Google and Yelp Acquisition?
December 23, 2009 · Posted in Companies
There has been a lot of buzz in the past few days about Google potentially buying Yelp for $500 million or so, a lot of back and forth, will it happen or not. A lot of folks see Yelp as just another review site for big cities, so what’s the big deal? Well here are a few reasons why Google may be interested:
- Google already has over a million and a half advertisers across its global business, sounds like a lot huh? Well there are 16 million local businesses listings in Yelp alone, so there are still a ton of potential advertisers who don’t use Google… and the ones that the Yelp sales team deals with everyday are of the local brick and mortar store variety, the same ones that very often don’t even have a web presence, let alone an AdWords account.
- Google already developed Google Place Pages to give every place on earth a webpage. Yes very philanthropic and all, and yes now it’s great that the Central Park Carousel now has its own web page. But one of the expected by-products of creating PlacePages was that those brick and mortar retailers who never really cared much for the web and didn’t have a relationship with Google, would wake up and say ‘wow, now I have a web page? thanks Google, let me claim it, and build on it, and take care of it and oh yes buy some advertising to promote it.’ It’s just possible that the initial reaction Google is seeing is that it’s not going to be that easy and maybe they need someone like the sometimes heavy handed Yelp sales force on the phone to force the issue a bit.
- Google lives and dies off of the creation of content and information on the web. In the same way that it wanted to own Blogger in order to be closer to those who have created 332 million pages of blog content on anything from pet Schnauzers to the history of the bowling ball, Yelp has established itself as an important tool and industry leader for folks wanting to create content focused on the local community and businesses… some use the term ‘lifestyle blog’. While it looks like Google only indexes a far more mundane 25 million pages of content on Yelp, the commercial potential for this content is in many ways much more rich, since there are real live companies with ad budgets behind many of the pages, and something there to be bought and sold which makes it fertile ground for advertising demand.
Some interesting numbers to consider:
- Size of the quickly dying yellow pages business: $15 billion. Will your Yellow Pages Rep be replaced with a Yelp Rep that down the road could be a major seller of AdWords as the new alternative to that yellow pages ad? It would mean more money in Google’s pocket versus relying on local re sellers.
- Yelp currently has 8.5 million reviews, with 3 million businesses having at least one review… that’s almost $65 per review at the rumored buyout price. Seems high, but not crazy high considering what people pay for an Associated Content piece… and it will only grow from here at little to no cost to Yelp.
- Yelp sells an estimated $30-40 million per year in advertising via 200 local sales people, I couldn’t find an advertiser count for Yelp except for some off handed remarks about having “tens of thousands of businesses accounts”, but using as an estimated 1.5 million advertisers for Google generating $22 Billion in annual revenue, the average advertiser on Google is worth nearly $15k in revenue… I’d hazard a guess that this is at least 5-10x what Yelp is getting, probably much higher. So the opportunity to get more out of the Yelp field sales team by giving them more to sell seems significant.
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