Yelp may be on the auction block. That’s according to a report from the Wall Street Journal that said the reviews site was in conversation with investment bankers to find a buyer for the multi-billion dollar company. No prospective buyers were named in the report, but in addition to the usual suspects, one less likely company stands out as a potential candidate: Priceline Group, the new owner of OpenTable.
The online travel giant, which owns Booking.com and Kayak among others, pushed into the local market last year with the acquisition of restauarnt reservations company OpenTable. The deal, which was worth $2.6 billion, thrust the company in competition with others in the restaurant tech industry, and increasingly, as the gap between search and commerce closes, in competition with local search firms — namely, Yelp.
The prospect of a deal remains speculative and unlikely, although the prospective benefits of a Yelp-owned Priceline are compelling for both companies. First, Priceline has the cash: the company has a market capitalization of a a little over $65 billion and has a little over $3.2 billion in cash and cash equivalents on the books as of the end of the first quarter. Although it may not be able to do the deal all in cash, as was the case with OpenTable, it likely could finance a large portion of it with cash and the rest with stock.
But more important, the company also has the initiative to shell out the billions needed to buy a company. The firm has never steered away from large acquisitions, and Priceline Group CEO Darren Hudson said in an interview this winter that he was “willing to consider additional takeovers. “We’re not a serial acquirer,’’ he said at the event according to a report. ”We have six brands at the table. We can’t have 15 brands.”
With OpenTable deal, an investment in local
If we agree that Priceline meets the basic criteria as a buyer, the strategic reasoning for a Yelp-Priceline tie-up is convincing. More and more, the travel technology industry (what we do in places where we do not live) is converging with the local technology industry (what we do in places where do live). Here’s how I put it after the OpenTable deal:
The growth of a slew of nationally-scaled services that help us explore and interact with cities in previously unforeseen ways means that many of the structures built to help visitors navigate new cities —and implicitly for marketers to reach tourists — might quickly become obsolete.
Like most movements in the technology industry, the consolidation of travel and local sectors begins and ends with information. More and more, there’s a belief among technology types that the barriers which kept information about one aspect of our lives from the goings-of another, or from locals to travelers, should be broken down. A traveler should be able to find the best places a city has to offer. He should, as they say, “live like a local.”
In many ways, the decision to buy OpenTable indicates that the company has already embraced that thesis. By acquiring a restaurant booking site, the company now has a stake in the restaurant discovery experience: discovery drives reservations, and thus helping people find a restaurant is a critical function in the economics of Open Table’s business. And that circuit is becoming more important, forcing these two categories — search and commerce — to converge.
A few developments are causing this convergence. The pairing of cloud computing and relatively inexpensive mobile hardware has dramatically expanded the market for brick-and-mortar operational software. A new generation of point-of-sale and customer-relationship management companies are exploding, and often folding in reservations and table management — two functions which OpenTable — offers into a much broader offering. That means that a company such as OpenTable, or even Grubhub, which traditionally drove value both as a SaaS firm and a customer acquisition firm, will increasingly rely on customer acquisition and search marketing as its core product.
As the OpenTable pushes toward search, the Yelps of the world are increasingly pushing toward operational integrations. The first reason is mobile: The fragmentation of the mobile application ecosystem makes the process of switching between application far more costly than on the web. Yelp has worked to solve this through its Platform initiative, and the company already has an partnership with OpenTable to allow bookings through its pages.
But the more important factor driving search companies to commerce isn’t the consumer, it’s the local marketer. In less than a year, the percentage of inventory sold on Yelp via cost-per-click models has grown from less than 10% to over 40% in the the first quarter of this year. Local marketers increasingly expect performance marketing models, and search companies need access to conversion metrics, everything from a click to a call to a booking, to make these work.
As of now, a Yelp-Priceline tie up is certainly speculative. But if the rumors are true that Yelp is seeking a buyer, Priceline could join a shortlist with Facebook and Yahoo.
Want More On Yelp? Check out why investors sold off in the first place.
Steven Jacobs is Street Fight’s deputy editor.