‘Zagat’ is the new Google baby

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Google acquired Zagat for an undisclosed fees last week. Photo - Eater.com

Google has acquired a new, bright and shiny feather for its already glowing cap. This new feather on the Google cap is in the form of a ?pocket sized maroon book.?

The Internet giant announced last week?it has acquired the restaurant-reviews company Zagat Survey LLC. However the company refused to disclose the price it paid to acquire the New York-based company.

The move is part of Google?s mission to improve its local products, which are now run by Google VP Marissa Mayer, a popular public face of the company who headed the Search department for a decade.

Zagat also owns Zagat Wine, a wine club that offers monthly wine shipments at discounted prices. But according to sources this is not on the cards for the moment.

Zagat Survey LLC

Zagat Survey, LLC was founded in 1979 and is based in New York. It provides consumer survey-based dining, travel, and leisure information in the United States. It publishes guides to dining, as well as guides for hotels, resorts, spas, family travel, entertainment, shopping, night life, movies, music, theaters, and golf.

The company also operates zagat.com, a subscription-based site that offers access to restaurant ratings and reviews, as well as maps, driving instructions, and a monthly e-newsletter; and facilitates voting and shopping online. In addition, it offers ZAGAT TO GO product, which enables consumers to access its survey information on handheld computers and cellular phones.

Zagat enlisted Goldman Sachs to explore a sale as early as 2008, although no buyers emerged in the middle of a recession. The company might fetch as much as $200 million, it was reported at the time.

“We are thrilled to see our baby placed in such good hands and to start today as official ‘Googlers,'” the founders said in a joint statement.

Mayer and Zagat co-founders Nina and Tim Zagat said on Thursday they planned to continue printing the Zagat’s pocket guides for now, and implied that Zagat’s 30-point rating scale would live on under Google.

Zagat gave Google a tongue-in-cheek rating on its home page on Thursday, awarding the Internet company a maximum 30-point rating for its “local, social, mobile and usefulness” categories. Industry analysts regard the local, social and mobile markets as some of the fastest-growing areas of the technology sector.

SWORN TO SECRECY

The acquisition was kept under wraps until all the formalities were finalised. According to some tech experts, Google maintained secrecy as it didn?t want to make the same mistake as it did with Yelp.

In late 2009, Google was in talks to acquire Yelp for at least $500 million, according to news reports at the time, but the deal fell apart.?Since then, the relationship between Google and Yelp has been tenuous, as Google borrowed liberally from Yelp?s database of reviews to flesh out its Google Places pages. The search giant has toned down the practice in the last few months, and is now clearly looking to boost the number of reviews it can call its own using features like Hotpot and through deals.

WHY ZAGAT?

Zagat, whose pocket-sized maroon books rate restaurants, hotels and other local attractions with the help of 350,000 contributors world-wide, has a small online presence compared to Yelp Inc. and other review sites. ?Further while much of Zagat’s content is free and available to anyone, some content remains behind a pay-wall and it was unclear if Google would remove it.

?Why not?? says James Peterson, analyst at Jacob and Stanley Consultancy Co. in Michigan, USA. ?Zagat is the ideal partner for Google. Up till now it is a small family business with limited web presence. There will not be any power issues after the takeover. It would be smooth sailing. Also it seems the anti trust guys have more trust that Google will be fair. So its all good for the giant.?

The Federal Trade Commission didn’t conduct a review of the Zagat deal like it did for prior, bigger Google acquisitions such as that of AdMob, which took months to get the agency’s approval before closing last year.

Judging from the response of Marissa Mayer, Google Vice President, the software giant is very excited about the acquisition.

?With Zagat, we gain a world-class team that has more experience in consumer based-surveys, recommendations and reviews than anyone else in the industry. The Zagats have demonstrated their ability to innovate and to do so with tremendous insight. Their surveys may be one of the earliest forms of UGC (user-generated content)?gathering restaurant recommendations from friends, computing and distributing ratings before the Internet as we know it today even existed. Their iconic pocket-sized guides with paragraphs summarizing and ?snippeting? sentiment were ?mobile? before ?mobile? involved electronics. Today, Zagat provides people with a democratized, authentic and comprehensive view of where to eat, drink, stay, shop and play worldwide based on millions of reviews and ratings.?

FOODIES DELIGHT

Yoni Appelbaum, a historian and contributor to The Atlantic Online, draws a parallel between Google?s acquisition of Zagat and the evolution of the classic Michelin restaurant guides in France. ?Andr? Michelin used local guidebooks to encourage driving and sell tires,? Appelbaum says. ?He didn?t want driving to be a new way of doing old things; he wanted it to be an entirely new thing to do. Google bought Zagat to do the same for internet search.?

