 times estimated earnings this year and 32 times earnings next year – but again, this is a market where many brand-name web companies are trading at even richer premiums.

OpenTable is no bargain but it’s not clear the company’s best days are behind it.