One of the key lessons in B-School was to stick to what you know.
Brands are built up over time for a reason, so it’s almost never a bad move to stick to your core competency, and sell off unrelated divisions that don’t add directly to your brand equity – if not your bottom line.
There are exceptions to this rule, of course. 3M is an amazing conglomerate, as are consumer brand conglomerates like Unilever.
The God of Ice Cream
Speaking of B-School, my brand marketing professor at the University of Maryland was essentially the “God of Ice Cream.”
He only had a Bachelor’s Degree (from Oxford University, but still…) – his authority came from his real-world experience – decades spent as a regional and country brand manager for Unilever’s ice cream division worldwide.
When Unilever first tried to enter the U.S. ice cream market, it found itself blocked out of the valuable grocery store shelf space.
So in order to clear space for its signature Magnum brand ice cream bars, Unilever pursued an acquisition strategy.
It bought Breyer’s, Ben & Jerry’s, Popsicle, and Klondike.
I mean…damn! That’s a formidable share of the U.S. ice cream market.
But I digress…
Word broke yesterday that Google holding company Alphabet was mulling over selling Zagat, the popular restaurant ranking guide that it bought in 2011 for $151 million.
I don’t really understand why Google pursued that purchase in the first place, other than as a clear consolation prize for failing to acquire Zagat’s much web-savvier competitor, Yelp.
The only reasons that come to mind?
- Additional firepower for hyper-local search; and
- Additional consumer data (restaurant preferences) it could later aggregate and sell better ads against.
Either way, it’s still a bit of a stretch for a search engine and digital advertising machine to buy a crowd-sourced restaurant review site that was largely stuck in the age of hard-copy books rather than mobile-enabled online reviews (Yelp).
Still, the prospect of Zagat’s sale raises a few interesting questions.
What’s Zagat Worth?
Namely, whether it has any value in today’s day and age.
First, there’s an argument to be made that $151 million is a rounding error for Google/Alphabet, a company that reported $90.3 billion in revenue last year.
Given that, Alphabet has nothing to lose by keeping it on the books, if only to keep competitors like Facebook from weaponizing its big data.
Or…there’s the very real possibility that Google found Zagat’s data to be of little concrete value.
After all, Yelp itself only reached true profitability in the last few years. While (as expected) it may post significant growth in 2018, there’s little case to support its long-term profitability (or even market dominance).
In addition, as with Yelp, there are currently no safeguards in place to prevent false reviews – or even to ensure that reviewers actually visited and ate from the restaurants they write about.
This is the same sort of problem that plagues Twitter – anonymous users and bots can skew the system with fake news accounts and/or posts that go “viral” due to manipulation, rather than for organic reasons.
The sobering conclusion of all this?
In the age of Yelp and nearly infinite information about any given restaurant freely available on the web — and thus, on our smart phones — crowd-sourced restaurant reviews by strangers may actually be worth next to nothing.