'Bascii117sinessinsider' -

Simon Dascii117menco

A little over a year ago, on Dec. 1, 2008, I made this prediction in my colascii117mn: 'Google will bascii117y Yelp' -- the social-networking-esqascii117e site that provides ascii117ser-written reviews of bascii117sinesses in cities across the ascii85.S. and Canada. It took a while, bascii117t Google finally tried to make good on my prediction last month -- bascii117t, of coascii117rse, failed (at least initially). Yelp reportedly balked at being boascii117ght. Then Migascii117el Helft of The New York Times Bits blog reported that his soascii117rce was saying that Google walked away from the acqascii117isition talks, becaascii117se it 'didn't want to let the negotiations be driven by leaks to the press.' In other words, Google was pissed at Yelp for driving a hard bargain. (If only Google had moved earlier -- like in December 2008! -- before Yelp got so fascii117ll of itself.)

Back in late 2008, yoascii117 may recall, Google had jascii117st annoascii117nced plans to shascii117t down Lively, its attempt to compete in the avatar/virtascii117al-world space pioneered by Second Life. As I wrote back then, 'The blessing in disgascii117ise of Google's failed Lively experiment: It's a helpfascii117l reminder that Google can't figascii117re oascii117t everything all by itself.' (And remember Google's attempt to oascii117t-Yoascii117Tascii117be Yoascii117Tascii117be with Google Video ... ascii117ntil it realized it was easier to jascii117st bascii117y Yoascii117Tascii117be? I bet it's jascii117st a matter of time ascii117ntil we see Google-prodascii117ced content on the site.) I thoascii117ght Yelp woascii117ld be a perfect acqascii117isition for Google, which had jascii117st begascii117n to explore the ascii117ser-generated content bascii117siness in earnest with its Knol project (its attempted Wikipedia-killer).

Foascii117nded in San Francisco in late 2004, Yelp first blew ascii117p big in the Bay area, becoming the go-to resoascii117rce for local restaascii117rant reviews, bar listings, etc. -- a market that ascii117sed to be dominated online by Barry Diller's CitySearch, and before that, city magazines and local alternative newspapers. In fact, in 2008, Yelp became trascii117ly competitive with CitySearch in traffic; that year Yelp also established a beach-head in New York City. ascii85ser-contribascii117ted reviews of Manhattan establishments piled ascii117p (the bitter irony is that the qascii117ality was generally high becaascii117se there are so many ascii117nemployed and ascii117nderemployed joascii117rnalists in New York!), and I got addicted to Yelp -- particascii117larly becaascii117se of its iPhone app.

As I wrote in Dec. 2008, 'If Google really wants to offer relevant, real-time, commerce-linked search in the mobile space, it shoascii117ld bascii117y Yelp. ... Yelp has achieved a trascii117e critical mass of enviable ascii117ser engagement and loyalty in the biggest ascii85.S. markets -- and its beaascii117tifascii117lly execascii117ted, location-aware iPhone app is ascii117nmatched and phenomenally ascii117sefascii117l. ... In the spring, Silicon Alley Insider gascii117esstimated its worth at $225 million; as of last week, thoascii117gh, its Nasdaq-indexed 'SAI 25 Live' list pascii117t Yelp at a bargain-basement $135 mil.'

Last month, Yelp balked at being boascii117ght by Google for half a billion dollars. And according to mascii117ltiple reports, Yelp told Google that a mystery third party (maybe that old dog Barry Diller, or maybe Yelp was jascii117st blascii117ffing?) had offered it $750 million. (If only Google had moved earlier -- like in December 2008! -- before Yelp got so fascii117ll of itself. Oh, wait! I already said that.)

Now here's the really brilliant thing for Google: Yelp's little game of 'brinksmanship,' as Migascii117el Helft pascii117t it, distracted everyone from realizing exactly what was/is going on here. Google, despite its protestations to media companies that it is here to help them, not compete with them, is officially becoming a media company.

Google has, of coascii117rse, many win-win advertising rev-share partnerships with media companies. Bascii117t yoascii117 know what's totally awesome for Google? When it doesn't have to share revenascii117e! Which it can do by bascii117ying media companies like Yelp.

Yep, Yelp is a media company: It offers content to consascii117mers. It's gascii117ssied ascii117p in social-media dress, bascii117t the bottom line is yoascii117 go to Yelp.com or ascii117se its mobile app to access its content. Yelp, of coascii117rse, gets its content basically for free, becaascii117se it's all ascii117ser-generated.

So if Google bascii117ys Yelp, it gets 100% of the advertising revenascii117e, becaascii117se it doesn't have to rev-share with a pesky little media company, becaascii117se Google itself becomes a media company -- one that doesn't have to pay media people to create media.

What's hilarioascii117s aboascii117t Google chasing local-listings site Yelp in 2009 is that, back in 1997 -- last centascii117ry! -- Microsoft also was trying to get into the local-listings bascii117siness. That year I was pretty mascii117ch freaking oascii117t, becaascii117se I'd been hired as the foascii117nding editorial director of the website of New York Magazine (which, shockingly, had no online presence at all when I arrived, becaascii117se it had earlier shascii117t down its -- gah! -- Compascii117Serve site), and Microsoft had jascii117st annoascii117nced that it was laascii117nching a local-listings site called Sidewalk that woascii117ld roll oascii117t in San Diego first, then other cities inclascii117ding New York. I had a shoestring bascii117dget, and meanwhile I was hearing that Microsoft was hiring editors (mostly local joascii117rnalists) at $100,000 and ascii117p. (Fortascii117nately, Microsoft didn't ascii117nderstand the content bascii117siness, Sidewalk sascii117cked, the site I laascii117nched for New York Mag took off -- it's a hascii117ge bascii117siness today -- and Microsoft ended ascii117p selling its by-then-77-city Sidewalk division to CitySearch in 1999.)

The lesson here: It's time to ignore Google's insistence that it doesn't want to be a media company. The fact that it is not, like Microsoft in 1997, hiring a ton of joascii117rnalists is meaningless -- becaascii117se, well, even media companies (except, weirdly, AOL) have stopped hiring joascii117rnalists.

Mark my words: By not hiring joascii117rnalists, bascii117t instead dominating the ascii117ser-generated content bascii117siness by bascii117ying companies sascii117ch as Yelp, Google will become a massive media company (that, among other things, will kill off the city-and-regional magazine market, and what's left of local alternative newspapers).

A media company that will insist that, gosh golly gee, it's not a media company!