With Frommer's, Google Taps Gurus

by Peak Positions

Story first reported from WSJ.com

Google Inc. for years swore it wasn't interested in creating content, choosing instead to point people to information on the Web. Google also championed the vox populi, letting crowd-sourced opinions bubble to the top when users search for answers online.

Slowly, though, the experts have been moving up in Google's eyes, and its business.

On Monday, Google said it is acquiring the Frommer's travel-guide business in a bid to attract more advertising dollars tied to online-travel bookings and local-business information. Google is buying Frommer's from publisher John Wiley & Sons Inc.

Google paid around $25 million for Frommer's, according to a person briefed on the deal, which hasn't yet closed. But the deal is more significant for its strategy than its price tag.

By owning Frommer's travel-guide content and showing it in search results, Google could sell travel-related ads against it and provide more tools for people to book travel arrangements.

The Frommer's deal follows Google's 2011 acquisition of Zagat Survey, whose reviews and ratings of millions of businesses have since been incorporated into Google+ local-business listings. Google said Monday that the Frommer's brand would be melded with the Zagat brand. Frommer's data about local businesses around the world could boost the Google+ business listings—where both Zagat ratings and individual customer reviews are displayed—and Google Maps.

With Zagat and Frommer's, Google is betting it can become a trusted guide for travel and local-business information by using expert ratings and aggregating online comments from thousands of customers, the way Yelp.com and TripAdvisor.com do.

Frommer's is more evidence that Google has grown fonder of professionally produced content. There are other examples: It recently took an equity stake in Machinima Inc., which creates video content mainly for Google's YouTube video site.

A Google spokeswoman declined to comment.

In addition, Google is investing more than $350 million to help create and market professional-grade videos for YouTube, located on special "channels," as the site upgrades its offerings from the simple user-generated videos of its roots.

A separate content effort, though—Google's Knol online encyclopedia, which took contributions from experts—wound down this year as Google CEO Larry Page killed off some underperforming services.

In addition to owning content, Google also is trying to become "vertically integrated" in terms of mobile devices. Google's strategy for years was to allow manufacturers to use its free Android operating software, helping them compete with Apple Inc. gadgets and ensuring that its search engine would be built into the devices. But Google recently bought handset maker Motorola Mobility and has embarked on an effort to build its own mobile devices.

The Frommer's deal could put Google at odds with other website publishers. In recent years, Google has expanded its array of services that seek to directly answer users' queries, departing from its original strategy of sending them quickly to the most relevant site. For example, people who search for local-business information now often see links to Google+ business listings—and Zagat ratings—in the search-engine results above other sites like Yelp.

Google—and its ambitions to capture more online ads related to travel and local-business information—are under scrutiny by antitrust authorities, who are looking into allegations that the company directs its search-engine users to its Google+ business listings, undermining travel and online-review sites such as TripAdvisor and Yelp. The Frommer's deal is too small to trigger an automatic review by antitrust authorities.

Google has denied any anticompetitive practices and has repeatedly said it creates its services to benefit users, rather than other websites. Some U.S. courts have agreed with Google's assertion that its search-engine results are a kind of opinion that is protected by free-speech rights.

Stephen Kaufer, the CEO of TripAdvisor Inc., said Monday, "It is puzzling to us that Google is going backwards to the opinion of one—a writer—when TripAdvisor is proof that travelers like the wisdom of crowds" and their social-network friends.

Mr. Kaufer, who has spoken out about Google's practice of pointing users to Google-owned sites, added: "I absolutely worry that Google will preference Frommer's content above organic search results to the detriment of the users' experience and the enrichment of Google."

Yelp Inc. declined to comment.

TripAdvisor shares fell 4.6% in Monday trading; Yelp's stock dropped 7.7%.

Google in 2010 made its first big foray into the travel industry by acquiring flight-data company ITA Software, which powers the flight-booking tools of numerous websites.

Last year Google launched its own flight-booking service.

Google generates about $2 billion to $3 billion per year from selling travel-related ads on its search engine and hotel- and flight-booking service, with travel sites Expedia Inc. E and Priceline Inc. being among the top advertisers, according to Herman Leung, a stock analyst at Susquehanna International Group LLP.

