Is it possible to make money off of other people’s opinions? If you study up on these following companies, you just might be able to!
Yelp Inc (NYSE:YELP) was founded in 2004, and provides user-generated reviews on restaurants, stores, and activities. Yelp Inc (NYSE:YELP) had an average of approximately 102 million monthly unique visitors in Q1 2013, and its users have written over 39 million local reviews to date.
Yelp Inc (NYSE:YELP) went public in March 2012 at $15 a share, and a valuation of $898.1 million. The company currently trades right around $30/share, with a market cap just shy of $2 billion. Revenue growth has been impressive (net revenue was $46.1 million in the first quarter of 2013, reflecting 68% growth in net revenue from the first quarter of 2012), as has the growth in reviews (39 million, up 42% from a year ago), monthly unique visitors to the site (up 43%), and active local business accounts (45,000, up 63%).
Yelp Inc (NYSE:YELP), like its competitor mentioned below – Angie’s List Inc (NASDAQ:ANGI) – drives real revenue to local businesses. A study by the Boston Consulting Group showed that a business saw an average annual revenue lift of $8,000 just by claiming its free business owner account on Yelp Inc (NYSE:YELP).
Investors who got in at the beginning Yelp Inc (NYSE:YELP) were in for an initial (but not unexpected) bumpy ride, but have doubled their investment in the past 1.5 years. But can the company continue to grow and be profitable?
Yahoo! Inc. (NASDAQ:YHOO) CEO Marissa Mayer has mentioned a few times that Yahoo! Inc. (NASDAQ:YHOO) needs “more personalized content and increased product innovation.” What better way of getting instant access to personalized content, while increasing search engine capability, than acquiring a review site?
An investment like Yelp, (and there are rumors Yahoo! might consider it) would help beef up Yahoo!’s services, plus bring in more mobile revenue. Yelp only launched mobile display ads in the most recent (first) quarter. In that quarter, 36% of local ads were shown on approximately 10 million unique mobile devices on a monthly average basis (roughly 10% of monthly users were mobile).
According to the website All Things D, sources inside Yahoo! say:
…direct mobile revenue hovers only around $125 million annually, mostly from search revenue on mobile devices. While users are consuming lots of Yahoo! Web pages on their phones, which could technically boost the sales numbers higher, rendering most desktop-created ads on mobile is not the same thing as the significant mobile revenue Yahoo! needs to generate.
In other words, the company needs more mobile specific ads and content. And that is exactly where Yelp reviews could come in handy for Yahoo!.
Yahoo! still does not share its mobile revenue figures, but it did reveal in its fourth-quarter earnings call that it has 200 million daily active mobile users. In comparison, Facebook Inc (NASDAQ:FB) says it had 618 million daily active mobile users during that same quarter, with 23% of its $1.33 billion in mobile revenue.
Clearly Yahoo! needs to up its mobile offerings, but the company just spent a billion dollars to acquire Tumblr, so chances are unlikely that it has a few billion more sitting around to acquire Yelp.
So who should buy Yelp?
How about Apple Inc. (NASDAQ:AAPL)?
Apple Inc. (NASDAQ:AAPL) has already been making moves away from even distantly relying on Google Inc (NASDAQ:GOOG) for anything. At the WWDC this week, Apple mentioned that Google Inc (NASDAQ:GOOG)’s biggest competitor, Microsoft Corporation (NASDAQ:MSFT)’s Bing, is integrated into iOS 7. Apple’s Siri is already an alternative to Google Search, and it uses sites like Yelp to answer certain questions. It is expected that the new iOS 7 update will better integrate Yelp and Apple Maps.
