Yelp Buy Could Give Google Main Street Creds

Google is in talks to acquire Yelp, an online local search and business review provider, in a deal that could be worth more than US$500 million, according to unconfirmed accounts first reported by TechCrunch.

Google and Yelp did not respond to the E-Commerce Times’ requests for comment.

The rumor has credence among tech watchers, as the two companies have flirted with an acquisition in the past. In recent months, the discussions seem to have become more serious.

Local Search Bona Fides

Yelp has reportedly raised $31 million in venture capital and is expected to realize about $30 million in revenue this year. For Yelp, the deal is about investment for growth and finding a good strategic fit with a company with traction, Venkat Venkatraman, a business professor at Boston University, told the E-Commerce Times.

“In that sense, Google is a good fit,” he said.

For Google, the acquisition would provide more options in a search advertising category that is quickly growing: local and hyper-local advertising and related customer reviews accessed both through computers and mobile devices.

Solid Presence

Yelp has a solid reputation as a repository of local business information and reviews. The social piece is important as well, Venkatraman said. “Google has not had much traction with its own social network initiatives, and this is a logical part of its evolution — especially as a way to make its Android OS create traction as a serious alternative to the iPhone. “

As Facebook and Twitter become more central to people’s search and influence behavior, Yelp could play an important complementary role to Google’s own social media content that would be different from simply highlighting Twitter or Facebook results, noted Venkatraman.

Probably what Google intends is to show Yelp results on its listings much as it is currently doing with the new “latest news” feature, Kenneth C. Wisnefski, founder and CEO of WebiMax, told the E-Commerce Times.

“This acquisition is evidence that Google is taking much more notice to localized search and also to the notion of online ‘word of mouth’ referrals.”

Thus far, Google has been primarily aggregating user reviews of local businesses from around the Web.

“They allow users to write their own reviews, but it is not a prominent feature,” David Erickson, director of e-strategy at Tunheim Partners, told the E-Commerce Times. “Acquiring Yelp will bolster their local business reviews by harnessing a passionate community — that is Yelp’s sole purpose, after all — and a great deal of data that will give them a better indication, based on aggregate user reviews, of what is more quality “content.”

A combined Google-Yelp will give Google another advantage over competitors Yahoo and Bing, especially as mobile search and mobile ads begin to develop more traction.

“I imagine Yelp data will play a large role in Google’s mobile properties from search to maps to apps like the Places Directory,” Erickson said.

It will also have ramifications at the local level.

“If a business consistently gets poor reviews, I imagine Google will demote that listing in favor of similar businesses that get better reviews,” suggested Erickson.

Ad Strategy

Google has been focusing on mobile advertising with other acquisitions, such as Teracent, noted Adam Bunn, head of SEO at Greenlight.

“It will give Google a lot more access to data it needs for this kind of targeting,” Bunn told the E-Commerce Times. “It will massively increase the amount of content they can use, in fact.”