Earnings Review: Will Yelp Inc (YELP)’s Fortunes Turn Around?

Page 1 of 2

Yelp Inc (NYSE:YELP) has slowly and steadily evolved into a force to reckon with in the online consumer reviews space. But the business of crowd-sourced reviews and local advertising seems to be attracting big names like Facebook Inc (NASDAQ:FB) and Google Inc (NASDAQ:GOOG) . In spite of growing revenues at a rapid rate of more than 63% year-over-year, Yelp faces serious challenges in terms of rolling out a profit in a business with limited barriers to entry.

Growth across the Board

Yelp’s monthly unique visitors are up 37% year-over-year and finished Q3 of 2012 at 84 million. The company’s business model of user generated content by operating as a social media site has paid off remarkably and that too, with minimal content acquisition costs. The number of reviews on its platform was up 49% year-over-year to end Q3 with more than 33.3 million reviews.

Yelp Inc (NYSE:YELP)The majority of Yelp’s revenues flow in from local advertising from small businesses, and contributed 78% of total revenues in Q3. With a strong sales-force in place, the company’s paying local business accounts are up 82% and now has roughly 35,500 customers. Going forward in Q4 and 2013, all of the key metrics of Yelp especially unique visitors, reviews and the number of paying local accounts should see steady growth.

Yelp is even poised to grow its international presence as well with the buy-out of Germany-based rival, Qype in 2012. The Qype acquisition gives Yelp the ability to tap into big markets like Germany, Brazil and UK etc. without building out its own platform from scratch. Qype also brings a lot of additional content and traffic to the table as well, and might be a good source of revenue growth for the company in the long term.

Will Mobile Monetization Take-Off?

Yelp has built up a strong mobile presence in part due to its integration with iOS 6.  Almost 45% of all Yelp’s search queries comes in from mobile-based devices at the end of Q3, 2012 and almost certainly this number will notch up over time. However, Yelp’s monetization of the 8+ million users of the mobile app is minimal, but the company’s management team intends to place Local advertisements with mobile search results, because of a higher click-through rate on mobile.

Yelp is ready to address the secular shift towards mobile with a pretty solid position. But can the company convince small businesses to advertise on mobile? In the last twelve months, ~77% of its total revenues came in from local advertisements, and only 17% of revenues came in from brand advertisements. The ability to convince small mom-pop stores and other small local businesses to post ads on mobile might pose headwinds for Yelp, and will be a key factor for its long-run success.

Rivalry amongst Existing Competitors

Google’s online review platform, Google+ Local is a big competitor for Yelp. As most of Yelp’s traffic comes in from Google’s search engine, it poses a great risk for the company as Google has put together Zagat, Frommer’s, Google+ and Google Maps as a holistic consumer reviews platform. As restaurants are a major category for Yelp, the Google+ Local can be more of formidable competitor down the road.

In addition to Google, leading travel advisory platform, Tripadvisor Inc (NASDAQ:TRIP) poses strong threats to Yelp. TripAdvisor is the world’s largest travel site and has millions of reviews and listings of restaurants and hotels for travelers on its platform. TripAdvisor has more than 57 million unique visitors and has content syndication partnerships with leading hotels and restaurants and can pose more incremental threats for Yelp down the road.

Also, Yelp competes with Groupon Inc (NASDAQ:GRPN) for Daily deals especially for the restaurant category, and many other smaller and regional competitors like Urbanspoon, Foursquare, Seamless etc. All these companies directly compete with Yelp not only for reviews and users, but more importantly, for local advertising dollars.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!