March 2, 2021

DealBook: Google to Buy Zagat

Zagat's Website reviews the deal with Google.Zagat’s Website reviews the deal with Google.

12:32 p.m. | Updated Google has agreed to buy Zagat, the guide to restaurants around the country, in an effort by the search giant to expand its local offerings.

Terms of the transaction, including price, were not disclosed. Tim and Nina Zagat, the husband-and-wife team behind the company, said they planned to remain involved in the business as co-chairs.

“We couldn’t be happier to see our baby placed into such good hands and are looking forward to being Googlers in the years ahead,” the Zagats wrote in a letter posted on their company’s Web site.

In a blog post, Marissa Mayer, Google’s top executive for local and location services, wrote that Zagat would become the cornerstone for the search giant’s local offerings.

“Their iconic pocket-sized guides with paragraphs summarizing and ’snippeting’ sentiment were ‘mobile’ before ‘mobile’ involved electronics,” she wrote.

Google has been itching to gain a foothold in the local business market for several years, and on the company’s earnings call in July, Larry Page, its chief executive, said local was one of his top priorities as an emerging business. The prize is a piece of the $140 billion that small businesses spend on local advertising.

Known for its 30-point scale and its quote-laden reviews, Zagat has grown from a two-page typed list to a global empire with millions of loyal readers and reviewers happy to rave about their favorite restaurants and bars.

But the company has faced several challenges in recent years, notably a slew of Internet-based competitors that provide an alternate outlet for restaurant reviews. Zagat (pronounced zuh-GAHT) has responded by partnering with a number of online players, including Facebook, Foursquare and, yes, Google.

“There’s lots and lots of empirical data that reviews are very influential and powerful, more than anything but recommendations from friends,” said Greg Sterling, a senior analyst studying local businesses online at Opus Research. “And as Google is able to maintain its centrality in that online-offline relationship, including in mobile, then the advertisers show up because Google is the destination.”

A little over three years ago, Zagat put itself up for sale and hired Goldman Sachs as an adviser. It wrapped up that effort six months later after running into difficulties in the sales process.

In late 2009, Google tried to buy Yelp, Zagat’s main online competitor, for $500 million, but the deal fell apart. Last year, Google introduced Places, a Yelp-like service for listing local businesses and collecting consumer reviews. It has encouraged users to write reviews, but so far it has not gotten the same volume as competitors like Yelp. It also include reviews from Yelp and other sites, like TripAdvisor, in Places, but removed some of them after the sites complained.

With Zagat, Google gets a ready-built stockpile of reviews.

“Now they’ve found a huge cache of reviews, and now they’re really going to close the gap between them and their competitors,” Mr. Sterling said. “It’s a little bit of a consolation prize. They went after Yelp, which would have been a bigger prize for them for many reasons, including salespeople and a sexier brand. But this is a pretty strong acquisition.”

Google has also introduced daily deals for local businesses in various cities and Google Wallet, for making payments with cellphones and earning loyalty points at local businesses. When people search for items to buy on Google, it shows local businesses that carry the items, and it offers advertisers a new ad product called Boost for ads that show up when people search for local businesses.

Ms. Mayer had more to say about the deal on Twitter in verse form, writing:

Acquisition announcement haiku: Delightful deal done; Zagat and Google now one; foodies have more fun! #gogooglelocalThu Sep 08 15:28:19 via web

And more cheekily, Zagat scored the deal a perfect 30 on its Web site.

Zagat was advised by the Peter J. Solomon Company and Allen Company.

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