Market Talk

Back in the fall, Google (GOOG) CEO Eric Schmidt said his company would get back into M&A.

He wasn’t kidding.

Google’s reportedly in talks to purchase local review site Yelp for about $500 million. NY Times says talks have been on going for a few years, but entered a more serious stage about two months ago.

“If the deal does go through, then Google will have snapped up seven companies since August, for what I estimate is a total of $1.5 billion,” MediaMemo blogger Peter Kafka says.

Yelp’s known for its community of users who’ve produced about eight million reviews in 30 different cities. “Those reviews help draw local advertisers, and that’s a market that Google, along with everyone else on the Web, has been trying to crack for years, with limited success,” Kafka says.

The fact that Google’s spreading its wings and acquiring so many different start-ups shows its new-found fascination for what else is out there in the non-search world.

“I think Google is starting to look at the world in a non-search context (i.e., local, live, mobile)” says Jeff Jarvis, blogger and author of “What Would Google Do?” “I see a strategy emerging that has Google profoundly improving search by better anticipating our intent and then moving past search to build hegemony in local and mobile.”

He also thinks all of these acquisitions will help Google transform itself into far more than just a search company. “Not that search will go away, but it will become less important,” he says. “And if search is going to stay preeminent, it had better update itself profoundly.”

But others are skeptical of Google’s latest M&A rampage. MarketWatch columnist John Dvorak says Google may be turning into the Yahoo of the 1990s, a company that bought other startups but couldn’t “monetize, leverage or sustain” them. From Dvorak:

The problem I have with Google buying up various companies, such as Yelp, is that they do nothing but add advertising to a useful service and then let things languish.

Take its acquisition of Blogger.com, for example. Blogger hasn’t really changed for the past decade. It’s frozen in time. Meanwhile, the more dynamic free systems such as Wordpress.com are constantly improving.

This is in line with the Yahoo strategy of buy it, milk it, kill it. The only difference being, Google can actually milk it.

He acknowledges that Google hasn’t achieved the “lofty insanity” that Yahoo reached when it was buying companies left and right. But it still needs to be cautious.

Google, Yahoo and Microsoft should all take a page from the Intel Corp. (INTC) playbook. Intel tends to invest in companies, not buy them out. It only invests in companies that help sell more of its core products. And the company does not pay extravagant sums.

Regardless, investors don’t seem fazed by Google’s recent buying prowess. Shares have nearly doubled from early March and sit close to their 52-week high. Google closed Friday up 0.4% at $596.42.