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Yelp Shifts Focus From Daily Deals To Mobility

Posted on Thursday, Sep 8th 2011

Online review site Yelp is slowly moving ahead with their IPO plans. They had been scouting for a CFO with an IPO experience earlier this summer and filled the position by hiring Rob Krolik, former CFO of Shopping.com. Given the present bearish market conditions, Yelp is now looking for an IPO launch by next year.

Yelp’s Financials
Yelp’s financials remained undisclosed, but management recently reported that their websites were now attracting nearly 53 million unique visitors a month across 63 cities in nine countries with access to 20 million reviews. They are expected to end the year with 24 million reviews compared with 15 million reviews reported at the end of last year. comScore estimates that the number of Yelp’s visitors has grown 87% over the previous year.

Yelp’s mobile initiatives are also delivering good results. Yelp claims to be receiving nearly 4.5 million unique visitors each month through mobile devices. The market maintains their estimates of the company earning revenues of $100 million this year. That being said, Yelp remains unprofitable to date.

Yelp’s International Growth
They continued to grow internationally and earlier this year added their fifth non-English-language international site in Spain. Apart from the website, Yelp’s iPhone and Android apps will also be available in Spanish to help drive mobile-based use of the site. The other non-English-language sites include those operated in France, Germany, Austria, and the Netherlands.

Yelp’s Daily Deals
Earlier this year, Yelp had joined the daily deal brigade with the launch of Yelp Deals. But recently, they decided to step down their focus in the segment and instead focus on their core business of leveraging user based reviews. As a result, they have reduced the sales staff deployed on Yelp Deals and reduced the number of deals offered to their customers. According to Yipit, Yelp had offered 60 deals a month in June and July, but it has reduced that number to 30 for the month of August. Bloomberg also estimates that the company’s revenue from each deal has fallen down from $30,000 at the beginning of the year to $10,000.  However, Yelp Deals will continue to be offered to businesses as part of a “self-serve platform” for businesses to enable them to set the deal up on their business page.

Today bigger players like Groupon and LivingSocial are chasing new subscribers and losing out on servicing their installed base. This is a mistake that will cost them heavily in the long run. It is nice to see that Yelp is not following this course and is instead focused on their core business of generating quality user content. The move should stand them in good stead.

Yelp also has one of the most popular and useful mobile location-based apps. Keeping their focus on these core assets and tuning the business to profitability is the right strategy.

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