Rumors are running rampant that Google is closing in on a potential acquisition of Yelp. Why would the Search Engine Giant consider such a move? Might a small savvy start-up like Foursquare be in its cross-hairs?
The next shiny thing on the social network horizon for 2010 is location-based social networks. Foursquare, often described as the next Twitter may also be considered Yelp on Steroids. It not only can surface restaurant reviews, it can accomplish that feat in real time while the user is in transit, and it can reward that same user with discounts and incentives once they get to said destination.
Latitude is Google's own location based social network. Introduced this past February, the opt-in feature lets smartphone and laptop users share their location with friends and allows those friends to share their locations in return. Although not pinpoint accurate, Latitude can display your general location based on information from GPS satellites and cell towers. Once you and your friends have opted in to Latitude, you can see your friends icons displayed on Google Maps. Clicking on their icon allows you to call, email or IM them, and you can even use the directions' feature on Google Maps to help you get to their location.
Yelp founded in 2004 by two former PayPayl employees was one of the first local review sites for restaurants and bars to appear on the Web. Covering every state in the US, users write and read reviews about anything from their favorite hole in the wall restaurant to the finest midtown Manhattan club. It also offers social networking features, that allows for adding friends, group events, forums and instant messaging. Based on the fundamental principle of Web 2.0, users will use Yelp because they trust their friends' reviews versus advertisers, or testimonials from people they don't know.
Foursquare has some unique game-like features built into its API. For instance, becoming a "Mayor" of an establishment (bar, restaurant,
nightclub, etc.) is a relatively simple process. If you have tallied
the most check-ins within the last 60 days at a venue in the Foursquare system, you are the deemed the "Mayor" of that place of business. And as Mayor you are entitled to additional discounts, freebies and swag that are above and beyond what the typical user would be offered. Ousting a Mayor from an establishment by accumulating more points, gives Foursquare users "local" cred, builds customer loyalty and has distinguished this LBS from its competition.
Now it doesn't take a rocket scientist to figure out that combining Latitude with Yelp could potentially create a super-sized location-based social network capable of running circles around Foursquare (no pun intended). Based on copious amount of venue data amassed by Yelp over the course of the last five years, plus Google's search engine prowess in local search, coupled with their newly acquired real-time search feeds from Twitter and Facebook, the acquisition makes all the sense in the world.
Google's move into the mobile media space is clearly one of their objectives. Location-based marketing is the last remaining online advertising markets for Google. Over the course of 2009, it has clearly shown an interest in combining Latitude, Google Maps, search results, and advertising technology. According to a TechCrunch report, Google and Yelp are in advanced acquisition negotiations, and while the deal isn't complete, the price tag is suspected to be as high as $500 million.
The Google-Yelp alchemy is like adding one plus one and ending up with three. The combined synergy of the two entities could far surpass what the start-up Foursquare can offer at this point in time. With less than a year under its belt, Foursquare's been able to accomplish remarkable things -- however the Google-Yelp deal could easily replicate the Foursquare model and take the concept to its next level -- in a fraction of the time.
For instance, since Yelp also features events, consider how a musical performance at a club could be selected. One could search through Google and find local results with Yelp-driven info blended in, but on top of that, Google's AdSense could also now provide deals and other offers for that event, including restaurant choices pre or post show. And if one was not satisfied with the reviews, they might continue to search for dining options with better reviews and higher ratings or other dates for the show where they might be offered greater discounts and/or incentives.
The one fly in the ointment here is Google was down this road once before when in 2005 they acquired a little-known social networking service Dodgeball. Ironically they purchased the service from co-founders Dennis Crowley and Naveen Selvadurai who went on to develop Foursquare (note the similarities between the Dodgeball and Foursquare logos). Perhaps they weren't ready to develop an LBS four years ago, or perhaps they didn't realized what they had until Crowley and Selvadurai went on to prove how successful an LBS could be.
In any event, the deal’s not done. "Yelpitude" or "Yoogle" is still speculative. And, it is suggested that despite the seriousness of negotiations, now that word has leaked out, another suitor might jump in and snatch Yelp away. If Foursquare was wise, they might want to consider hitting their investors up for another round of funding and seize the opportunity for themselves.
It will be interesting to see in the months to come, who's "local" acumen gains the most "local" cred! (me, personally, I'm rooting for the little guy!)
December 21 Update: Google's acquisition of Yelp, in the range of $500 million and thought
to be all but a done deal last is off the table after Yelp CEO Jeremy Stoppleman walked away. TechCrunch reported
that no other suitor is known, but speculates that a company such as
Apple or Microsoft stepped in with an alternative offer.