In my opnion this week’s announcement that Seattle-based Urbanspoon has been bought by Internet giant IAC was excellent for the startup community. While financial terms were not disclosed, it’s safe to say this exit was a ways below IAC’s self-imposed $100 acquisiton ceiling but significant nonetheless.
Xconomy Seattle‘s Gregory Huang has heard a wide range of reactions on the deal – everything from “this is great for Urbanspoon and the startup community” to “this deal makes no sense” – so he’s dug a little deeper to try and understand the differing opinions.
So I pinged Warren Gouk, managing director at Seattle’s Cascadia Capital, to get his outside thoughts on the acquisition and what it means for the prospects of consumer Internet startups. Gouk has expertise in Internet strategy and mergers, and just yesterday published an extensive report on the state of new media and online marketing. I asked him how the Urbanspoon deal fits into the overall landscape of startup and investment strategies, and whether we should expect to see other exits like it anytime soon.
“Urbanspoon is a good example illustrating how the business model for traditional media, advertising and publishing companies is being reinvented by consumer Internet companies,” Gouk continues. “Urbanspoon’s approach to quickly aggregating restaurant content (user-generated content + business information) in each city created a scalable next-generation online directory listing for restaurants. These type of plays represent a double-dip value proposition: 1. vertically targeted audience in local markets; and 2. vertically targeted audience focused on eating out. IAC obviously saw the strategic fit tapping into the local and vertical market strategy that they have been pursuing for years.”
Sounds like a WIN-WIN to me. Urbanspoon is a pioneer in the online and mobile space with a unique, innovative and consumer-friendly product (and very cool iPhone App). Their content aggregation and polling system to rank restaurants fits perfectly with IAC’s complementary Citysearch online lifestyle guide. And imagine what Urbanspoon can do with IAC’s financial resources.
On the flip side, Yelp is hot on the heels of Citysearch and this may just be the piece to help fend them off for a couple more quarters.