Google Acquires Zagat. Will The Service Now Become Free?

Google (NSDQ: GOOG) is expanding its push into local content with its acquisition of Zagat, which started out as a New York City restaurant guide in 1979 and now publishes guides in 13 categories and over 100 cities. It’s good news for Zagat, which unsuccessfully put itself up for sale in January 2008, pulling itself off the market six months later when there were no buyers. “Zagat will be a cornerstone of our local offering,” Google VP Marissa Mayer said in the announcement. Update: Google bought Zagat for a reported $125 million, according to the WSJ. Update: Google bought Zagat for $151 million. That is lower than the $200 million Zagat sought in 2008. Google offered $500 million in its failed attempt to buy Yelp in 2009.

The terms of the deal were undisclosed, but TechCrunch points out that the deal must be for less than $66 million or an FTC antitrust review would have been automatically triggered. )Update: According to the WSJ, which cites an unidentified source, the deal was $125 million but was not reviewed by the FTC.)

In an announcement on, Tim Zagat wrote, “Nina and I will continue to be active in the business as co-Chairs; however, the merger of our resources, expertise and platforms with those of Google will give us the opportunity to greatly expand.” Google’s Mayer calls Zagat’s reviews “one of the earliest forms of user-generated content–gathering restaurant recommendations from friends, computing and distributing ratings before the Internet as we know it today even existed.”

Though Zagat was a pioneer before the Internet existed, it has faced some difficult trade-offs since then. By putting most of its content and ratings behind a paywall, it missed out on Google traffic and, as of one year ago, had 570,000 unique domestic visitors compared to Yelp’s 9.4 million (Nielsen will provide updated figures later this afternoon. Below are *comScore* figures from July 2010 to July 2011).

A source familiar with the plans said that Zagat’s content pricing–$24.95 per year or $4.95 per month–will not change for now. The question, of course, for Google is whether it can significantly increase the subscription revenue or would be better off maxing out on advertising revenue. Another source who is very familiar with Zagat’s business says the company’s membership revenues are less than $10 million per year, and that advertising revenues are less than half of that. Zagat’s biggest revenue stream by far is corporate partnerships (including everything from custom guides to events and microsites). Trade sales of Zagat’s printed books, though they are arguably the most well-known piece of the business, only bring in about as much as advertising does, this source said. In total, Zagat’s is a $30 million to $40 million business.

Zagat has tried to develop its mobile business. Its app, which costs $9.99 per year, was one of the founding iPad apps. The company announced a partnership with Foursquare for a “foodie” badge in 2010 and also partnered with Foodspotting to use that company’s data and photos.

In the past, Google has resisted the characterization of itself as a content company, but this is a major push into local content for sure. Mayer wrote that she is “excited to collaborate with Zagat to bring the power of Google search and Google Maps to their products and users, and to bring their innovation, trust and wealth of experience to our users.” That could mean that Zagat content will be featured prominently on Google Place pages. (Google recently had to yank many of the user reviews it pulled over from sites like Yelp and TripAdvisor, Search Engine Land points out, after those companies complained.)