500 Million isn’t enough.
Why?
Mobile Search/Maps + Local Reviews = Mobile Killer App. Mobile is the next great search frontier and credible local information is what people want when they’re mobile. A Yelp acquisition with proper intergration into mobile map application leapfrogs an acquiring company light years ahead everyone one else in the industry trying to become the ‘Google of Local/Mobile Search’, Google included.
Yelp may have turned down Google for now, but it’s just a tactic to get a higher exit valuation. Whatever company loses the bidding war (Microsoft, Google or AOL) is going to be hard pressed to compete against a Yelp Powered Local Search application.
Despite their shortcomings (prone to abuse, strong signals become fuzzy as law of averages kicks in, etc) I’m a firm believer crowd sourced product and service reviews. As a member of Yelp I’ve turned to its crowd sourced ratings to help make a decision or two on where to dine. I often look at product ratings on Amazon to help affirm a product purchase, and have seen first hand how my clients eCommerce conversion rates and revenues are strongly correlated with how they’ve been trending on resellerratings and other eCommerce review sites. It’s very clear that there is some value to hearing what other people have to say about a product or service.
At the end of the day it’s up to review platform figure out the best way to provide a clear signal for its users. Whether that means simply assigning less value to older reviews or doing something more clever like leveraging a social graph or purchasing behavior to weight reviews that come from people who are close to you socially or behaviorally, I feel there is still a ton of room improvement as far as recommendation engines go, with Yelp and Trip Advisor barely scratching the surface, Netflix and Amazon’s ‘recommended for you’ doing a little more, but no company really nailing it.
If a company has the ability to purchase a site like yelp, it’s probably fair to assume that they have the resources throw some dollars against trying to improve what gets served up, using crowd sourced ratings as baseline. Even if, say in the worse case scenario, they can’t improve what’s already out there and consumers turn away from crowd sourced reviews five years from now, the money and edge that the acquiring company gets from throwing yelp ratings into a map application probably would justify a nine figure purchase especially if you believe local/mobile is the next big search frontier as I’m sure google does
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With that said it wouldn’t surprise me to see a Yelp acquisition in 2010 at 1.5 to 2.5 times what Google has initially offered. Should be interesting to see how everything pans out as the story develops
-N


