What Does Google’s Purchase of Zagat Mean for Restaurants?

Today, Google acquired Zagat, the popular restaurant review guide. Before we get into Google’s possible motivations, let’s look at what led to this. This is really only act 2 of a drama that happened in December 2009.

In December 2009, Yelp looked like it would be become, like many other tech companies before it, property of Google. Google put down a half billion dollars and it seemed like a done deal. Then two unusual events happened that forced Yelp to take its “for sale” sign down. First, Yahoo bested the Google offer by some 200 million dollars, making it impossible for the leadership of Yelp to accept an offer from Google that was substantially inferior. Next, Yelp managers resisted the idea of working for Yahoo. As Yahoo has been a rudderless company for so long, it was not surprising that Yelp employees weren’t excited to work under a Yahoo banner. Google, at first, didn’t believe there was another bid, but when it was confirmed, the deal had lost momentum.

2011 isn’t 2009 and Google has made the best decision for 2011.

What’s Changed

Reviews are just as valuable as they were in 2009. Yelp is still the dominant online source for review, having handly eclipsed Citysearch. Yet how we access reviews is changing especially in regards to local search and mobile review application (that have geo-location capabilities).Both, local search and mobile review applications (which are interrelated) have grown quickly as we move from computers to smartphones.

Smartphones

Let’s go over smartphone applications that give restaurant review.

Smartphones control a large and growing chunk of cell phone usage.  We want to find somewhere new to eat and we want to do it while we are on the street. This means brevity, accuracy and ease. Yelp may not be better than Zagat to satisfy this need.

Zagat reviews are different and I believe can work better than Yelp in a mobile application.  Yelp has a lot of information—too much in my view. You have to read a complete review to get some idea of the biases of the reviewers. That takes time and space, things not available on smartphones. Sure, with Yelp you can take the rating and go blindly forward, but a number gives you no idea about the restaurant.

Zagat, in contrast, uses reliable reviewers and gives a quick but accurate description of the restaurant. They may not perfect reflections of general “opinion” but neither is Yelp. Zagat’s accuracy in dishes and condensation can provide Google a formidable smartphone application. As Google controls Android, they can even integrate an application.

Google Places

Secondly, local search directs many customers to businesses, including restaurants. This happens through both smartphone and computer browsers. Google originally compiled reviews and ratings from Yelp, Citysearch, etc. for Google Places, where Google focuses its local search energies. That stopped, and Google was left with relatively small supply of reviews through Google Places. If Google decides to hook Zagat ratings up to Google Places for free, suddenly customers may circumvent Yelp. The location, website and reliable reviews will be put in one place, making Google a more attractive option.

For restaurant owners, Zagat has been a double-edged sword. It carries authority that Yelp has never had, at least amongst the pre-Internet generations. But compared to the undependability of Yelp, Zagat, at least, produces something more predictable. Because they are seasoned reviewers substance trumps style.

It is still to be seen if Google directly wants to charge customers for Zagat’s information. There is a good chance that Google won’t mind if they make money indirectly and make the reviews readily available. In the end, Yahoo may have done Google a favor when they sabotaged the Yelp-Google partnership, sending Zagat into Google’s arms.