Is Google Making a Play for Yelp?

TechCrunch is reporting that Google is “advanced acquisition negotiations” to buy Yelp for $500 million or more. TechCrunch has been generally correct recently 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 rest of this post is at SEL.

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Ideally the buyer should be AT&T or another YP publisher rather than Google. Indeed, Yahoo! would also be in some ways a better cultural fit for Yelp (or the old Yahoo! at least). But Google seems to have beaten the others to the punch. And hypothetically IAC could combine Citysearch, Urbanspoon and Yelp into a local empire of sorts; however Barry Diller doesn’t have quite enough cash to pick up Yelp it would appear.

Even eBay should have taken a run at Yelp, but it probably lacked the vision to do so.