Dimmi and Restaurant Adwords Arbitrage – Are they stealing your restaurants’ customers and selling them back to you?

Date: 31-05-2017

Too many restaurants are having their customers stolen by Dimmi (owned by Tripadvisor), though a practice known as restaurant adwords arbitrage,  from the one place on the internet that their customers details should be safe and that is the Google search for their own website.  The practice is known as adwords arbitrage.  When restaurants sign up with Dimmi, many believe that they will work in partnership, with Dimmi providing the ability to take bookings on their own website, along with Dimmi marketing their restaurant through their ‘network’, but the reality is much more complicated than that, with Dimmi competing against their own restaurant partners.

What is restaurant  adwords arbitrage?

Arbitrage occurs when you can buy something in one place and sell it at a higher price at the same time.  Adwords arbitrage is when occurs when a customer of your restaurant does a Google search.   Dimmi runs an adwords campaign targetting keywords around your Restaurants’ name and they buy a click from Google or Bing.  That click directs the customer to Dimmi’s portal and they take the booking.

How does adwords arbitrage work?

Dimmi charges $1 per seat booked through the restaurants own website and $3 per seat for each seat booked through their network.  Dimmi exploits this difference between the $1 and $3 that they charge.  Customers do not realise that the restaurant is being charged a higher price, in fact Dimmi advertises that their booking system is free, when in fact the restaurant is bearing the cost of the bookings.  Some restaurants are being charged over $2,000 a month and Dimmi is able to exploit the difference it charges ($1 and $3 for seats booked through the restaurants websites  vs Dimmi’s network) with buying clicks  from Bing and Google for less than the price difference they can charge the restaurant.  If a customer makes a booking for 10 people, that works out at $30, an extra $20 on what they would normally get, so paying $2 or $5 for that click makes a lot of sense for Dimmi, but adds a lot of costs for Restaurants.

What is the effect of restaurant adwords arbitrage?

Adwords arbitrage has a number of negative effects for restaurants:

  • Increasing costs for the restaurants for taking bookings
  • Creating a false impression of the marketing that Dimmi is doing for the restaurant

Using Dimmi in general also has a number of negative effects:

  • It gives your customers contact details to Dimmi
  • It exposes your customers to discounted offers to other restaurants in your area

If a customer is a regular restaurant customers who knows and loves your brand, or is a new customer coming to you because of a marketing campaign that you have run, using Dimmi equates to giving them your customer database and being charged for the privilege of helping Dimmi to build their database.

Why does Dimmi use restaurant adwords arbitrage?

Fundamentally, Dimmi is a business to consumer business.  Their customers are diners.  Restaurants are used for service fulfilment, they are just to be the place for the customer to eat – effectively Dimmi doesn’t really care where someone eats.  It doesn’t matter where a diner books, as long as they book somewhere through the Dimmi system.  This is why Dimmi have come out so heavily against restaurants that have queues.  They can’t tax those restaurants, which are really popular  Adwords arbitrage enables Dimmi to send a monthly report to each restaurant detailing how many people booked through the network and it reinforces the myth that Dimmi is doing a great job of marketing the restaurant.  In reality, what they are often doing is intercepting the restaurants own customers and selling them back to them at a higher price.

How to find out if you are the victim of Adwords Arbitrage

The quickest and easiest way to see if you are the victim of adwords arbitrage is by doing a Google search on your own restaurant.

restaruant adwords arbitrage
Here is an example of restaraunt adword arbitrage by Dimmi. They have an ad running above the search result for the restaurant. Note also the Google Knowledge panel links to Dimmi’s reservations, not the restaurants website. This is also incurring higher fees.

What else does Dimmi do that has a negative impact on restaurants?

Dimmi is very aggressive in attempting to manipulate Google search results, driving customers to their website, not that of the restaurants.  Once again, this has the effect of making the restaurant owner believe that Dimmi is more effective at marketing than it really is.  The practice is even more nefarious when a restaurant stops using Dimmi, because they then continue to market through Google, but provide a landing page that directs the restaurants to customers to make a booking at other restaurants.  This would almost look like a bait and switch.

Another contentious part of the relationship with Dimmi for many restaurants is the effect that no shows have on the restaurant.  If a booking of 15 comes books through adword arbitrage, the charge is $45.  Once they no show, not only does the restaurant now have a vacancy for 15 seats at short notice which they may not be able to fulfil, but they have incurred a fee of $45.  If they don’t submit a claim back to Dimmi in time, they will be forced to pay the $45 fee.  For some restaurants, the combination of the no shows and the fee for the booking of the no show can have a significant impact on the profitability for the night.

What impact do Dimmi Flash sales have on restaurant customers?

One tactic that Dimmi uses to increase the number of bookings that it takes for the restaurants in it’s network is to send out Flash Deals.  These are often 50% off deals for restaurants that are struggling and require more customers and who are willing to deeply discount their food.  These deals are often displayed on the website, through the app and through emails.  This is a “Groupon by stealth” tactic.  It is particularly harmful because it decreases the amount that a customer is willing to spend when going out.  It creates a group of customers that are not loyal to the restaurant, but loyal to whatever the next deeply discounted offer that Dimmi will send out.  Many restaurants experimented with Groupon and found that it was incredibly difficult to prize a one time customer with a heavily discounted offer away from Groupon and to turn them into a repeat customer.  We believe that these Flash Deals have the same negative impact for the restaurants using them.

Dimmi Flash Sales
Dimmi Flash Sales are a great way to get coupon seeking customers in, but how easy are they to turn into repeat, full fee paying customers? Also, your own customers may be exposed to these deals if Dimmi gets their email address from your website.

How to protect your restaurant from adwords arbitrage

The simplest way to minimise the impact of adwords arbitrage is to stop using Dimmi and ensure that they are not hijacking your bookings details in Google searches.  If you find that they are, you can contact Dimmi or contact the team at Marketing4Restaurants.  We have a lot of experience in helping small restaurants to look after their brand when threatened by large multinationals like Dimmi (which is owned by Tripadvisor).

We recommend the following actions to check the integrity of your brand and your restaurant database:

  • Open a browser in incognito mode and conduct a Google search for your restaurant. Your own website should come up first
  • Create a new Gmail account.
  • Make a booking through your own booking system that is on your website using that Gmail account.
  • Monitor that account over the next 4 weeks to see what communication comes out from Dimmi not only about your restaurant but also about other restaurants in your area – has Dimmi sent you any discounted offers to other local restaurants? As we’ve said, this ‘Groupon by stealth’ approach decreases the likelihood that a customer will return to your restaurant and also decreases that amount that they are willing to pay when going out.
  • Talk to your Dimmi rep and tell them that you are quiet and need more bookings

Most importantly – use the Free Online Restaurant Booking system.  It provides the benefits of an online electronic restaurant diary, along with the ability  to take bookings through your website 24/7 with no fees or charges and enables you to grow your database, not Dimmi’s.  This is what makes FORBS a great Dimmi alternative.

Do other companies commit adwords arbitrage?

Yes!  The practice is very common with large corporates attempting to get in between restaurants and their customers and to clip the ticket on the way through.  It is commited by OpenTable, Zomato and Quandoo, and is even more prolific in the online ordering space and is done by companies like GrubHub, Menulog and JustEat.

Restaurant adwords arbitrage can create a significant decrease in repeat customers whilst increasing the costs of taking bookings online.  Each and every restaurant should carefully review their online booking systems to determine if they are subject to restaurant adwords arbitrage or any of the other practices that decrease their restaurants brand value.

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