Dining Out's Power Couple
Tim and Nina Zagat, the royal couple of the restaurant review business, are holding court at Jean Georges, where the sunlit dining room offers a view of Central Park West. They are attended to as if they were visiting heads of state. Yet when they leave, the Zagats can greet each member of the kitchen staff by name.
Tim, 67, and Nina, 65, take advantage of all the perks of running a global review business—the instant access and upgrades—but always make sure to pay the bill. And when they're out on the town, they stress to chefs and managers alike that they're not the ones writing the reviews. Whether they're penning co-bylined articles for the New York Times on why it's hard to find good Chinese food or ringing the opening bell at Nasdaq, the two are inseparable. Even their navy suits look as if they've been coordinated.
But there are rumblings of trouble for the couple's empire. So with online search giants and food sites like Yelp and Chow, which is owned by CNET and run out of San Francisco by former Industry Standard editor Jane Goodman, encroaching on their realm, the Zagats are striking back. They now offer a redesigned version of their website for cell phones, so that on-the-go diners can get a review quickly. And in the process, they are reaping rewards from the rapidly growing amount of advertising headed toward the mobile sector.
Making Zagat available across every conceivable platform has been one of Nina's main responsibilities inside the company, while Tim focuses more on sales and marketing.
In October, Zagat's website will go through another round of tweaks as part of an overall effort to ramp up the free, ad-supported content online: For instance, the site will offer video and entertainment-oriented content that will be updated more frequently. And as with Yelp, visitors to Zagat's site are encouraged to publish their own reviews online.
Like many companies, Zagat has struggled with its online strategy, first offering everything for free when it launched in mid-1999 and later making users pay for much of the content as the service grew.
The site now offers a mix of premium and free content. A $25 subscription gives customers access to the company's 30,000 official reviews and scores. The company won't say how many online subscribers it has or how its revenue pie is divided, though one executive describes subscriptions as the heart of the business. Advertisers appearing on the site include Audi, BMW, Mercedes, Continental, Delta, Charles Schwab, HSBC, and Visa Signature.
The company has a long way to go to catch its online competitors. Zagat.com was ranked the 62nd-most-visited food-and-beverage reference site for July, while Chow's Chowhound came in at No. 18 and Food Network topped the list, according to Web measurement firm Hitwise. According to Nielsen/Net Ratings, another online measurement service, Citysearch reached 11.7 million unique visitors during July, while Zagat.com reached 665,000. (Epicurious.com, it should be noted, is a food-and-beverage sister site to Portfolio.com.)
Though many New Yorkers still tote their Zagat books to dinner in their jacket pockets and purses, Chowhound's customers not surprisingly find fault with Zagat. "Too often their picks are overhyped and underwhelming," says Mojoeater, one Chowhound commenter, who relies on the site and word‑of‑mouth recommendations to pick restaurants. Another Chowhound visitor says Zagat was good for prices and addresses but believes the Web had instantly made print books of restaurant recommendations out of date, adding that she uses her car's global positioning system to find places when she's on the road. But Zagat's may not be far behind; the company took a stake in the mobile application firm Vindigo in 2000 and is part of some G.P.S. content systems.
When it comes to traditional media, the Zagat business model is one that few other rivals can match. Because reviews are written by a small army of vetted volunteers, its content costs practically nothing to collect; the company charges subscription fees, sells advertising, and also acts as a custom publisher. The Zagat Survey can also be served up for any number of niche or mass markets. For instance, pharmaceutical giant Pfizer recently ordered a custom book to distribute to employees about where to eat healthy meals, while MasterCard International, as part of its promotional involvement with the movie The Breakup, wanted a book on the best places to end a relationship.
Zagat's revenue is anywhere between $25 million and $50 million, depending on whom you ask, though current valuations are hard to come by. When the couple sold a stake to an investment group led by General Atlantic to help fund Web expansion in 2000, the firm's worth was put at $100 million. That was at the height of the dotcom boom, however.
Investors-which include Kleiner Perkins Caufield & Byers, Allen & Co., Nathan Myhrvold, Nicholas Negroponte, and Nancy Peretsman-bought into Zagat for about $31 million, and some wonder if they will be looking to sell out soon, given that private money tends to look for a return after five to seven years. But General Atlantic representative Patricia Hedley denies it. In an email, Hedley says, "We continue to be an investor in Zagat Survey. Our firm has a long-term investment horizon."
Nina Zagat says the investors "want to see us develop the company as aggressively as we can," adding that "in five years, you'll see us continue to grow geographies to add more content in verticals we cover and add additional leisure activities." She stresses repeatedly that the couple has no plans to do anything but continue with the company, though the question of who will succeed them remains open. The couple's elder son, Ted Zagat, 32, earned an M.B.A. from Harvard Business School and left his position as Zagat's president earlier this year after spearheading the company's foray into rating urban nightspots. A company representative says Ted is still very involved with the company, and he appeared on a Today show segment this summer to promote the firm's first-ever fast-food survey. Ted's brother, John, 30, is currently a medical student at New York University.
Mark Edmiston, managing director at AdMedia Partners, a financial advisory firm, says he once tried to buy the company in the early 1980s for the Washington Post Co., but at the time, he didn't think the Zagat concept would ever work beyond a couple of cities. He says the Zagats have more than delivered on the execution of their plans for expansion.
As for their personal dining preferences, the Zagats may be seen at Jean Georges, but their tastes are, shall we say, eclectic. Even with the best of the globe's cuisine to choose from, Tim has something of a Clintonian weakness for fast food. According to a diary the couple penned for Slate in 1999, Tim can not resist McDonald's french fries or Burger King's Double Whoppers.




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