December 18, 2009 10:38 pm

Google in talks to buy Yelp

Google is in advanced talks to buy Yelp, the local reviews site, for more than $500m, according to several people close to the negotiations. The deal is “80 per cent there”, but has not yet been finalised.

Yelp has emerged as the leader in user-generated reviews about local businesses in the US, and
is expanding internationally.

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The site says it has more than 26m users a month, and that users have written more than 8m reviews.

It has taken $31m in funding, most recently with a $15m round from venture capital firm DAG Ventures last year.

Revenues for the site, which makes money through advertising from local businesses, are expected to be about $30m this year and as much as $50m next year.

The deal would give Google a more compelling platform to host adverts for small businesses. While the search giant already offers a competing service with Google Local, which displays user-generated reviews of businesses on Google Maps, the company has struggled to win over mom-and-pop businesses that do not have a large online presence.

A source close to the negotiations said that if the deal went through, Google was likely to scrap its Local product and replace it with Yelp. This was the strategy Google took when, after purchasing YouTube, it phased out Google Video.

Integration with Google would give Yelp a much broader audience, and a source close to the talks said that Yelp would retain its own brand and identity as a subsidiary of Google.

Yelp, founded in 2004 by two PayPal executives,
Jeremy Stoppelman and Russel Simmons, enjoys a passionate user base, with fans known as “Yelpers”. Its “Yelp Elite” program has inspired fierce competition among users. And in a throwback to the days of the dotcom bubble, the company is known for throwing lavish parties.

But Yelp has been criticised for what some users say are unfair business practices, such as deleting positive reviews from businesses that refuse to advertise on the site.

Yelp has denied the allegations.

Yelp declined to comment on the deal, saying: “Yelp is approached frequently by numerous entities to discuss partnerships, investments and more, and the company does not comment on private discussions that may occur.”

A deal would be the latest big acquisition for Google, which bought AdMob, a mobile advertising site, for $750m last month.

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