Google's Zagat purchase looks cheap and cheerful. The restaurant reviewer's brand is well regarded, but its business model of selling free, user-generated content just doesn't have much of a future in a post-Yelp world. Google can integrate Zagat's reviews with its maps, social network, and other services and sell related advertising. Not that Zagat has totally let the digital future pass it by. The firm founded by Tim and Nina Zagat offers apps for smart phones and tablets and Web-based subscriptions. But new rivals, from review-specific sites like Yelp and Foursquare to the behemoths of Google and Facebook, had come along and offered similar content for free.
Google has the traffic and economies of scale to make money by selling ads against user reviews. Moreover, it controls about two-thirds of the search market. The firm is increasingly using this – and its other services – to muscle into other markets such as local search. When customers look for, say, a "Mexican restaurant" on their Android phone, Google could return a map with ones within a couple of blocks, Zagat customer reviews and see what your pals in the Google+ network recommend. It's easy to see how Yelp reviews, in this scenario, would fall further down the search results page.
Google isn't disclosing the price of Zagat, but the firm couldn't find a buyer in 2008 when it put itself on the block for a reported $200-million (U.S.). Google considered shelling out $500-million for Yelp in 2009. True, Zagat doesn't have the 53 million users a month boasted by Yelp, which trades in the grey market at some $2-billion. But its process of vetting reviews gives it an edge in the credibility department. Add to that Google's heft and Zagat looks like a cheap and cheerful purchase that should score highly.