Google's Zagat Acquisition Supports Future Growth: 10 Reasons Why
News Analysis: With the acquisition of the Zagat restaurant and travel guide, Google has shown that it's prepared to spend money to buy Web content resources that support its local advertising strategy.
Google made the surprising move on Sept. 8 to acquire Zagat. For those unfamiliar with Zagat, the company publishes a highly respected restaurant guide that includes ratings of restaurants around the world. Zagat has become an authoritative online resource for diners and travelers. This also makes it one of the premier content creators on the Web.
It's that last element that makes this move most surprising. Over the years, Google has been a place for folks to find content from other sources. Now, Google has set about acquiring content such as Zagat's rather than concentrating on cataloguing the world's Web content with its search engine or building online services such as Google Maps or Google Apps in-house.
That shift is just one of the many things that Google's acquisition of Zagat says about the search giant. For years, Google had been viewed as a singular entity operating mainly in search and advertising. But over the last several years, it has expanded rapidly. And now, Google is looking like a much different firm than it once was.
The Zagat acquisition is a clear demonstration that major changes are afoot at Google.
Read on to find out what Google's Zagat buy says about the search giant.
1. Google: the content creator?
Google has long been a place for users to find other content. But with Zagat now a part of its operation, all that has changed. Google is now a content creator and that could very well mean that the search giant will look elsewhere to deliver original content especially when that content ties into its local advertising strategy. Over the next several months and years, look for Google to break out of its restraints and start offering original content in a big way.
2. It cares deeply about local
Over the last year or so, Google has made it abundantly clear that it believes local services are important to the Web user. The company's search is perfect proof of that. But with this latest Zagat acquisition, Google is showing that it cares far more deeply about hyper-local content than many thought. Zagat is an ideal local platform, and it's something that Google can use to bolster its own plans for the future of localized content.
3. Competitors beware
There is a backdrop to the Zagat acquisition. Earlier this year, Yelp complained that Google was using its user reviews and not linking back to its service. In response, Google removed external links from Places. Now, Google has a competitor of Yelp's in Zagat. If that doesn't say everything about Google's mentality when it comes to competition, what does? Simply put, if competitors don't like what Google is up to, they can either hope to be acquired or face its wrath.
4. Google will spend money
Google has already spent boatloads of cash this year. The company acquired IBM patents for a large sum, and then announced recently that it will buy Motorola Mobility for $12.5 billion. There's even speculation it might acquire Hulu. All that, plus the Zagat acquisition, seems to indicate Google is more than willing to spend its cash.
5. The Web still matters
Much of the talk surrounding Google as of late has related to the company's Android mobile platform. And when it announced its acquisition of Motorola Mobility, some wondered if the mobile space was Google's new focus. Now it's clear that Google will continue to develop its business interests on multiple fronts. The Web is still vastly important to Google and that won't change no matter how popular Android becomes.
6. Google wants to be a destination
Over the years, Google's search has been a middleman of sorts. People go to the search page to find the location of another site that they want to get to as quickly as possible. But now, with Zagat's help, it appears Google wants to be a destination for users. No longer does it simply want to help people go places; it now wants to be a company that people turn to and spend time sifting through its content. It's an interesting shift.
7. Search as the backdrop
In the coming months, look for Google to make Zagat's reviews a cornerstone of its local-search option. Although Google is apparently looking elsewhere to expand its business, search is still vastly important to the company. And bolstering that service as much as possible is still paramount in its plans. By acquiring Zagat, Google is showing that. And users, hoping to get better content in the company's search, will benefit.
8. Advertising as the kicker
If search is integral to Google's business, advertising is what keeps the company ticking. Advertising has long been Google's chief revenue generator and with this new Zagat purchase Google get's to own an entirely new advertising venue. Thanks to its hyper-local content, Zagat seems like the perfect platform to expand Google's advertising efforts. Shareholders hoping to see a positive return on the Zagat investment, could start to see that in the next few quarters.
9. Expect Android to play a role
Although Google is really only talking about its local services right now, don't be surprised if Zagat reviews find their way to Android in some way, as well. Google has proven as of late that the combination of Android and its online services is something that it wants to further exploit. It will likely do that again with the help of Zagat's services.
10. Google will keep growing
If nothing else, Google's acquisition of Zagat proves that the company is ready and willing to continue growing. Google long ago moved past its search roots. Now, the company is key player in advertising, a mobile OS soon to be a handset maker. It's also a cloud-services provider and a software developer. Google is simply a giant. All of these assets are only going to help Google keep on getting bigger.
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