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With the end of 2009 drawing nigh, Google is reportedly brokering a deal to buy local search and review property Yelp for $500 million, a royal sum for a company that banked $31 million in funding and boasts a $30 million run rate.
Google is no stranger to such premiums and set a serious precedent by offering $750 million for AdMob, which IDC said earned $40 million in mobile display ad sales in 2009.
A Google spokesperson declined to confirm or deny that a deal, first reported by TechCrunch, is forthcoming, coyly telling eWEEK, “While we’re always talking to various companies about various things, we don’t comment on rumor or speculation.”
Yelp hosts more than 8 million reviews for local businesses, including restaurants, spas and pretty much any type of concern one might need to call on to aid them through the daily grind. The Website had 26 million visitors in the last 30 days through November.
Google wants this information to boost the data and services it already provides with its Local Business Center. Participating businesses list their phone numbers, hours of operation and other factoids with Google, which renders this info on Google Maps Place Pages. Yelp has been immensely successful providing similar info, but lacks Google’s massive Web presence.
Google also recently unveiled its “Favorite Places on Google” initiative, which lets more than 100,000 business owners in its LBC place a window sticker with a bar code on their storefronts. Users walking by on the street can scan the QR code from their Apple iPhone or Android-powered phones, surfacing the business’s Place Page right on their handhelds.
If Google can get Yelp, it will be able to take this treasure trove of local information and pair it with contextual ads. A user walking around a city with his Apple iPhone or Android device could feel his phone vibrate. He would check the phone and see shopping alerts from Google/Yelp, which might also offer coupons from retailers.
Imagine two-for-one offers from clothing stores, a free cup of coffee offer as one passes the local Starbucks, or a 10 percent-off coupon from a nearby Indian restaurant. With Yelp data powering Google Maps Place Pages on Android phones, the ad possibilities are endless.
Adam Bunn, of U.K. search marketer Greenlight, said such a deal would give Google fresh local search results without the need to go through the usual crawling and indexing process and sending searchers to another site. Interestingly, Bunn said Google seems to be taking a page out of a competitor’s playbook, and it’s not local search power Yahoo.
“This is one of the strategies that Microsoft had chosen for Bing, and the main reason why it took so long for Bing to launch properly in the U.K.: identifying potential content or functionality partners relevant to that market, negotiating with them and then integrating their data takes time,” Bunn said.
Yelp is more than just about the local data. Kelsey Group analyst Michael Boland noted that in Yelp Google would also be acquiring a fat sales force of advertisers:
““[Yelp] COO Geoff Donaker told us at last week’s Interactive Local Media show that 200 of the company’s 300 employees are advertiser facing in some way, including account rep or direct sales positions. Google has always maintained that it’s not in its strategic interests to buy or build a direct sales force to access the elusive SMB marketplace at the heart of its ‘long tail’ paid search efforts. That’s kind of true but this deal changes it a bit.”“
If Google does bid for Yelp, it would be Google’s seventh of 2009, preceded by On2 Technologies, ReCaptcha, AdMob, Gizmo5, Teracent and AppJet, all since August. Moreover, Google is also rumored to be eyeing real-estate search provider Trulia.
These deals underscore how Google is well-positioned to maintain and extend its lengthy search, ad and Web services lead into 2010.