Google to gobble Yelp?

File this under rumor, Google is looking into acquiring Yelp, the social recommendation site popular for restaurants. It is said Google will pay near $500 million for the company to get its hands in local advertising. Try as it may, Google has yet to strike gold in local online advertising.

Last month, Google paid $450 million for AdMob, a mobile ad network. Yelp has $30 million in revenue and forecasts $50 million next and was created by folks who started PayPal. Google looks to be paying a big premium for a company many feel are built on fake reviews and strong-arm sales tactics.

From a post I wrote back in February of this year: “New allegations surfaced from a San Francisco area newspaper claiming Yelp is suppressing bad reviews of establishments in exchange for advertising revenue. The allegations are by nine businesses who claim they are contacted regularly to move bad reviews as part of their advertising budget. ”

Is this what Google wants to get into? Whether to augment their local search efforts, where they recently sent out decals to merchants that feature a special barcode users can scan to get special coupons and reviews of establishments or to provide the backbone for mobile advertising in their free GPS navigation system.

Read: [BusinessWeek]