Google To Buy Yelp For $500 Million?

TechCrunch is reporting that Google is “advanced acquisition negotiations” to buy Yelp for $500 million or more. TechCrunch has been generally correct about many of the rumors it has reported recently (i.e., Google Phone) so we should take this seriously.

Yelp has raised a little over $30 million over several funding rounds. Revenues are heading toward $50 million according to several sources. If the price suggested by TechCrunch is correct, it would be about 10X estimated revenues.

There has been an imbalance between Yelp’s success as a consumer brand and destination and its ability to “monetize” among small business advertisers. However that $50 million in revenues, if correct, would be very respectable.

Buying Yelp would be a different sort of acquisition for Google — a major one — because it’s not really a technology platform so much as a local brand, community and sales channel. If Google does buy Yelp, what exactly does it get?

It gets a local-social network with roughly 26 million users across the US, Canada and the UK. Yelp reportedly has 8.5 million reviews. This is a huge amount of content that Google can’t generate itself and which it is already leaning on pretty heavily on its Place Pages as part of its increasing focus on local. But Google is also doing things on Place Pages that potentially threaten sites like Yelp longer term (e.g., sentiment analysis).

The Yelp brand is stronger than Google in the local market in many respects (see my post: Berkeley Salon: ‘80% of New Biz from Yelp’). And this would be the closest Google has gotten to buying a “sales force” with a meaningful “on the ground” presence in the form of local editorial people in market and telephone salespeople.

If this does happen many “Yelpers” (as they call themselves) will be unhappy, as many YouTube users were when Google acquired that site. It would also be a major (read: MAJOR) threat to many of Google’s local reseller publisher partners and others in the local space. The ad options for Google here are many, including:

• Distributing geotargeted display and text ads on Yelp
• Using Yelp as an “onramp” for Local Listing Ads, which will reappear next year

In some ways this would be as dramatic or more dramatic than the recent AdMob acquisition announcement. Google is increasingly serious about the local market — from both a content and advertiser/small business perspective (extending into mobile). Yelp helps fill in several gaps for Google on both sides.

If this does happen it will reverberate through the entire “local ecosystem” for many months to come. No, it would be an earthquake.