The U.S.-based leisure-travel industry spent $2.56 billion on online advertising last year, up 40.6% from a year earlier, according to research firm eMarketer Inc. Last year U.S.-based travelers spent more than $100 billion to book trips online, a figure that is expected to grow by around 10% annually, eMarketer said.

Google said Monday it hasn't yet decided whether the Frommer's guidebooks will continue to be published in print or whether they will eventually migrate entirely to online.

"Our commitment is to keep things as they are today and once we combine operations, we'll know better what the future looks like," said Bernardo Hernandez, a director of product management within Google's Zagat unit.

"Consumers need fresh, accurate information," Mr. Hernandez said. "When you add information you can trust to phone numbers and addresses as part of the Google search experience, it enables users to convert their intentions into actions," meaning to book travel online.

Wiley, which has owned Frommer's since 2001, said it intended to sell the brand in March as it no longer aligned with its long-term strategies. Frommer's dates back to 1957, when Arthur Frommer, founder of the Frommer's series, published "Europe on Five Dollars a Day."

Bill Newlin, publisher of Avalon Travel, an imprint of the Perseus Books Group that publishes travel expert Rick Steves and the Moon branded guides, said he wasn't worried about Frommer's titles getting an unfair advantage in Web search.

"There's only one way to spell Rick Steves," he said.

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Review Site Yelp Under Fire in Business' Lawsuits

SAN FRANCISCO (AP) - Yelp, one of the most popular Web sites that let people post opinions about restaurants, shops and local services, is being sued by several small businesses that claim they've been pressured to advertise on the site in exchange for getting negative reviews squashed.

Yelp denies the claims, but exactly what happened may never be clear. And regardless of what happens in court, the lawsuits could taint Yelp's reputation as a leader in online reviews.

San Francisco-based Yelp has faced many complaints since it began letting consumers post reviews about local businesses ranging from all-you-can eat buffets to zip line operators six years ago. Often businesses have complained about how reviews on the site - positive or negative - can mysteriously disappear and reappear.

If your company or brand is being damaged by negative reviews, contact the online reputation management specialists at Peak Positions SEO.

But since late February, at least three lawsuits seeking class action status have been filed against the site by a dozen companies, complaining that reviews are manipulated depending on which companies advertise on the site and which ones do not.

The first suit, which explicitly alleges Yelp engaged in extortion and attempted extortion, was filed Feb. 23 in U.S. District Court for the Central District of California by Cats & Dogs Animal Hospital in Long Beach, Calif.

That lawsuit was amended in March to add nine more companies - some Yelp advertisers, some not. It alleges Yelp sales representatives indicated to businesses that they could alter site listings to help advertisers and harm non-advertisers, and that Yelp has actually done so.

The lawsuit began with Cats & Dogs owner Greg Perrault, who said in a court filing that after receiving negative reviews on the site he started getting calls from Yelp, informing him that if he advertised Yelp would hide or lower negative reviews on his page and let him choose the order of the reviews.

Perrault said he decided not to advertise, and a week later a negative review that had disappeared from his page reappeared. He also received a second negative review from someone who had previously written one, he said. Yelp refused his request that the reviews be removed, he said.

The lawsuit seeks an order barring Yelp from manipulating reviews and forcing the company to return money reaped "by means of its wrongful acts and practices," along with unspecified damages.

At least two similar lawsuits have been filed: One by Christine LaPuasky of D'ames Day Spa in Imperial Beach, Calif., on March 3 in the same district court, and one by Boris Levitt of Renaissance Furniture Restoration in San Francisco on March 12 in San Francisco Superior Court.

In an interview, Yelp co-founder and CEO Jeremy Stoppelman said that the businesses suing his company don't understand how Yelp works.

Yelp says some reviews might come and go because it relies on an automated program to weigh reviews and filter out ones that might be untrustworthy, such as a negative review a spa owner might write about a competitor. Yelp says it does nothing to manipulate reviews, aside from allowing advertisers to choose one review they would like to feature at the top of the page about their business.

