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Google Acquires Zagat Restaurant Guides, OpenTable Stock Off 8 Percent In Late Trading

September 8, 2011

Google Inc. today announced that it has agreed to acquire restaurant and lifestyle reviewer Zagat Survey LLC, in a move widely seen as an effort to increase Google’s local market business.

In a blog posting this morning, Marissa Mayer, Google’s vice president, Local, Maps and Location Services, announced that Zagat will become “a cornerstone of our local offering,” enabling people to find “extraordinary (and ordinary) experiences around the corner and around the world.” Local searches currently comprise about 20% of all Google searches, according to the company, with that share even higher among mobile phone users.

One competitor in Google’s sights with the Zagat deal is Yelp, the local search web service which claims to have more than 50 million monthly unique visitors. Google attempted to acquire Yelp in 2009 for around $500 million but didn’t succeed, according to the Financial Times. Also targeted is OpenTable, the online restaurant booking and review service. OpenTable, which has been a star among Internet stocks lately, saw its share price drop 13% to $54.50 after the Google-Zagat deal was announced. With the Zagat ratings, Google will be far better positioned to compete against Yelp and OpenTable.

Among other growth opportunities, Google is likely to utilize the Zagat ratings to strengthen Google Offers, a new service featuring deals from local businesses. Google Offers competes against Groupon, the deal-of-the-day web service that offers discounts from local and national companies. Google also tried to buy Groupon for a reported $6 billion in late 2010, and it then launched Google Offers earlier this year as a direct competitor.

Zagat was founded by Tim and Nina Zagat in 1979 and today covers more than 100 countries, using its famed 30-point system to rate dining, travel, nightlife, shopping, golf, movies and music. More than 350,000 consumers participate in the Zagat surveys each year. In addition to its pocket-sized guides, Zagat also offers an app, “Zagat To Go”, priced at $9.99, for the iPhone and iPod Touch, as well the Android, BlackBerry and other smart phones.

Zagat also owns Zagat Wine, an online wine club offering discounted monthly wine shipments to members at a minimum 20% savings. Zagat Wine wasn’t part of the deal, Google confirmed.

The Zagats put their company up for sale in January 2008, hiring Goldman Sachs as its financial advisor and asking a reported $200 million. But there were no takers, and six months later Zagat took itself off the block and announced it would pursue an organic growth strategy. Today, neither Google nor Zagat disclosed terms of the deal.

Despite its long success, Zagat has never really leveraged its brand power on the Internet. In 2000, private equity firm General Atlantic acquired a third of the company from Zagat LLC for $31 million, partly on the prospect of major Internet expansion. But Zagat’s subscription model hasn’t generated the level of traffic garnered by competing review sites such as Yelp. In recent years, due to the soft economy and increasing competition, Zagat’s business has been under pressure. But if the company’s goal was to aggressively expand its online presence, that clearly will happen with this deal.

The Zagats will stay on as co-chairs.

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