Should Facebook ‘Just Buy Yelp’?

Matt Greitzer of Avenue A pens a provocative column (How to Solve Local Search, Once And For All) in which he argues that Facebook should buy Yelp:

Facebook should not build its own socially powered local search engine; it should just buy Yelp. This combination makes both companies better. It would instantly propel Facebook into the local search space with the backing of an active reviewer base and a proven service model. And Facebook’s scale would rocket Yelp from niche to mainstream, making a good service even better by combining reviewer opinions with vetting via the social graph.

There’s also this related piece from AdWeek on user behavior, advertising and social networks: Poll: Few Use Social Media to Guide Purchases:

Knowledge Networks polling released this week finds fewer than 5 percent of social-media users age 13-54 “regularly turn to these sites for guidance on purchase decisions” in a range of common product/service categories.

The figure is a lackluster 4 percent in the “travel or travel services” and “banks or financial services” categories, and a mere 3 percent when it comes to “clothes or shoes,” “eating out or restaurants” and “personal care products.” It’s lower still for “cell/mobile phones and services,” “cars or trucks” and “groceries or food” (each at 2 percent) and lowest of all for “prescription or OTC drugs” (1 percent).

Social networks are not “directional media” — they’re not search — at least they haven’t emerged as viable alternatives to search. Twitter is a bit of a different story there although we’re still in Act I.

I would argue that social networks are primarily a branding medium, though the survey above disputes that a bit. With better search integration they could also drive query volume and paid search revenues. But perhaps that ship has sailed. If so, there is still the potential to be a source of trusted (local) recommendations and to create an ad model around that. That’s what Greitzer is getting at in arguing that FB should just buy Yelp.

Facebook, despite its deal with Microsoft for search, has failed (so far) in capitalizing on the search opportunity I allude to. This search for “sushi” is a case in point:

Web:

Facebook results:

The irony is that Facebook began life as a local site (organized around schools in specific places), yet it really has no local strategy or really good SMB ad strategy from what I know. But it still could be a huge force in local. (It does feature a lot of localized apps.)

There’s a question in my mind whether FB could build an effective local search experience at this point. It’s possible in the abstract but might not be in practice. So Greitzer’s suggestion is interesting from that point of view. FB probably wouldn’t want to pay what Yelp’s investors would want. The company has received roughly $30 million in funding and I’m guessing would want at least $200 million. I’m also going to guess that FB wouldn’t want to pay that in cash; one could imagine a stock deal (a la Twitter) and a similar rejection from Yelp. There are cheaper companies in the local search/directory space that FB could potentially buy.

I can see the multi-faceted local opportunity at Facebook so clearly (I even articulated it in specific detail to someone at FB who’s gone now), yet I don’t think the company is going to buy Yelp or otherwise realize its local potential.

Who thinks I’m wrong?