Yelp rejects Google, Google walks from Yelp

The rumors that Google might purchase Yelp for over half a billion dollars have been replaced by new rumors that the alleged deal is dead. If that is true, it is very unfortunate because the two complement each other in ways that no other acquisition or partnership can match.

The buzz all weekend was that Google was close to a deal to acquire Yelp–a site that allows users to review local businesses. As of today, the deal has unraveled with a sort of “he said, she said” scenario about which party broke things off, and with little explanation of why.

Regardless of whether Yelp walked away for the promise of a better deal, or Google called things off feeling that Yelp was not negotiating in good faith, or just to call Yelp's bluff, the news is unfortunate. Google is really the only suitor that can really capitalize on what Yelp has to offer, and Yelp fills a void that can really tie all of Google's advertising empire together with a pretty red bow.

Match Made in Heaven

The rival suitor that allegedly offered $750 million for Yelp has not been revealed, but it seems safe to say it would have to be Microsoft–if the offer really exists and wasn't simply a negotiating tactic to try and elicit more money from Google. What other company has that kind of money and can find any strategic use for Yelp that would be worth an investment of that size?

Microsoft has done well with Bing–developing a number of innovative search elements and creating a compelling alternative to Google. Bing is a success and it is gaining in market share, but it's no Google and Microsoft doesn't have all of the other pieces necessary to capitalize on what Yelp has to offer.

Google, on the other hand, is uniquely suited to leverage Yelp. Combined with other recent Google acquisitions like AdMob and Teracent, purchasing Yelp would extend Google's advertising capabilities and enable it to deliver targeted ads based on personal preferences and current geographic location via mobile platforms.

With all of the various components in Google's advertising arsenal and Yelp, Google could come close to emulating the sort of personalized, point-in-time ads that sprang up all around Tom Cruise in the Minority Report–minus the holographic images.

Local shops and small businesses would be able to get into the mobile ad game. Combined with GPS positioning in mobile handsets to track your location, Google could present ads from local shops that are in your immediate vicinity. I am much more likely to act on a $2 off coupon from a local coffee shop I am walking past right now, than to care about a more abstract mobile banner ad for a product or service.

Kiss, and Make Up

It's hard to say what the state of the Google-Yelp negotiations is. Whether Yelp walked away or Google retracted its offer, neither side is saying that the deal is off forever. Face it, neither of them has an alternative that is even remotely as viable as what the two can do together.

For the sake of all parties, I'll keep my fingers crossed that they play nice and reach an amicable solution.