14 DAY TRIAL // It looks like Google is trying to recoup on the past year going on an acquisition spree after staying quite on that front for a while. It has done some pretty big deals, AdMob, On2 and some smaller ones and is now said to be in talks with local business directory and review site Yelp and is apparently willing to shell out $500 million for it.
Things aren't final and nothing has been signed yet, but the deal makes a lot of sense for both companies. However, there are some saying that $500 million is a bit low considering the valuations other startups have been getting while some are even suggesting that the details on the deal were leaked precisely to drive up the price.
Yelp enables users to find and review local businesses and is built around a social networking core. The site claims it has about 25 million users at this point and the four-year-old company is growing at a steady pace. It is an established player in the local business market and its biggest asset is likely the brand recognition it managed to build up.
Despite the growth though, this is the time to sell. The local market is heating up and Google, to name one, is pushing strong in this space. If it were to continue to compete with Yelp and, most likely, increase its efforts, it has the resources to become a serious threat to the startup.
On the other hand, it relies on Yelp rather heavily for products like Place Pages and the site features frequently in Google searches for local content. By acquiring the site rather than compete with it, Google gets its hands on quite a treasure trove of data and, equally important, a solid user base.
Yelp is said to bring in $30 million in revenue this year and may get $50 million in 2010. It has raised $31 million in funding so far, most recently at a valuation of $200 million so, even at $500 million, it would make a nice exit for the investors.