SAN FRANCISCO — In a sign that Google is interested in broadening its reach among local businesses, the search giant is in acquisition talks with Yelp, the review site for local businesses, according to three people with knowledge of the deal.
The two companies have had conversations for several years, but a more serious round of acquisition talks began two months ago, one of the people said late Thursday. The companies have discussed a price and are negotiating the details, but have not yet signed an agreement.
Both Google and Yelp declined to comment on Friday.
The people with knowledge of the deal would not disclose the acquisition price, but one said that it was more than $500 million, the figure cited by TechCrunch, the industry blog that first reported the news Thursday evening.
Yelp, which has raised $31 million in venture capital, is on track to bring in about $30 million in revenue this year, one person said.
Yelp, which was founded in 2004 by two PayPal veterans, Jeremy Stoppelman and Russel Simmons, dominates the market for local business listings and ads in big American cities, and has listings in Canada and Britain. It gets more visitors than its closest rival, Citysearch, and many of them review local businesses prolifically.
Yelp makes money selling sponsorships to these businesses. For $300 to $1,000 a month, their ads appear on top of search results and on the profile pages of competitors, and businesses can post slide shows of photographs and prevent competitors from advertising on their page.
Google has been showing greater interest in the local business market in the United States. It has expanded its profile pages for local businesses, which include location and hours, maps and reviews from other Web sites. In June, Google gave local businesses the ability to manage what people see on their profile pages, similar to what Yelp does.
Google has been reaching out to local businesses with simpler ways to advertise on the search engine. It is also distributing stickers that businesses post in their windows and passers-by can scan with cellphones to get coupons or information about the business.
The deal between Google and Yelp could still unravel, one person said, particularly if another acquirer comes forward now that details have leaked.
Rich Barton, a superstar of the Internet era, settles across from me in a coffee shop in Centreville, Virginia, looking like a 1950s sitcom dad—glasses, preppy haircut, V-neck sweater. He built Expedia in the 1990s, co-founded the real-estate site Zillow in 2005, and most recently launched Glassdoor.com, which lets employees grade their workplaces for the public to see. When I wonder what Barton might get into next, he leans forward to tell me his investment mantra: “If it can be rated, it will be rated,” he says.
Sounds so absurdly evident, yet it’s so big. Customers rate hotels and restaurants on Web sites like TripAdvisor and Yelp. College students dive into RateMyProfessors.com before signing up for courses. Readers rate books on Amazon.com. In 2007, the Pew Internet & American Life Project found that about one-third of all American Internet users rated something online.
But rating is about to spread like a pandemic. Everything—everyone—will get rated by Web users. You. Me. The dentist. All the hairstylists in town. The sermons in every place of worship. Youth soccer coaches. Lunch meats. Wine. The fact is, on tomorrow’s Internet, everyone will know if you’re a dog.
Web companies will drive a lot of the activity, using it to make money. Zillow just built a way to rate mortgage brokers alongside its information about housing prices, hoping to draw more house shoppers, who are targets for ads from Home Depot and Snapper lawn mowers. In other cases, online ratings will be less about business and will arise out of need or passion. Tom Seery says he started RealSelf.com to rate plastic surgeries, after his wife found it easier to get information about hotel towels than about a $2,000 laser skin treatment.
The proliferation in ratings is already changing societal dynamics. Look at its impact on the relationship between doctors and patients. According to Pew, 47 percent of Internet users now search online for information about doctors. Ratings, though still just a trickle, are increasingly part of that information. Now, if a medical practice routinely leaves patients in the waiting room for two hours—or leaves a spare scalpel in someone’s abdomen—the whole world will know. The power shift ticks off doctors so much, about 2,000 have turned to a company called Medical Justice, which offers advice about using legal and bullying tactics to stop doctor ratings. (Predictably, lawyers have sued—so far unsuccessfully—to shut down Avvo, a lawyer-rating site.)
Today’s ratings are only the raw material for what’s to come. Rearden Commerce’s Web-based personal assistant already helps employees in corporations like ConAgra make travel plans, by quizzing them about their age, income, job, family situation, lifestyle, and preferences like favorite types of restaurants. (JPMorgan Chase will roll out a Rearden-based travel adviser to its credit-card customers later this year.) The next step, says Rearden CEO Patrick Grady, is to pull in ratings from all over the Web and mash them up with anonymous information from Rearden users. Then, if a beef-loving cat-litter salesman is traveling to Dallas, the system can recommend a top-rated steak house where other cat-litter reps have had luck taking pet-shop owners to close deals.
“You’ll see more passive ratings turned into active suggestions by software that runs behind these sites,” Rich Barton says. “It’s a hard problem to get right, but it will be super-compelling.”
But the ratings game still faces, well, a few challenges. I talked to Dartmouth about RateMyProfessors, and was told that the site’s ratings often don’t match Dartmouth’s more rigorous survey results, in part because contributors to RateMyProfessors score teachers on some nontraditional criteria—like “hotness” and “easiness.” Yelp has been accused of not being transparent about how it filters ratings and reviews; anonymous bad ratings might come from the rated business’s competitors.
In theory, though, the more technology can help with decisions, the better life will be. Guided by ratings and personalized suggestions, I’ll more likely end up doing things I enjoy and using professionals who do their jobs well. On the other end, I won’t waste so much time or money trying to find the right kickboxing class or financial adviser. I can then devote my brain cells to higher-level problems the Web can’t yet solve, like how to get my teenagers to clean their rooms.
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