News broke yesterday that Google just may be in late-stage acquisition talks with Yelp for a deal that’s rumored to be more than $500 million. Yelp, the successful social review site with 26 million users in the U.S., Canada, and the UK with more than 8.5 million reviews might just be key in the search giants move to disrupt the mobile industry.
GigaOm’s Om Malik poses that the deal is a “good-short term move” for Google, “since it gives it a fighting chance to build a decent enough local business, something it’s struggled with in the recent past,” he writes. For Yelp, which has raised just $30 million and reportedly has hit $50 million in revenue, it’s prime time to talk selling. GigaOm’s point of view is that other local players with more of a people-you-know element, like FourSquare and Twitter, are taking over the local scene, thanks to the rise of mobile.
But for Google, local data may be a key element in their grand mobile plans. What Google needs to be thinking about right now is, what is the future of digital advertising and marketing? Obviously they’re on the mobile train — not only pushing Android software to the mainstream but also building their own hardware for the rumored and FTC-approved Google Nexus One smartphone. In the mobile battle with Apple, they haven’t caught up yet, but their maps features are more advanced and pulling in more local data — especially Yelp’s reviews — will make their business slightly less about robotic algorithms and more social.
Google would also be acquiring a local salesforce, writes Greg Sterling of search engine land. Yelp has become so successful in promoting local businesses that those same local businesses are willing to pay for listings. Google can’t just ignore Yelp’s shared interests in the local space, as Yelp has become too big a player in local reviews, at least for the time being.
With an acquisition of Yelp, Google could drive development of more exciting local mobile apps and features, including a more advanced and perhaps less head-ache inducing Augmented Reality app.
One problem Yelp will experience is a revolt of the Yelp community if it gets acquired by Google, but it remains unclear how much harm the acquisition will do to Yelp’s active community. Yelp has build each local city out in formulaic fashion, identifying and offering free alcohol-infused events to local “Elites” who like to write reviews and get noticed for their opinions. Their best users, thus, are the most opinionated and quickest to take action on a business that has done them wrong. But YouTube has thrived under Google’s hands, and Yelp could too.
Some suggest the leaked acquisition figure is from within Yelp, in hoping to spark a bidding war. I wonder where Yahoo is in all of this, as their whole “Y!ou” campaign and occasional successes in the social space makes Yelp perhaps a better fit for the same company that Flickr and Upcoming call home. I’ve always felt that Yelp was the missing brother in the Yahoo family of acquisitions, but it might be Google’s power and mobile obsession make Yelp a better fit for Google, in the long term.
But the real question is should Yelp be selling at all? Or should Yelp be selling now? With $50M in revenues, according to various online sources, the company could continue to grow and remains successful on its own, or at least keep making money for a while and raise its worth before selling. If Yelp sells, it’s clear that they believe their business is facing disruption from other players in the local space. Liz Gannes at GigaOm thinks more intimate local apps like FourSquare will take over the local review space because they are more useful than Yelp and will ultimately chip away at Yelp’s business model. “The wisdom of crowds is great and all, but it’s just too much to take in. And more importantly, reviews are a matter of taste,” she writes. “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 friend’s tastes.”
The truth is, though, when you’re not in a major city filled with hipsters, you have less available reviews on Yelp and very little, if anything, available on — mobile social local review gaming sites — like FourSquare. And ultimately if FourSquare, BrightKite or any of the local mobile apps clearly become winners, Google could just acquire them too. Google isn’t shy of taking risks, and with its belief that mobile is key to its business, we’ll see if the company will continue to do everything it takes to come out on top.
