Why Google’s acquisition of Zagat matters

Today, Google announced its acquisition of Zagat, the company that publishes the venerable restaurant and hotel review guides. It’s a terrific acquisition. If Google executes correctly, this deal could be as significant as the YouTube deal has been. (I was also a big fan of that deal.)

Although Zagat is primarily known for its maroon pocket-sized guidebooks, it has long been working with innovators to get its data in the hands of mobile users. I first used Zagat on a mobile device on my Newton MessagePad 110 in the mid-90s. I later used it on a Palm V and Palm VII as part of the Vindigo service. (Vindigo eventually switched to Gayot and other data sources because they didn’t want to pay Zagat’s licensing fees.) There are aspects of those services that still haven’t been replicated by the leading mobile products.

Competition with Yelp

The most direct competitor to be affected by this deal is Yelp.

I love Yelp and use it all the time. But it’s way too much work. Half of each review seems to be about the personal life of the reviewers. Sorry, but I couldn’t care less that your girlfriend dumped you; I just want to know how the food and service was. Yelp has made great strides over the years in making sense of the reviews but its five-point scale that homogenizes food, service, ambiance and cost isn’t very helpful. Add to that the fact that a lot of restaurants are rated 4 stars and quickly discriminating among places is hard.

When it comes to restaurant reviews, comprehensiveness is less important than conciseness. There isn’t a “correct” answer — I’m just looking for a good-enough answer quickly. I don’t want to engage in a 30-minute research project and read 20 reviews to choose where to go to dinner. That’s where Zagat has excelled. Just glancing at the ratings, I can quickly pick a place. (I think my food threshold was 24.)

All that said, I stopped using Zagat when Yelp took off. The primary reason: I didn’t want to pay the fees and Yelp provided a good-enough solution for free. I fully expect that Google will take down the Zagat paywall and offer the ratings for free. (I’m surprised that hasn’t happened already.) I also expect that Zagat ratings will be syndicated across various Google properties, including mobile properties.

Zagat’s team is good at synthesizing information into actionable data. If Google can translate that knowledge into algorithms acting on data collected by Google Places, that could be really powerful.

Mobile

Mobile has been a godsend to companies like Yelp, Fandango and others that have strong brands. Unlike the Web, they’re not held hostage by Google’s search algorithm for traffic. Google has continually expanded the presence of its own local products on the main search results pages to the detriment of sites like Yelp.

The app-centric nature of mobile devices to data means that companies with strong brands can intercept that traffic before Google gets a chance. Zagat is a brand that carries its own affinity and a free Zagat app would instantly become a strong competitor to Yelp.

Brand

One of the biggest assets that Google gets with Zagat is the power of the Zagat brand, which in many circles is synonymous with fine dining.

As powerful as Zagat is with consumers, it’s also incredibly powerful with restaurateurs. Here is my subjective assessment of various local brands, as perceived by restaurateurs:

  • Zagat. Highly positive.
  • Facebook. Positive.
  • Google. Neutral to positive.
  • Groupon. Slightly negative, but heading downhill rapidly.
  • Yelp. Strongly negative.

Where Zagat is viewed as a friend of restaurants, Yelp is often viewed as an enemy. Part of the problem is that Yelp has sold advertising to restaurants and many restaurateurs view Yelp ad sales people as extortionists. (I believe Yelp management’s claims that they separate editorial from advertising, but that doesn’t change the widely held perception.)

If Google can use the Zagat brand as an in-roads to better engage with restaurateurs, that alone would be the price of the acquisition.

Facebook — and why all this might not matter

The biggest problem I have with local reviews as they’ve been done to date is that they largely ignore the social layer that has been built up over the last four years. When it comes to matters of taste, I’d rather get recommendations from people I know than random strangers.

It bugs my friends at Yelp and foursquare that every time I go on a trip, I post a Facebook status message asking for restaurant recommendations. Bill at Yelp will tell me to check Yelp. Tristan will tell me to check out foursquare Explore.

Yelp has its own social layer, but the people in my Yelp friend graph aren’t my real friends. The few that are rarely write reviews. Foursquare has my real friends, but for the most part doesn’t have enough data density to suit my needs. (A recent trip to Chicago was an exception.)

Even without any optimization, Facebook has both. Most of my status updates generate 3-4 restaurants, which is all I need. There’s another important benefit: I know how my tastes compare with the tastes of my friends. There are some friends that I know have a positive affinity with; if Dariusz offers a restaurant recommendation, I’ll go there without thinking about it. There are others with whom I have a negative taste affinity; if they recommend it, I won’t go.

A lot of people have looked at Facebook’s recent public announcements in local — killing its Deals product and removing the Places product from mobile — as a sign that Facebook doesn’t care about local. That couldn’t be further from the truth.

I’ve seen Facebook testing product concepts that point at its future direction in local. One test asks you to compare recent places you’ve visited. Another feature lets users contribute data on restaurants and other venues. Facebook realizes that most average people won’t go to the trouble of writing long reviews like those on Yelp. It’s better to collect small nuggets of data from massive audiences. See my post, Heading toward the Facebook recommendation engine.

Ironically, Ted Zagat, son of Tim and Nina Zagat, works at Facebook. That should make for some interesting dinner conversations. The question is how they’ll decide where to eat.

See also:

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About Rakesh Agrawal

Rakesh Agrawal is CEO of redesign | mobile. Previously, he launched local and mobile products for Microsoft and AOL. His personal blog is at http://blog.agrawals.org and tweets at @rakeshlobster.
This entry was posted in facebook, foursquare, google, groupon, yelp. Bookmark the permalink.

One Response to Why Google’s acquisition of Zagat matters

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