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Summary:

Google’s purchase of Zagat is a small deal, but the ripples it creates could be much larger — the purchase takes Google even further into the area of content ownership, and that could give “search neutrality” advocates and the FTC more ammunition against the company.

Google’s acquisition of Zagat, which was announced on the Google blog on Thursday, is a relatively small one for the search-engine giant: less than $66 million, according to some estimates. But the ripples created by the deal could be far larger than its monetary value, because the review-based service is a content producer, which takes Google into an area it has mostly avoided in the past. That the web behemoth plans to make Zagat a central part of its local recommendations could give “search neutrality” advocates — and possibly even the Federal Trade Commission — more ammunition in their battle with the Google empire.

As Stacey described in her post on the news, Google is clearly interested in the “people power” that Zagat brings to its local recommendations — something the search company tried to get by acquiring Yelp in 2009, only to be turned away (as it was when it attempted to buy Groupon for a rumored $6 billion earlier this year). Although it’s often confused for a paid-review service, Zagat actually pioneered a pre-web version of the “crowdsourcing” approach that Yelp and others have taken to local reviews. But the review service has reportedly had trouble making the leap into the web era.

Is Google plus Zagat a Yelp-killer?

Much of the coverage of the news has portrayed the Zagat purchase as Google’s way of “killing” Yelp — and that’s the kind of language likely to raise warning flags both at the FTC and for many of Google’s other critics. Even some Google fans–  such as journalism professor Jeff Jarvis, author of the book “What Would Google Do?” — have raised concerns about what a Zagat purchase means for the company. Jarvis said:

Google buying Zagat as a content company would concern me. It would bring channel conflict and put Google in the content-creation instead of the content-linking business, competing with the other side of links and raising conflict-of-interest questions.

To complicate things, Google has even more of a history with Yelp than just trying to acquire the company. For a time, the search company was aggregating reviews from Yelp and other services and showing them on its Google Place pages for a specific location. Yelp CEO Jeremy Stoppelman cried foul over this behavior, however, saying the search company was stealing traffic from his service, and Google recently stopped doing so. (Stoppelman also said Google effectively told the company if it didn’t like its reviews being aggregated, it could remove itself from Google’s search index altogether.)

Buying Zagat is obviously an attempt to replace that kind of content, but it could cause even more problems for the company if Google starts giving preferential treatment to Zagat results. That’s because a key part of the criticism the company gets — criticism that has led to antitrust inquiries and/or investigations not just in the United States, where the FTC notified Google earlier this year that it has started an inquiry, but in Europe as well — is that it distorts search results to send traffic to its own in-house properties.

More fodder for the “search neutrality” crowd

This kind of criticism even has its own buzzword: “search neutrality,” which tries to draw a direct link between the idea of net neutrality — which is supposed to prevent large telecom and networking companies from giving their own content preferential treatment — and the idea that Google should provide unbiased search results rather than favoring its own assets. Critics such as FairSearch.org, whose members include Microsoft and web services like Expedia  and Travelocity, say the company causes harm to other companies and to users by giving its own services prominence in search results. They have said that:

Google’s anticompetitive practices include scraping and using other companies’ content without their permission, deceptive display of search results, manipulation of search results to favor Google’s products, and the acquisition of competitive threats to Google’s dominance.

Zagat isn’t Google’s only move into the area of content — the company has long owned Blogger, a blog-publishing platform that competes with WordPress (see disclosure below), and YouTube is also a giant user-generated content provider. But so far, no one has really tried to argue that Google is depriving users of access to competing sources of blog content or funny videos. Zagat’s content, however, is directly related to what many see as a hot and competitive market: namely, local recommendations and reviews.

In some ways, Google can’t win: When it tried to aggregate Yelp reviews as a way of adding local content to its Google Place pages, the service complained that it was stealing traffic. Now adding its own reviews from Zagat is likely to draw critics who say it is competing with Yelp and others unfairly by giving prominence to reviews from its own service. And if Google makes further inroads into content-related businesses, as some expect that it will, those kinds of criticisms are only going to intensify.

Google’s argument, outlined by Google Fellow Amit Singhal in a blog post following the announcement of the FTC inquiry, is that Google simply tries to provide the best search results it can, and that users are free to go elsewhere if they wish. But it remains to be seen how well that kind of Pollyanna-ish approach goes over with the feds.

Disclosure: Automattic, the maker of WordPress.com, is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.

Post and thumbnail photos courtesy of Flickr users Mark Strozier and bloomsberries

  1. “In some ways, Google can’t win: when it tried to aggregate Yelp reviews as a way of adding local content to its Google Place pages, the service complained that it was stealing traffic. Now adding its own reviews from Zagat is likely to draw critics who say it is competing with Yelp and others unfairly by giving prominence to reviews from its own service. ”

    Sigh. Newsflash… taking peoples’ content without permission is usually frowned upon. Had Google done a deal with Yelp to display the reviews on Places that would have let Yelp fairly value the data. Simply taking it wasn’t OK (and I’m not particularly a Yelp fan).

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    1. The problem is “let Yelp fairly value the data.” Since there is no market price for such data, Yelp’s ‘fair value’ would probably be an outrageous number from Google’s point of view. Yelp can’t have it both ways: if they believe Google was stealing traffic from them when their reviews were indexed, then they should be relieved now that Google is no longer doing it. They can’t turn around and complain that Google is stealing traffic from them by NOT indexing them.

      Going to the comparison with telcoms: Google is offering its competitors (where ‘competitors’ here means content sites) free and equal access to its ‘pipes.’ If the competitors decline, that’s their problem.

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  2. How is Zagat more of a content business than Maps, YouTube or Books? They don’t own the restaurants. Users supply the data…

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  3. And I doubt that Google will be shaking down the restaurants for advertising, offering to hide bad reviews only if restaurateurs pay up…

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  4. All this really shows is that anti-trust lawsuits are to protect companies, not consumers.

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  5. There is nothing wrong with Google pursuing a vertical integration strategy. Look at Apple. They are in the software phone/computer and even chip business. Google is dong vertical integration by buying Motorola. What’s wrong with getting into the content creation business too?

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  6. These critics are payed for by competitors. There is no such thing as “search neutrality” and here are the expert options about the ridiculousness of claiming otherwise: http://nextdigitaldecade.com/contents

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  7. I don’t understand how the consumers are hurt by this. Providing high quality reviews of restaurants is a good thing. And if it’s linked to maps, even better. I’m a long term customer of Zagat and prefer their reviews to yelp and all the other reviews out there. Yelp is horrible – the local taco truck gets the same rating as a 5* restaurant. Making Zagat reviews broadly available is 1000X better for the consumer. I presume you won’t have to pay for them so it’s a true value add to the consumer. I hope this spurs yelp to improve their rating system but I fear all it will do is cause them to hire lots of lawyers.

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    1. If the local taco truck does well at what it does, then what’s wrong with it getting five stars too? I personally don’t like star ratings that place extra weight on restaurants that charge more, or have a fancier setting. That doesn’t make sense to me. What if you’re in the mood for taco truck food today? Is it not possible to have a 5 star experience at a low budget place?

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  8. This is entirely unrelated to Net Neutrality. Google does not provide internet service. Yes, they could show favoritism in search results or for Chrome/Android users, but that also has nothing to do with Net Neutrality.

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