A social media platform (With the demise of Ping, Apple has no social media property)
Internet/Cloud application expertise (Recurring problems with iCloud and earlier, MobileMe, indicate this is not a core competency for Apple).
Yelp’s technology would let Apple respond to users’ on-the-go search queries with targeted ads, and allow users to quickly and seamlessly buy what those ads are offering from their phones. Apple Inc. (NASDAQ:AAPL)’s promotion partners would receive real-time updates on the effectiveness of the Yelp Inc (NYSE:YELP) advertising/promotion program, allowing them to change or modify features of their mobile promotion. And Apple will be able to create an extensive profile of iPhone users’ purchase habits, which can be used to add further enhance the value of the company’s mapping services.
Why Partnering With Yelp is Not Enough
Yelp’s value is already evident to Apple’s competition. Google Inc (NASDAQ:GOOG) unsuccessfully attempted to acquire the company for $500 million in 2010. Google later purchased Zagat to integrate its restaurant, lodging and entertainment data into the company’s mapping applications. However, Google is likely to still covet Yelp for the company’s social media platform and service reviews.
Also, Yahoo! Inc. (NASDAQ:YHOO) of late has shown interest in growth through acquisitions with the recent purchase of Tumblr and its overtures toward video-streaming site Hulu. Given Yahoo! Inc. (NASDAQ:YHOO)’s increasing interest in partnering with Apple via search, it could be in Yahoo!’s interest to purchase Yelp as a way to increase the company’s long-term value to Apple.
iPhone apps using data from Yahoo! Finance and Yahoo! Inc. (NASDAQ:YHOO)’s weather site come preloaded on all iPhones. In addition, some Yahoo! data, such as sports stats, already power Apple’s voice-activated “assistant” Siri. The Wall Street Journal reported in April that the two companies were in discussions in regards to expanding their iPhone partnership.
Conclusion
With a market cap approaching $2 billion, Yelp is larger than the typical Apple acquisition. However, a Yelp buyout would allow Apple to integrate Yelp’s search technology with a mobile payment system, thus providing the iPhone with a key point of differentiation versus other mobile competition.
Simply partnering with Yelp does not seem to be a long term solution, given the increasing interest in mapping apps/functionality. (For example, Google and Facebook Inc (NASDAQ:FB) are currently rumored to be in a competition to acquire the map app Waze.) A purchase of Yelp by a competitor could significantly damage Apple’s Siri local search capabilities and value of the company’s mapping app.
Since Yelp is not expected to show a profit until 2014, purchase of its stock today is somewhat speculative. However, given the sizable resources Apple is investing in maps, Yelp’s current partnership with Apple, and the strategic value of Yelp’s data to Apple’s competitors – it may be worth a Foolish investor’s time to consider a modest investment in Yelp.
Apple Inc. (NASDAQ:AAPL) investors, in the meantime, should follow the Apple/Yelp partnership closely to better determine whether the company can cash in on extra revenue from mobile searches and purchases anytime soon.
The article Why Apple Needs to Buy Yelp originally appeared on Fool.com and is written by Bill Shambllin.
Bill Shambllin owns shares of Yelp, Apple, and Google. The Motley Fool recommends Apple, Facebook, and Google. The Motley Fool owns shares of Apple, Facebook, and Google. Bill is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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