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Google Acquires Zagat Restaurant-Rating Service to Reach Local Advertisers

Google Inc. (GOOG) acquired Zagat Survey LLC, the review service known for its burgundy-colored restaurant guides, adding features designed to boost ad revenue from local businesses.

Zagat rates hotels, eateries, retailers and other vendors, Mountain View, California-based Google said today in a blog post. Google, the world’s largest Internet-search company, didn’t disclose terms of the transaction.

Adding Zagat’s rankings, famous for a mix of quotes from different users, helps Google vie with Yelp Inc. and OpenTable Inc. (OPEN) in offering restaurant information. The purchase also escalates competition with social-networking leader Facebook Inc. and daily-deal providers Groupon Inc. and LivingSocial.com.

The Zagat deal signals that Google is getting more serious about providing local information, said Kerry Rice, an analyst at Needham & Co. in Los Angeles.

“Competition is going to increase,” he said. “That may not ultimately be good for OpenTable and Yelp.”

Shares of San Francisco-based OpenTable fell $5.23, or 8.3 percent, to $57.50 on the Nasdaq Stock Market, marking the biggest decline in four months. Google’s stock, which has dropped 9.9 percent this year, rose 93 cents to $534.96.

OpenTable Partner

OpenTable provides restaurant reservations on Google Places, which helps local businesses call attention to themselves in search results. The company said in August that 5 to 10 percent of traffic on its site comes from Google and other affiliates, including Zagat and Yelp.

Zagat will be central to Google’s efforts to provide more local information, Marissa Mayer, vice president of local, maps and location services, said in the blog posting.

“Moving forward, Zagat will be a cornerstone of our local offering -- delighting people with their impressive array of reviews, ratings and insights, while enabling people everywhere to find extraordinary (and ordinary) experiences around the corner and around the world,” she said.

In June, Google said the U.S. Federal Trade Commission had begun what’s likely to be a broad antitrust review of its business practices, including search and advertising. U.S. and European investigators are stepping up their scrutiny of Google, questioning whether its dominance in search blocks competition or harms consumers.

Reviews Removed

Google said July 21 that it removed outside reviews from its Places pages, which directs users to local establishments. Yelp, Expedia Inc. and other companies complained that Google used their content without permission and misrepresented information on their sites.

In announcing the deal today, Zagat framed it in the form of a review: “Zagat, a ‘pioneer in user-generated content’ and creator of the world’s most ‘influential’ and ‘trusted’ consumer reviews, has been acquired by another ‘renowned innovator,’ Google.”

The deal marks a reversal of course for Zagat. The New York-based company said in June that it had decided against a sale and intended instead to make investments to expand its Internet business.

The review service hired Goldman Sachs Group Inc. more than three years ago to find a possible buyer. Tim and Nina Zagat, who founded the closely held business as a hobby in 1979, said in 2008 they were considering partnerships or joint ventures.

The couple met at Yale Law School and started the business after a guest criticized a newspaper’s restaurant reviews at a dinner party. The Zagats began asking friends’ opinions and found 200 amateur critics to rate 100 restaurants for food, décor, service and costs. The results, printed on legal-sized paper, were an instant success, according to Zagat’s website.

Yelp, based in San Francisco, was founded in 2004 as a way to gather user-generated reviews on a range of local businesses. The company said in April that it was exploring an initial public offering, without giving a timeline.

To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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