Google buys Zagat, targets Groupon, Facebook

By beefing up its local deals offerings, Google could transform the whole market, analyst says

With Zagat's restaurant reviewing operation now in its arsenal, Google is in a position to radically change the daily deals market.

That could spell big trouble for Groupon, which made its name in the localized deals business, and Facebook, which has started investing in this area.

"Zagat will play a prominent role in Google's overall plans for becoming a player in travel, entertainment and particularly deals," said Dan Olds, an analyst at The Gabriel Consulting Group.

"Groupon and others have paved the way with their deals offerings. I would expect to see Google expand the Zagat model to many more businesses, and also become much more active in the Web deals space," Olds said.

Google announced Thursday that it had bought world-reknowned restaurant ratings publisher Zagat for an undisclosed sum.

Google expects the move to expand its online maps and local business listings to include restaurant reviews and recommendations.

"Zagat will be a cornerstone of our local offering," said Marissa Mayer, Google's vice president of local, maps and location services, in a blog post.

Rob Enderle, an analyst at the Enderle Group, noted that Zagat's initial value to Google will probably lie with helping Google Maps users pick out places to stay or eat. "It will also allow them to target high-scoring products for deals and the scores will help validate the value of the deal," he added.

IDC analyst Hadley Reynolds added that Zagat's treasure trove of restaurant information could benefit Google by increasing searches for local restaurants.

He suggested that Google could also add in-depth YouTube video reviews to search results.

"At the end of the day, the target for Google is local advertising, and this deal is well-focused there, and not just in the U.S.," said Reynolds. "Zagat will work particularly well for mobile searches, another primary Google target, where a much higher percentage of searches is local, and restaurants are a natural local search query."

Just this spring Facebook launched Deals on Facebook, a service focusing on helping users find discounts on local activities like concerts or hot air balloon rides.

Google has been increasingly turning attention to the local daily deals business.

Early last month it wrapped up an agreement to buy The Dealmap in an effort to further extend its local deals business. And last April, Google unveiled a beta test of Google Offers , a service designed to go head on against with Groupon.

"For Zagat, the acquisition represents 'game on' rather than 'game over,' as it was about to become the Encyclopedia Britannica of the review business," said Reynolds. "Now they have a second chance to reinvent the service for the online world, assuming Google can harness the management acumen not to kill the value of the brand - something that has been a challenge for them in the past."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, or subscribe to Sharon's RSS feed . Her e-mail address is sgaudin@computerworld.com.

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Sharon Gaudin

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