Google’s Acquisition of Zagat Feeds Push to “Local”

14 Sep

Zagat posted this cheeky review upon the Announcement of the acquisition

The rest of us might be keeping a tight grip on the purse strings as we weather the storms of this epic recession, but not Google. The search giant has been on a spending spree as of late, and its latest two acquisitions of Motorola Mobility and Zagat show its commitment to growth and innovation regardless of the economic environment. I think that it will be particularly interesting to see how Google integrates Zagat, a company that will give Google another foot in the door of the “local” services market, because Google is so well positioned to compete against other B2B restaurant service providers such as OpenTable.

Zagat put itself up for sale in 2008, when it was said to be valued at $200 million, but Google acquired the company for considerably less (many commentators have noted Google must have paid less than $66 million because there was no automatic FTC antitrust review).  The restaurant grading service was one of the most influential tastemakers in the world of haute cuisine long before the advent of user-generated content on online platforms such as Yelp (which, coincidentally, Google tried to acquire in 2009 for ~$500 million), but has since ceded popularity to competitors.

A Zagat guide in a hungry consumer’s hands can drive dining decisions, but what about a Zagat business in the hands of Google? Upon the announcement of the acquisition, OpenTable’s stock tumbled 8%; clearly the market anticipates that Google might expand into the restaurant reservation services with the acquisition. OpenTable’s restaurant management solution is a combination of software and hardware that requires a significant upfront investment. The service helps restaurants to manage demand and market their businesses, but the breadth of services pales in comparison to those that Google could offer. With the Zagat acquisition, Google could develop a software restaurant management solution, and derive revenues from the sales its other B2B services.

Additionally, Zagat will strengthen Google’s foray into the world of location-based services and daily deal offerings, and one can imagine a mobile solution that would be a mash-up of all the above, a la Living Social’s Instant Deals.

Google made a name for itself by aggregating information and returning information sought out by users in the form of search results; will the company leverage Its acquisition of Zagat to move from aggregation to recommendations based not only on user’s searches, but also their location and prior consumption history? Time will tell. In the meantime, I’ll whet my appetite for innovation in the food services industry with a healthy serving of Willie Nelson and Chipotle in this brilliantly animated video.

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