Stoppelman said the automated filter has helped Yelp stay relevant to consumers, even though it frustrates some businesses.

Bob Gutgsell, whose San Carlos, Calif.-based Astro Appliance Service is one of the 10 businesses involved in the Cats & Dogs suit, said he does understand how Yelp works, and he doesn't like it.

Gutgsell said that after responding to a negative Yelp review from a customer, he got a call from a sales representative asking him to pay several hundred dollars a month to advertise. Gutgsell said the Yelp representative explained that if he did so Yelp would help him control his good and bad reviews.

"The attitude that was conveyed was, 'You really need to do this for your business.' And I felt I really didn't need to do that for my business," Gutgsell said.

Soon after declining to advertise, he noticed some positive reviews had disappeared from his site profile, he said.

Stoppelman countered, however, that his sales reps have "absolutely no ability" to move reviews or remove them from Yelp. Once a sales representative closes an ad deal it is handed over to an account manager who, unlike representatives, is not paid in accordance with the number of deals he or she makes, Stoppelman said.

"We would immediately know from our account manager that something was going wrong, or their messaging was off-key, and we simply haven't found that," he said.

Stoppelman says the lawsuits are suspiciously timed, because Yelp recently got deeper pockets. Yelp got an infusion of venture capital in January, snagging $25 million from Elevation Partners. That values the company at about $475 million and brings its total financing to $56 million.

Some plaintiffs said they were unaware that Yelp had just gotten more financing, though. Ronald Marron, a lawyer for D'ames Day Spa, said he just wants money returned to people who were subject to Yelp's "unfair business practices and bought advertising as a result."

Yelp has tried to head off problems by making efforts to connect with businesses and educate them about the site. After a rash of complaints early last year, Yelp started allowing businesses to respond publicly to customers' critiques right on their Yelp pages. Previously businesses could contact reviewers only privately. Yelp also has hired an outreach manager who has met with business owners and business groups.

Given that more than 15 million small businesses are listed on the site, including businesses that have not yet been reviewed by Yelp users, lawsuits from even a dozen businesses don't seem like very many, said Ray Valdes, a Gartner Inc. analyst.

"The question is," he said, "how many more will come out?"

Google In Talks To Purchase Yelp

NY Times

SAN FRANCISCO — In a sign that Google is interested in broadening its reach among local businesses, the search giant is in acquisition talks with Yelp, the review site for local businesses, according to three people with knowledge of the deal.

The two companies have had conversations for several years, but a more serious round of acquisition talks began two months ago, one of the people said late Thursday. The companies have discussed a price and are negotiating the details, but have not yet signed an agreement.

Both Google and Yelp declined to comment on Friday.

The people with knowledge of the deal would not disclose the acquisition price, but one said that it was more than $500 million, the figure cited by TechCrunch, the industry blog that first reported the news Thursday evening.

Yelp, which has raised $31 million in venture capital, is on track to bring in about $30 million in revenue this year, one person said.

Yelp, which was founded in 2004 by two PayPal veterans, Jeremy Stoppelman and Russel Simmons, dominates the market for local business listings and ads in big American cities, and has listings in Canada and Britain. It gets more visitors than its closest rival, Citysearch, and many of them review local businesses prolifically.

Yelp makes money selling sponsorships to these businesses. For $300 to $1,000 a month, their ads appear on top of search results and on the profile pages of competitors, and businesses can post slide shows of photographs and prevent competitors from advertising on their page.

Google has been showing greater interest in the local business market in the United States. It has expanded its profile pages for local businesses, which include location and hours, maps and reviews from other Web sites. In June, Google gave local businesses the ability to manage what people see on their profile pages, similar to what Yelp does.

Google has been reaching out to local businesses with simpler ways to advertise on the search engine and achieve better Google SEO results. It is also distributing stickers that businesses post in their windows and passers-by can scan with cellphones to get coupons or information about the business.

The deal between Google and Yelp could still unravel, one person said, particularly if another acquirer comes forward now that details have leaked.