Google May Buy Yelp: A Quick Analysis

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. next?”

Photo Courtesy of via Flickr.