TechCrunch reports that Google is in advanced stage negotiations to purchase Yelp, the online local business review service. This is a deal that makes so much sense for Google, it makes me wonder why they haven't done it already. As I wrote yesterday, mobile is a big part of the Google strategy and Yelp plays right into that and the ability to expand Google's ad network to the highly lucrative local market.

What Yelp Offers

Yelp provides a service that lets people review everything from restaurants to colleges. People rate the businesses, and then participants rate the raters. There is a social aspect to the ratings, where you set up a profile and share information with other like-minded people. Businesses can proactively set up their own pages and Yelp makes money selling local ads. According the site's About page, 26 million people visited Yelp in the last 30 days.

There is an excellent iPhone App (and it's also available on Android), that provides a way to find the businesses you want with a quick search from their Nearby links. You get access to a listing of a particular business type, ratings, a map and directions, offering a very efficient way to find a business that suits your tastes, even when you are not in a familiar place.

What It Would Give Google

This plays to Google's sweet spot on just about every level. It uses advertising as its revenue model. It's place-based making use of map technology, and finally it relies on user information, which could help Google leverage information from your personal network, something Marissa Mayer has said Google plans to do moving forward in its evolving results page.

The TechCrunch article reports that Google has tried creating its own directory of local services, but why build your own, when a highly successful one already exists and is there for the taking. This also fits with the new and evolving Google Goggles, which includes a way to look through your Android-powered phone camera to see the names of all the local businesses in your view finder. If you click one, you go to more information about that business. I would imagine, if this deal goes through, you would have the option to go to a Yelp page about that business.

It's Still About Ads

Ultimately, this gives Google access to Yelp's ad network. In a story on Market Watch yesterday, a local business owner was complaining with the move of Ann Arbor News to an online/print hybrid, he wasn't sure where to spend his ad dollars anymore. Google would be foolish to not try to fill such an obvious vacuum that increasingly exists for local business owners as newspapers fail at an alarming rate. It could work well for everyone including the businesses trying to attract customers, and mobile users looking for a local business.

More Ad Clicks

Imagine, entering a search, going to a Yelp page listing local businesses along with links to ads with coupons and so forth. Instead of clipping the coupons, you just show your smart phone, and the click through rate is probably going to be far higher than typical Google ads because people would quickly learn to use the ads to save money.

Google has always had a tough time getting at that local ad market and this purchase would give them an out of the box package ready to merge with existing Google services. It's so perfect, it's hard to imagine this deal not getting done.

I don't think Yelp need google but $500M deal is worth to consider. :)

Yelp has a good and loyal client base (including yours truly). Google has tapped into this following and from a marketing standpoint, it will be a good segment to unleash pilot ad campaigns and market research. Let see...

I have the feeling this deal will still happen some time after the holidays. Too much money on the table, and as I say, it just makes so much sense.