Groupon Inc (GRPN), Yelp Inc (YELP), Google Inc (GOOG): Want to Make Money on Internet, Go Local

Yelp is trading at eight times (8x) its sales.The company’s business model has a good amount of built in operating leverage and viral marketing is likely to help its top-line grow at an impressive rate. The company is likely to even make money, turning in positive Earnings Per Share by next year. Yelp is increasingly a day to day utility for consumers who use it to make their purchase decisions. I believe there are ample growth opportunities for Yelp Inc (NYSE:YELP) and it will be a secular growth story for next several years. Hence, I recommend a buy on the stock.

Google: Acquisition of Waze highlights the importance of local

Google Inc (NASDAQ:GOOG) has three categories which attract over a billion monthly users each. They are its core search offerings, YouTube and Google Maps. It’s core search offerings is already monetized to a good extent while over the past couple of years it has increased advertising on Youtube. Effective monetization of Google Inc (NASDAQ:GOOG) maps, the only remaining “billion monthly user” category, represent a significant revenue growth driver for Google in the long term.

Google Inc (NASDAQ:GOOG)’s acquisition of Waze will add a social element to its offering and make it more relevant for local business partners. It will also provide Google defense against new players entering this space. The price Google paid for this acquisition ($1.3 billion) highlights the importance Google is placing on the local business as the next growth driver.Google Inc (NASDAQ:GOOG) is a very diversified company and local/maps business alone cannot be the reason for buying its stock. However, the company is doing very well on the other fronts as well and improving revenues from local/maps business will prove to be icing on the cake. I recommend buying the stock.

To sum up, local advertising represents one of the most attractive opportunity for internet investors. Groupon Inc (NASDAQ:GRPN) and Yelp are two pure play stocks on local which investors must include in their portfolio. For investors looking for more diversified play, I believe Google Inc (NASDAQ:GOOG) is a good bet.

The article Want to Make Money on Internet, Go Local originally appeared on Fool.com and is written by Ash Sharma.

Ash Sharma has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google. Ash 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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