Yelp! Thinking Inside the Box
Google discussions to buy Yelp were leaked Thursday before the deal closed. Shocking. Yelp, the web's best known directory and reviewer of local business may be valued at more than $500-million for its access to this elusive advertising market.
The leakers tell us: the deal is 80% done — that means the deal is 20% undone, or the leakers would like it to be. The NY Times quoted “one person” yesterday who said, “the deal…could still come apart…if another suitor comes forward now.” The Times mentioned Microsoft, AOL and IAC in loose context.
Sorry, but: AOL will never eat lunch in this town again – it has leak value only because it is a recognizable name other than Microsoft, which is too obvious — not wired, just tired. The number hasn’t been fixed but all sources say they know it’s over $500-million.
That would be 17 times gross revenues of $30-million. Oh, no, wait: the annual gross revenue evaluation model is only 2 times gross, so the price must be $60-million plus a venture capital premium for strategic value, say $500-million. Anyway, how would you interest the powers at Google for less than a cool half-billion?
So, what’s the strategic thing that Google sees in Yelp and why would it be worth half a billion dollars to them?
Google has already made its own version of Yelp, using Google Maps and Google money. Yelp is just a competitor and hardly worth a premium. What’s inside the Yelp box that’s worth the extra bucks?
Some speculate it must be the Yelp local ad sales force — variously estimated between 130 and 200 people. Acquisition price for Yelp as a function of sales force valuation would be $500-million / 200 bodies = $2.5-million per head, many are recent hires. So, no, that’s not it, or, if it is, it shouldn’t be.
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