Google just gave Zagat a 30 rating for buyability.
The acquisition of Zagat gives the Internet giant a huge database of restaurant ratings to build up reviews on its local search offerings, and to compete against companies like Yelp and Groupon. Co-founders Tim and Nina Zagat have tried to sell their company in the past, but took it off the market in 2008 after potential acquirers balked at a $200 million price tag. Terms of the Google deal weren’t disclosed; Zagat is one-third owned by private-equity firm General Atlantic.
Since that aborted sale, Zagat has struggled with adapting its popular books to the online marketplace, which is one reason the deal makes sense: You can’t get much webbier than the Googleplex. Google, for its part, tried and failed to buy Yelp for $500 million two years ago, and the Zagat purchase is clearly meant to replace that failed acquisition. It also puts pressure on upstarts like OpenTable, whose stock plunged on news of the deal, and Groupon, which Google also unsuccessfully tried to buy.
The most notable fact about the Zagat acquisition may be that it is Google’s biggest foray into the original-content business. Whether it will place its own reviews over those of its competitors (including MenuPages, owned by our parent company New York Media) will be closely watched.
Zagat will clearly be a boon to services like Google Offers and Google Places. But with such smooth integration comes concern about potential conflicts of interest that could run afoul of antitrust laws. Google has been gearing up for a fight, hiring twelve D.C. lobbying firms to head off claims that its search results unfairly disadvantage the competition. Yelp has already complained about Google Places, and the Federal Trade Commission has its eyes peeled.
The Twitterverse quickly supplied plenty of Zagat-style reviews of the deal:
At least one high-profile restaurateur disagreed. “I think it is plenty smart for both companies, ” Nick Kokonas of Alinea told Intel. “Zagat needs to find a new business model to leverage their breadth and trove of ratings. Google needs to find ways to get local. Win-win in my mind.”
But whatever Zagat has done in the past, such as hiding its online reviews behind a pay wall, is now largely moot. Google now owns the biggest brand name in the restaurant ratings game, one that happens to be built on a crowd-sourced model that is inherently simpatico to Google’s search-focused philosophy.
If there are negative reviews coming in, they’re likely to come from Google’s competitors.
Additional reporting by Joe Coscarelli and Alan Sytsma.