Yelp Escapes Google's Clutches: Report

Hot startup may have turned down a cool $500 million

By Owen Thomas
|  Monday, Dec 21, 2009  |  Updated 1:30 PM EDT
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Google is flush with cash -- but money can't buy you love.

Not from fickle Web users, and not from flighty Web startups, either.

That's the apparent lesson of a deal undone -- the rumored acquisition by Google of Yelp, the San Francisco-based online-reviews site, for $500 million. TechCrunch, which first reported talks between the companies, now says the deal fell apart over the weekend for unknown reasons.

Google's interest in Yelp was clear: The company needs to bolster its local search against competitors, and Yelp's user-written reviews of restaurants and other businesses would put it far ahead of rivals. Google has tried to mimic Yelp's reviews with its "Favorite Places" feature in Google Maps, but Yelp has managed a trick Google has struggled to learn: how to create a vibrant online community.

What now for Yelp? Venture capitalist Paul Kedrosky believes Yelp -- and a cohort of similar startups -- could go public, in a wave of tech-IPO action like Silicon Valley hasn't seen since the late '90s.

IPOs have been rare this decade. But it's worth considering who's behind Yelp. Cofounders Russel Simmons and Jeremy Stoppelman both worked at PayPal, an online-payments startup which went public in 2002, a rare event after the dotcom bust.

And Yelp is backed by Benchmark Capital, an ambitious venture-capital firm best known for funding eBay in the '90s. OpenTable, another Benchmark company, went public in May.

If anyone might bet on an IPO, rather than take a cool half-billion dollars from Google, it's these guys.

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