This spirit of adventure could help distinguish Google and Zagat from Yelp, Bing and other competitors. ?Zagat doesn?t just offer good local info, it promotes the foodie belief that good eateries are worth hunting down. Google thrives on people’s searching for new experiences.?

LOCAL COMMERCE

The acquisition would add a valuable brand to Google?s content offerings and bolstering its push into the rapidly growing local commerce market.

Local commerce offers services such as finding a discount from a nearby store, or a review of a neighborhood eatery, and the world’s No. 1 search engine plans to compete in this market against Yelp and OpenTable. Zagat?s rankings, famous for a mix of quotes from different users, would help Google against its competitors in offering restaurant information.

?The Zagat deal signals that Google is getting more serious about providing local information?, said Kerry Rice, an analyst at Needham & Co. in Los Angeles. ?Competition is going to increase,? he said. ?That may not ultimately be good for OpenTable and Yelp.?

The purchase also escalates competition with social-networking leader Facebook Inc. and daily-deal providers Groupon Inc. and LivingSocial.com.

OpenTable is already reeling from financial results that have disappointed investors this year and the departure of CEO Jeffrey Jordan.

WHY NOW?

Google has a lot going on at the moment. Its new social media site Google Plus and its daily deals site Google Offers are both in its teething stages, so it is kind of baffling to see that Google is still acquiring services rather than develop the ones that it already has.

As recently as 2009, Google tried to step it up in the restaurant ratings sector. It rolled out a “Favorite Place on Google” logo for local restaurants as an alternative to the “Zagat Rated” signs. Using mobile technology, users could scan the Google logo to find out more. It turned out that there weren’t that many takers and thus ended the experiment. So it seems the wise choice is to merge, a decision which many people agree on.

In ?Google As Content Company ? A Trend Worth Watching,? John Battelle suggests the acquisition signals a significant shift, marking Google?s willingness to expand to areas it previously left to partners and advertisers.

Google is walking a thin line here ? media partners are critical to its success, but if it?s seen as favoring its ?owned and operated? content over those who operate in the open or independent web, well, lines may be redrawn in the media business.

It is easy to argue that this was a small, strategic buy to support Google?s local offering. But then again Blogger, YouTube, and Google TV are not small efforts at Google.

 

APPLE BATTLE

The move is part of Google’s push to adapt its online services for a world in which consumers increasingly access the Web on mobile phones such as Apple Inc’s iPhone and rely on social networking services such as Facebook to get information from friends.

“A reasonable person would say that Google may never beat apple in product design by itself. At least not for a sustainable period of time. But Google could better integrate content and have that become another reason to buy those devices,” said Stifel Nicolaus analyst Jordan Rohan.

Last month, Google announced plans to acquire mobile phone manufacturer Motorola Mobility for $12.5 billion. The deal, if approved by regulators, will allow Google to produce its own line of smartphones based on its Android software.

PLACES AND MAPS

Analysts say that the reviews and ratings which the internet giant has accumulated are expected to be integrated with Google Places and Google Maps services, which provide people with information about local businesses through desktop PCs as well as mobile devices.

“This underscores Google’s local and mobile initiatives,” said Brian Pitz, an analyst at UBS, who expected the acquisition to provide a boost to Google Maps as customers look for restaurants. Last year, Google moved Mayer, a top search executive, to head its local initiatives.

Google needs reviews and other content for its “Google Places” websites, in part to fend off criticism. It has been accused of using comments from review sites such as Yelp, essentially siphoning off their readers and, more importantly, their clicks. Google has toned down its borrowing of comments recently, Pitz added.

GOOGLE SEARCH

Google needs to provide more than just directions to consumers seeking information about restaurants and other local businesses, said Marissa Mayer, Google’s VP of Local, Maps and Location services, in an interview with Reuters last week.

“It’s also (about) getting them a sense of the place. A sense of what to expect,” said Mayer. “Zagat reviews, in a few short lines and a few scores, gives you a great sense of a place very quickly when you’re on the go.”

The move raises the question of whether the search giant will start its own restaurant reservation service, building on existing ties with restaurants that advertise on it.

There are a few constraints to leap over.?Expanding into reservations would require extra steps such as building reservation software and getting restaurants to install it, as well as building different relationships with the restaurants. Can Google really pull it off?

ONLINE TRAVEL

Zagat ratings, Google Places, Google Maps, Google Hotel Finder, free voice-guided directions on your Android phone — what more do you need to figure out where you’re going on your next vacation? Could Google also become the best online destination for travel planning?

All that’s missing is a great way to search for flights, at least for now.

Google sure seems to be proceeding at full speed, which means there would not be bumps ahead.

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