The big news on Friday was that Google and Yelp had nearly cinched negotiations for a buyout with Google acquiring the social consumer site, for a sum rumored to be over $500 million. Well, that deal is off according to breaking news today at TechCrunch.
The deal looked like a win-win for everyone. Except maybe the loyal fan base at Yelp. Yelp’s investors and shareholders would have stood to gain a huge return on their investment while Google would have gained a vital niche for their local content strategy. Google seems desperate to fill this niche, which is one of it’s biggest weaknesses and where the search giant seems to be unable to gain any market share.
Google has thus far proven incapable of running either local content portals or social networking portals. Users of Yelp are big on socializing and are very vocal about things they do and don’t like. They didn’t like Google or this deal. This was made clear on CNET where a special Q&A section was put up just to discuss this. The question is, really, what made the deal break? TechCrunch says that Yelp CEO Jeremy Stoppleman walked away from the deal. While that might be likely, it doesn’t answer the motivation for doing so nor does it cover what he’s telling investors and who gave him permission to do so. Two things immediately come to mind: an IPO or another investor. Yelp has been ripe to go into an initial public offering for some time. An IPO would definitely raise the bar for the company and probably would result in a huge amount of cash. The thing is, that’s speculative cash, not real money and so it’s questionable that this is really what killed the deal. There is no guarantee that a Yelp IPO would generate over half a billion dollars in any amount of time. So the next question is whether there was another investor stepping in or not.
This may be a buyout or a really strong partnership to help push Yelp to the next level. In this case, it could be a combination of a strategic partnership leading to a stronger IPO. Who would have not only the money, but the interest in nixing a Google-Yelp deal? Microsoft assuredly. But until someone officially makes an announcement, it’s not likely it will be known how all of this played out over the weekend.
