YouTube aside, Google has generally steered clear of user-generated content plays. YouTube’s difficulty generating revenue is explanation enough. That makes its rumored acquisition of Yelp all the more interesting. Why do it?
At a rumored $500 million, the deal would certainly be good for Yelp, which is seeing increased competition from location-based mobile applications. Yelp has continued to innovate in the last year, bringing the first augmented reality app to the iPhone store, and with a reported 8.5 million reviews, it’s still the largest user-generated local reviews company, but other sticky social networks and applications are putting the heat on.
Google, which has had to import social results from Twitter and has seen its own social network experiment, Orkut, fall flat in the U.S., may be recognizing it needs to “buy social,” in order to stay sticky.
Then there’s the rise of mobile and location-based technology. Local impulsive search is a huge growth market. Google already has the hard info down pat: coordinates, business names, streetviews. But soft info like the best place to eat is still anyone’s game, and so far, Yelp is in the lead.
But Google is already tapping into Yelp intelligence, leaning heavily on the company for the content on its Place Pages. Why buy it if you can just use it? One possible answer is Bing. Like Murdoch, Yelp may realize it finally has a way to leverage its content assets, and giving one search engine exclusive rights would be a big Bing ding for competitors.
Another plus for Goog is the talent and intelligence grab. Don’t forget that Yelp, like YouTube, was founded by a PayPal alum. It’s hard to go wrong with more of them on staff.
Yelp has raised at least $30 million in the last 5 years, from Bessemer Venture Partners, Benchmark Capital and DAG Ventures.
