Why Google should buy Yelp? And how wrong I was;(

October 27, 2008 - Get free updates of new posts here

I was just adding another bookmark to Yelp.com and realized they added some Google ads to their site. See pic below. I really hate when people make wild predictions about someone should buy someone so I’ll apologize ahead of time. I was talking to someone yesterday who was saying Google was dumb to buy YouTube. I thought so at the time, well mostly I was jealous of the $$$:) Anyways, Youtube is a content system that people are browsing and Google can throw ads on. There is more than this but I’m simplifying. This is the EXACT same thing with Yelp.

On Yelp there is ton of great content and information about restaurants (and potentially any business) generated by a passionate userbase. I was VERY wrong when I talked crapped on Yelp a year ago. My bad. Right now Yelp has grown mostly through Google Search results and map results with some word of mouth thrown in. I am guessing shortly they are going to start focusing on monetization after they’ve done a lot of growth. The amount of business they drive to restaurants is insane but they don’t get a cut of it at all. For now…anywho, they have a lot of opportunity and seems like a slam dunk for Google.

Anywho, I am totally off base or does this make sense. Thoughts?

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21 responses to “Why Google should buy Yelp? And how wrong I was;(

  1. Jillian C. York Reply

    Totally disagree. As a Yelp! Elite, I love Yelp’s commitment to the Yelp community, and I doubt that with Google at the helm they’d be able to continue in this way (Google’s great at a lot of things, small community management is not one of them).

  2. Dan Reply

    If the only ads that Yelp has are Google Adsense then Google is already getting 70% of revenue generated, since Google pays approx. 30% to the publisher. Would it be worth buying Yelp just to secure the remaining 30% of revenue?
    Perhaps the question is not about revenue but about the technology and data. That is my understanding of Google’s acquisition strategy. Yelp or something like it would be a great compliment to maps.google.com and google local business if it could integrate the acquired service without killing it. Maybe it would be a nice addition to the suite of Google Account services. But is Google in the social network business? Isn’t that what Yelp is ultimately?

  3. Ted R. Reply

    They’ve had a very hard time breaking into new cities. From what I understand after all their time they are only relevant in about 5 cities. Not including new york.

    It’s still a very significant service, but it’s very hit or miss.

  4. Patrick Jarrett Reply

    I don’t think the case is strong enough to buy it. It’s still a service that has major overlap with google maps or google local. With very small tweaking Google makes Yelp obsolete by tweaking Google Local.

    All Google would be buying is what data they’ve acquired, information google has largely already indexed from their site…

    Don’t misunderstand me, I enjoy Yelp and use it for restaurants and locations I enjoy visiting or am thinking about going to, but it’s not worth Google’s money to acquire them I don’t think.

  5. Jillian C. York Reply

    It’s completely different, Noah. Yelpers meet monthly or so in person, and Yelp hosts events for its folks, including free drinks and food, and sometimes free swag.

    While YouTube has an online community, as far as I am aware, there is no YouTube community offline, at least not officially speaking.

    Also, YouTube is not location-specific; Yelp is and therefore is conducive to that kind of community.

    As for the person who said Yelp! is only relevant in about five cities, that may very well be true, but if you search for any restaurant in Boston on Google, Yelp! is always the first or second result. There are hardly any restaurants, shops, or even exterminators left unreviewed here.

  6. Noah Kagan Reply

    Dan,

    Great point. Google I guess wouldn’t really need the extra 30%. They wouldn’t be buying it for the community but the amount of data and ways they can help monetize all the business information that is now generated by users on the site. The big $$ opportunity is how to collect lead gen on all the restaurants that people are eating at because of Yelp…

  7. noah kagan Reply

    you harvard people are so smart;) youtube people do get together but your location statement is right on the money. yelp is much higher and influential than techies realize. i figured this out when my mom was talking to me about it.

  8. noah kagan Reply

    Ted,

    Yelp! owns austin and many other places we haven’t realized. They are branching out well.

