Google in talks to acquire Yelp

According to several media reports, the two companies are close to finalizing a deal, and Google is expected to pay around $500 million for Yelp.

What the deal means to Google?
Yelp presently operates in 30 markets. Founded in 2004, the site helps people find information about scores of local businesses like restaurants, dentists, hair stylists, retail shops etc.

In addition to this, it also helps users to find events, special offers, lists and to talk with other Yelpers. The information is in the form of user generated reviews.

While it provides information, Yelp makes money by selling ads to local businesses.

Currently, there are more than 8 million reviews available on the site, and over 85 percent of them have rated a business 3 stars or higher.

Further, more than 26 million people had visited Yelp in the month of November.

Thus these reviews, with focus on local businesses, and higher user base of the site will enable Google to emerge a strong player in the local online advertising markets, one area in which it is a lagging behind.

Google has its small-business online directory called Local Business Center, which allows businesses to add basic information like address, contact number, hours of operation, and a link to their Web site.

Needham & Co analyst Mark May was quoted by Reuters as saying, “The local advertising market is a multibillion dollar market that for all intents and purposes is still untapped on the Web.”

According to research firm Borrell Associates, the local online advertising is expected to rise to $14.2 billion this year compared to $2.1 billion five years earlier.

Overall, the deal is anticipated to bolster Google’s advertising business, which has slowed recently.

Google eyeing Yelp since long
This is not the first attempt by the search giant to acquire Yelp. In fact, Google also had discussions to takeover Yelp several years ago, according to a former Google executive who refused to be identified.

The deal did not materialize over concerns that Yelp is still an unprofitable business as the local businesses to which it sells online advertising are more interested in traditional channels of advertising like local television, newspapers, yellow pages etc.

But now Google has stepped up efforts with an aim to finalize the acquisition. Both Google and Yelp have not divulged the details of private discussions that may have taken place.