Google in talks to acquire Yelp?

The rumors hit the street yesterday that Google is in talks to acquire Yelp. Google has made it no secret that they want (or maybe need is a better word) to gain access to local businesses in what might be thought of as their own bid for the “long tail.” As the enterprise ad / search market gets more saturated the only place to look for new business is with these small and medium companies. Of course Google already has the Google Local Business Center which was its first real attempt to gain access in a more local environment. Yelp lists local businesses and has a community of reviewers that provide content and is by far the 800 lb gorilla in the local business market from a web perspective. It is also capitalizing on the mobile and location-based trends by providing a GPS-enabled iPhone app.

So what’s all the fuss over the local ad market? According to the NYT the fuss is that the local ad market is an almost untapped $29B market that has historically relied on print like the yellow pages and does not, for the most part, understand the online ad world. To reach this audience requires local reach, something web behemoths like Google do not have. Yelp, on the other had has ~200 ad sales people, 2/3’s of its total staff. The deals not done yet and of course some other web giant (Microsoft or AOL for example) could also join in the bidding which at present is rumored to be over $500M.

I certainly understand the “why” from a Google perspective, but I was thinking about the deal in the context of some of the predictions that I’m working on for next year and I have to say I wonder if the Yelp paradigm might be a bit dated (and yes, I know they were founded in 2004, but trends in the online world are changing rapidly). Recently I was in Boston for a couple of events and some meetings and I was looking for a good place for dinner near my hotel. Now in the past (say 6 months ago), I would have probably checked Yelp for some reviews of local places near by –I do value the idea of crowdsourcing these types of questions. This time though, I decided to try GraffitiGeo, a context aware iPhone app that I have been trying out for a few weeks that let’s users tag locations and leave short (Twitter style) remarks and reviews on the virtual walls of the venue. I quickly found a restaurant, read the tags and headed out. I checked in on FourSquare when I got there (no deals nearby) and left my own tag about my meal on GraffitiGeo.

In fact, over the last few months I’ve used several context-aware, location-based and augmented reality apps to find and evaluate local businesses. So why the shift away from the collective intelligence type reviews on Yelp? Yelp has a broad community of reviewers and they tend to be fairly verbose in those reviews (something Yelp seems to reward). I don’t in general have a way to establish a level of commonality with the reviewers either. In the newer types of context aware apps, I can build off of my already established trust networks from Twitter and Facebook so I can much more easily establish that common link with the reviewers. One good review from someone in my network I trust is worth 100 bad reviews from strangers.

Augmented reality like Wikitude and Cyclopedia, and proximity-based networks like FourSquare, Gowalla, Brightkite and GraffitiGeo are more relevant to me and to my network than Yelp, its that simple. Trust filtering is a significant factor in our online social networking world. Most of these new networks build on what you already have established, which makes them an extension of your network, not a new venture. And let’s face it, our networks are becoming more and more interconnected all the time as more services open up API’s like Facebook Connect. As more of these proximity-based, context-aware networks gain in popularity, I think they supplant directory type services because they are extensions of my current online comfort zone.