September 8, 2011 / 3:51 PM / 8 years ago

REFILE-UPDATE 2-Google buys Zagat to vie with OpenTable, Yelp

(Refiles to remove extraneous name from tag line)

* Zagat finally finds a deep-pocketed buyer

* OpenTable shares get hammered (Adds analyst comment and context on OpenTable, Yelp)

LOS ANGELES, Sept 8 (Reuters) - Google Inc (GOOG.O) has bought Zagat, the popular dining recommendations and ratings authority, jumping into a niche Web market alongside the likes of OpenTable Inc OPEN.O, Yelp and Yahoo Inc YHOO.O.

The shares of restaurant-booking service OpenTable, which also publishes reviews and ratings, were down more than 8 percent to $57.50 in midday trading after hitting a low of 54.50 earlier.

OpenTable is already reeling from financial results that have disappointed investors this year and the departure in May of CEO Jeffrey Jordan, who joined venture-capital firm Andreessen Horowitz. Jordan remains chairman.

The 32-year-old Zagat, which polls consumers and compiles reviews about restaurants around the world, will become a cornerstone of Google’s “local offering” and work in tandem with its mapping services and core search engine, the Internet search and advertising leader said.

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

The Federal Trade Commission has been looking into the issue as part of a broad antitrust investigation, a source familiar with the probe has said.

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.

Fitz said expanding into reservations would require extra steps such as building out reservation software and getting restaurants to install it, as well as building different relationships with the restaurants.

“It’s apples and oranges,” he said.

While much of Zagat’s content is free and available to anyone, some content remains behind a paywall and it was unclear if Google would remove it.

Founded by Tim and Nina Zagat, the eponymous service provides the familiar burgundy pocket-sized guides to restaurants in more than 100 cities. It may be one of the earliest forms of user-generated content, Google Vice President Marissa Mayer said in a blog post on Thursday.

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.

“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.

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.

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.

Google declined to offer any transaction details about the Zagat transaction. (Reporting by Edwin Chan and Sarah McBride; editing by Maureen Bavdek and Andre Grenon)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below