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Does Yelp have a future?

After a couple of years of disappointing results, investors may now be wondering what the future holds for Yelp (Yelp Stock Quote, Chart NYSE:YELP), whose share price has fluctuated from a recent high of $52.00 last September to the $34.00 range it now inhabits.

Everything depends on the whether the review platform company can keep distinguishing itself among some of its larger competitors like Google and Facebook, says Alex Sherman, technology reporter for CNBC.

“Originally, Yelp was the only game in town when it came to reviews, and this goes back to the initial question of why investors were so gung-ho on Yelp,” Sherman said on CNBC Thursday.

What does the future of Yelp hold? Maybe a buyout…

“[But] this is the $64,000 question: can Yelp survive as an independent company? At this stage, I would probably say that Yelp is too small and I would not be surprised if they sold to a larger competitor.”

Yelp’s story goes back to 2004 when it began as an email listserv by former PayPal employees Jeremy Stoppelman and Russel Simmons, with the business growing community by community, gradually attracting businesses and user traffic. By 2012 when the company had its initial public offering, the site had 22 million reviews and 61 million average monthly unique visitors and by 2018 those numbers had shot up to 177 million reviews and 164 million average monthly unique visitors.


Future of Yelp

“We want to be the Amazon of local information,” said Stoppelman at the company’s IPO. That was three years after both Google and Yahoo had made offers for the company (of $550 million and $1 billion, respectively), both of which were turned down. Now, the same Google is threatening Yelp’s livelihood through its own user-generated reviews integrated with its search engine and, importantly, taking away advertising dollars from Yelp.

“[Yelp] is no different than Facebook or Google in the sense that they’re all on the hunt for digital ad dollars. Yelp’s niche in this is that if you’re going to look for a small business or restaurant, those restaurants can advertise right up against your search on their site and therefore they can make money that way,” says Sherman.

“[But] Yelp has had a difficult time monetizing the business of recommendations into a growth tech company that can compete with the biggest tech companies out there,” he says.

Those challenges were apparent in the company’s quarterly earnings in November. Yelp’s share price dropped 30 per cent as the company reported third quarter revenue that came slightly under analysts’ expectations at $241 million versus the consensus $245. But management’s guidance for Q4 was also disappointing, calling for slower growth on new accounts.

Yet the opposite occurred in February’s fourth quarter report when shares jumped on an earnings beat and a promise to increase its share buyback program.

Going forward, Stoppelman says Yelp plans to its expand its offerings for businesses as well as partnerships with platforms like Grubhub, aiming to become more transaction-oriented than information-oriented.

“In 2018, we evolved our go-to-market strategy to capture more of our addressable market and reduce sales friction,” stated Stoppelman in a press release. “We also made significant progress in driving consumer usage in the Restaurants vertical and business-owner monetization in the Home & Local Services vertical. We plan to continue the transition in 2019.”

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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