Local reviews website Yelp is looking to continue the internet IPO's resurgence this week. The company is expected to offer 7.2 million shares on Thursday, March 1st at a price range of $12 to $14. Trading on the New York Stock Exchange should begin on Friday under the symbol YELP. Yelp is one of seven deals on the calendark next week.
For 66 million people each month, Yelp is the destination for user reviews on a variety of local businesses, especially restaurants (42% of reviews) and shopping (20%). To date, the site hosts 25 million reviews, covering local businesses in 46 US and 25 international markets. Revenue is primarily generated through local advertising (e.g. enhanced listings; 70% of 2011 revenue) and display advertising from national brands (21% of 2011 revenue). Yelp Deals, launched in the second half of 2010, allows merchants to offer discounts through the website for a fee. Yelp also has partnerships with OpenTable, Orbitz and third-party advertising networks.
Yelp's fast growth to date certainly will not be limited by a $134 billion local advertising market. With 606,000 registered local businesses but only 23,700 local advertising customers, it has immediate opportunities to expand revenue. While there are risks to its story, Yelp has a strong management team, with experience from PayPal, eBay, Yahoo and Move, Inc, which should help it execute on its opportunity. Considering the excitement generated by recent internet IPOs (e.g. Groupon, Angie's List, LinkedIn and Zillow), we think investors may soon be yelping with delight.
