After AdMob buy, now Google eyes Yelp

CALIFORNIA, USA: Search major Google is in talks with Yelp, a website that connects people with local businesses, to acquire the latter. TechCrunch has reported that both the companies are now in “advanced acquisition negotiations,” citing multiple unidentified sources. The price is supposedly at least $500 million, as per the report.

The acquisition is expected to help Google in the ongoing process of building out their own directory of local businesses with its Place Pages, which can be accessed via Google Maps and local search.

Founded in San Francisco in July 2004, Yelp (yelp.com) communities have since then taken root in major metros across the US, Canada, UK and Ireland. The website drew an audience of more than 26 million unique visitors in November 2009.

Comscore puts worldwide traffic at nearly 9 million monthly unique visitors.

Yelp has whispered that 2009 revenues will be around $30 million and are expecting $50 million or so in 2010.

Yelp's members have written more than 8 million local reviews on the website. Yelp Mobile is available on WAP enabled phones at mobile.yelp.com and via the Yelp for iPhone application or Yelp for BlackBerry application.

In September 2009, Yelp teamed up with movie social-networking service Flixster.com to enable the visitors to not only search for movies playing in their neighborhood, but also find the best places in the area to eat or drink.

Google had recently acquired AdMob for $750 million, and was in the running on the LaLa acquisition. 

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Yelp said in an emailed statement that it is frequently approached to discuss "partnerships, investments and more, and the company does not comment on private discussions that may occur."

A Google spokeswoman said the company does not comment on rumors or speculation.

Google has had its eye on Yelp for some time. According to one former Google executive, the Internet company had had "early discussions" with Yelp about an acquisition several years ago, but ultimately passed on the deal.

"Yelp doesn't monetize very well, so it's always a bit hard to justify an acquisition," the person said.

The local businesses that Yelp sells online advertising to are more interested in promoting their businesses through coupons than online ads, he added, noting he believed Yelp was still an unprofitable business.

Yelp was founded in 2004 and has received $30 million in funding from Benchmark Capital, DAG Ventures and Bessemer Venture Partners.

The acquisition talks are the latest in a string of recent deals by Google, including the $750 million acquisition of mobile ad firm AdMob announced in November, that are designed to extend Google's reach into new advertising markets.

The world's No. 1 Internet search engine generated roughly $22 billion in revenues last year, but has seen its top line growth slow from the 40 percent-plus clip it was managing as recently as early 2008.

Google has stepped up efforts to court local merchants recently, encouraging businesses to register their information on its small-business online directory.

But some analysts say Google will have its work cut out trying to sell online ads to local merchants more comfortable with traditional channels like local television, newspapers and the Yellow Pages.

Needham's May estimated that Yelp, which had 8.9 million unique visitors to its site in November according to comScore, is generating revenue at an annual rate of $15 million to $20 million.

"That's a pretty tough nut to crack," May said about selling online ads to local merchants. "Whether Google can crack the code on it, is still to be seen."

(With inputs from Reuters)