Buying Zagat: Smart Move for Google
Googleâ€™s stunning acquisition of Motorola Mobility has barely cooled off, and now the search giant just announced it has acquired Zagat, the publisher renowned for its restaurant reviews.
At one time, it would have been inconceivable to think an Internet/software company could acquire the likes of Motorola, the once mighty maker of all kinds of technology products, most notably cell phones. But Google has built up a gargantuan cash reserve and is not afraid to use it for strategic acquisitions. While the Motorola purchase was supposedly motivated by patent issues, it instantly turns Google into an all-in-one vendor in the mobile market, not unlike Apple. The acquisition effectively smooths the way for Google to build single source integrated smartphones. Shrewd move.
Googleâ€™s acquisition of Zagat is equally shrewd. The thirty year old Zagat publishes reviews of restaurants, hotels and other leisure activities based on the opinions of over 350,000 surveyors from around the globe. The reviews often make for engaging reading and the scores awarded in various categories are reliable indicators for discriminating consumers. A â€œZagat Ratedâ€ establishment is an accolade worthy of note.
While Zagat reached its pinnacle as a traditionally published guidebook, its transition to a web-based property was less successful. Zagat, like so many other review publishers, attempted to erect a paywall to protect its intellectual property. Stung by a raft of competitors, started looking for a buyer in 2008. Last week, they found one in Google.
Marissa Mayer, Google VP of local, maps and location services, said this about the acquisition in a blog post:
Â â€œMoving forward, Zagat will be a cornerstone of our local offeringâ€”delighting people with their impressive array of reviews, ratings and insights, while enabling people everywhere to find extraordinary (and ordinary) experiences around the corner and around the world. â€¦ I’m incredibly excited to collaborate with Zagat to bring the power of Google search and Google Maps to their products and users, and to bring their innovation, trusted reputation and wealth of experience to our users.â€
Note the emphasis on â€œlocal offering,â€ which is a key for Google. Two years ago, Google unsuccessfully made a bid for Yelp, realizing it needed to make headway in the local content game. The fact is, Google desperately needs local content, especially reviews, to remain competitive. Google Places pages had included Yelp reviews, but Yelp pulled the plug when it realized Google Places was effectively a direct competitor.
In an article about the Zagat acquisition in Fast Company, Neal Ungerleider writes of Google Maps:
Â â€œâ€¦in-map review content has been a problem for them: Googleâ€™s in-house review service is weak and additional reviews are imported from second- or third-tier services. Losing Yelpâ€™s reviews negatively impacted the quality of Googleâ€™s local map offering (at least temporarily).â€
Another weakness, writes Ungerleider, is the fact that Google Maps is not used on many GPS services today. And that, apparently, is the second reason for the Zagat acquisition — to reinforce Google as a mobile player. Zagat is a strong brand, and Zagat reviews are obviously most valuable when they can be carried around. Zagat could be a reason for consumers to rely on a mobile-enabled Google, and potentially the GPS application it offers, so they can have walk-around access to reliable restaurant and hotel reviews. If Google drops Zagatâ€™s paywall, which would be no surprise, itâ€™s an even more attractive service.
Local and mobile may be the facilitators, but in the end, Googleâ€™s Zagat buy is all about content, as Larry Dignan writes in a blog for ZDnet:
Â â€œIs this Zagat purchase the beginning of a series of content moves for Google? Googleâ€™s timing is notable given the struggles of both AOL and Yahoo of late. Both AOL and Yahoo are building out content to differentiate themselves from Google. Now the search giant enters the content game via Zagat.â€
The small price Google paid for Zagat (somewhere considerably south of the 2008 asking price of $200 million) will very likely pay off in a potent combination of local content delivered on a mobile platform. Smart move, Google.