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Summary:

Google is rumored to be in talks to buy Yelp for over $500 million. If the deal happens, then it is a good move for Yelp and its backers, who are selling at what we think is the top of the market.

4098879592_9f82d6a86f_m.jpegGoogle is rumored to be in talks to acquire local reviews site, Yelp for about $500 million. If the deal happens, then it is a good move for Yelp and its backers, who are selling at what I think is the top of the market. It is also a good short term move for Google as well. The Yelp gang gets to walk away into the sunshine, getting top dollars at a time when they are about to be disrupted by a whole new class of more real time and socially contextual services. In her post earlier this week, Liz wrote:

This is why I see so much value in online networks that are more intimate. The wisdom of the crowds is great and all, but it’s just too much to take in. And most importantly, reviews are a matter of taste. Sure, tacos and beer may appeal to most everybody in the core Yelp demographic, but far more awesome would be things that reflect my actual preferences, as approximated by my friends’ tastes. Intersecting where we are and who we know should become an amazing indicator of what we want.

Now Yelp’s business wasn’t going to go away in next two years, but it would have started to stagnate as the web started to move away from them. That is why they are smart to take Google’s cash.

In the near term, the deal is good for Google as well, since it gives them a fighting chance to build a decent-enough local business, something it has struggled with in the recent past. Greg Sterling, a well known analyst who tracks the local advertising markets for SearchEngineLand writes:

If Google does buy Yelp, what exactly does it get? It gets a local-social network with roughly 26 million users across the US, Canada and the UK. Yelp reportedly has 8.5 million reviews. This is a huge amount of content that Google can’t generate itself and which it is already leaning on pretty heavily on its Place Pages as part of its increasing focus on local.

As we have pointed out in the past, Google has a Vitamin S deficiency, S being social. For instance, when Google recently announced “Favorite Places on Google” program it decided to tabulate them by “counting how many times people search for a business, look up directions to it, or click through to its web site.”

Anyway, if they do, it will be a major shift for Google and its overall strategy. The company, as Jason Calacanis so succinctly said (via Twitter) “is buying the items in their search results. About.com next?”

Photo Courtesy of Yelp.com via Flickr.

  1. Agreed. It’s seems like tips from foursquare are quickly becoming more and more relevant, whereas Yelp is cumbersome to use on mobile phone.

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  2. I think this maybe a good move for both Google and Yelp. The marriage of the two can give services like Foursqaure a run for its’ money. I like Yelp. I just like Foursquare more. Why? Simply because it’s very social. I can see where my friends are and what they are doing and we can hook-up. And that is real friends not social network friends. I feel that Yelp is lacking in this area.

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  3. Jason is dead right about Google desperately buying items in their search results. It’s kind of sad because I view Yelp as a very very spammy site. I am very surprised that Google would buy this one.

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  4. Yelp has been playing some funny games in the name of chasing revenue, particularly with regards to the way that certain reviews are handled depending upon whether or not a particular business is a sponsor or not. Church and State are not perfectly segregated and the don’t be evil thing may need some repeating. It is also curious how the Elite thing works, at least in the Bay Area version of Yelp, where there seems a strongly positive correlation between being an attractive young Asian female and Elite status, but I suppose the founders needed something to tide them over until the End Game.

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  5. i am sorry, but real time is no threat to yelp. no one needs real time reviews … especially not 130 character limited ones. the social aspect is something google might like about yelp, although yelp i think is not overly social. this is a lot of hot air with a lot of hype and jargon … adding very if any value.

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  6. Google bought the items in its search results with YouTube. That has hardly been worthwhile. The same will be true if they buy Yelp. Google is inherently a technology driven company. Yelp, YouTube or any other social media is not.

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  7. Liz Gannes wrote:
    “far more awesome would be things that reflect my actual preferences, as approximated by my friends’ tastes.”

    Yeah, Yelp does that already, it being a social network and all. I almost solely look at reviews from my contacts, rather than the greater Yelp population.
    It also highlights the dishes people are talking about over and over by bringing them to the top.

    Based on these two features that are already there, I don’t see FourSquare type apps replacing Yelp anytime soon.

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  8. Om, another reason for Google to buy Yelp it to get closer to local merchants. I believe that Google will be making a big push to provide value added services for local merchants and Yelp had done a decent job engaging local biz, so this can assist them with penetrating this segment. Selling services to local merchants is very very difficult and most merchants are not leveraging the web to advertise or promote their services, this segment represents billions of dollars that could be spent online. For Google to continue their big growth, they need to go after segments with big potential, and local is huge.

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  9. Perhaps in an old fashioned way, I’m surprised how short the half life of these companies are. The turnover rate is stunningly quick, what other industries have businesses like this?

    Secondly, I’m also surprised at the assumption that if a company isn’t worth $X it just naturally has to be bought out. I suppose people expect if a small company isn’t bought, a huge company will clone its features and let it die instead.

    New rules of business. Though I’m sure astute commentators could cite other examples.

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  10. OP,
    I used to work with you in India abroad.

    Can you help me get a job, OP? I do website banners, html newsletters, graphics. I recently got lay off from CMP Inc. where I worked 15 years.

    Look forward to hear from you.
    Thanks, Neel

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  11. Most of us already predicted that the deal of Yelp and G would play out just any other acquisition google had in the past. Surprisingly, even with the generous ‘gift’ of 500 Million dollars presented by Goog, Yelp still found a way to turn it down. Why? here’s a detailed point of view: http://bit.ly/yelp-decline-google-best-worst

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  12. Great Article! I have a Yelp Clone for sale on my site so you can run your own localizied review site.

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