    Patrick,

    Fair enough that google owns the data but couldn’t google have just indexed all the youtube videos? It’s also the traffic / activity the site generates that can thus be monetized. But youtube was more of a destination where i still feel yelp gets the bulk of traffic from google.

  9. Patrick Reply

    The latter half was the crux of my argument. I don’t know the numbers in terms of traffic but Youtube was leagues ahead of Yelp at the time of their purchase, and their content was something Google was far behind on in terms of technology at the time. Video was still a black box for them, still is largely.

  10. Jason Reply

    When I first moved to Austin, I relied a lot on Yelp. I also used it when I lived in San Diego and when visiting other cities in the US. I think it is bigger than 5 cities.

  11. Dan Reply

    “Fair enough that google owns the data but couldn’t google have just indexed all the youtube videos? It’s also the traffic / activity the site generates that can thus be monetized. But youtube was more of a destination where i still feel yelp gets the bulk of traffic from google.”

    Patrick,
    With YouTube it was technology and buzz. Video was a new thing–bandwidth had just extended enough to support it effectively–and youtube now host videos that are embedded into blogger and other services. Embedded video brings new traffic back to youtube. The trouble is, they have yet to successfully monetize youtube. It might not matter though, since google’s market cap went up by more than the purchase price when they bought youtube, so effectively they made money on the purchase. It can’t be cheap to host and maintain, though.
    I don’t think Yelp has the tech reasons behind it that youtube had for google to acquire. And at the end of 2008, the headline “Social Network Acquired” isn’t such ground-breaking big news. Yelp may be doing very well–I don’t mean any disrespect–but in the grand scheme of technology, innovation, and the internet, Yelp is still small potatoes. Just one mid-sized inhabited planet in a star trek sized galaxy.

  12. iPod Reply

    Am I not the only one scared of how powerful Google are becoming. Can you imagine how much personal information Google has access to! I know they are an ethical company but what if they weren’t.
    John

  13. Nathan Ketsdever Reply

    Yelp does a great way of a) creating a water cooler effect around local questions and discussions b) the elite programs helps encourage their top 5-10% of users c) the elite program is also a great way they create real world connections between users–this makes it more like Meet Up and Craigslist and the old Mac User groups meetings than people realize. d) a lot of the data is open, as opposed to a walled garden, which does make it better for search as well as for usability. (I hate getting the NYT login slapped in front of me before I can see most of their stuff)

    In addition to Yelp, Google should seize up one of the crowd sourcing collaboration platforms. Whether the content was more creative, pop culture, or business oriented would of course be their choice. However, its a perfect fit for their brand and if Google managed it well, it would be the de facto brand in terms of traffic and engagement.

    I have to think they are either doing this internally now or they are waiting for one of the crowd sourcing platforms to be an unofficial winner.

    Ultimately, it seems that with all the intellectual capital at Google they would be a perfect fit to create an algorythm which harnessed the best of the crowd, and either eliminated or leveraged the chaff.

  14. Tiffay Reply

    I don’t think google wants to be associated with the likes of yelp.com. Google is a highly ethical – the complete opposite of yelp.com. Yelp is ruining it’s reputation at a rapid rate. Google “yelp sucks” or “yelp mess” or “search engine roundtable” for more.

  15. Estelle Reply

    While I don’t thing Google is a “saint”, I must agree with Tiffany that Yelp is completely unethical. Their two main methods of earning $ are ads and sponsorships. Yelp’s lack of ethics has to do with Yelp business sponsorship. A crappy company can get bad reviews removed by paying Yelp. A crappy company can write a bad review about a good company that is a competitor, and Yelp won’t remove the false poor review unless that second company.

    With 1-800-Dentist, you know it’s a paid service. Yelp is portraying itself as “real people. real reviews”. This is where the lack of ethics becomes a major concern. People trust the reviews on Yelp, and they really shouldn’t.