Yelp Redesigns Homepage With Emphasis On Social Connections

by Trefis Team
-14.25%
Downside
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Market
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Trefis
YELP
Yelp
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Yelp (NYSE:YELP) has redesigned its homepage to integrate more social elements into its design. It is now easier to find out what your friends are “yelping” about. The new features include a news-feed that shows your friends’ activity on the site and the user can view comments, check-ins, reviews and photos. You will also be able to comment on these activities. The news-feed is similar to the kind you see on Facebook and has tight social integration. The design is clearly intended to increase mobile usage; the app is currently in use on 7.2 million unique mobiles as of Q2 2012. Monetizing the mobile application is key as more users begin to use the application on their mobile phones. [1]

Check out our complete analysis of Yelp

Solid Earnings Growth

Yelp reported a solid 67% jump in net revenues y-o-y with Q2 revenues coming in at $32.7 million. Cumulative reviews grew 54% y-o-y to more than 30 million, with average unique monthly visitors growing to 78 million. Active local business accounts grew 113 percent y-o-y to approximately 32,000. For Q3, the company has guided for net revenues in the range of $34.5 million to $35.5 million with adjusted EBITDA of $750K to $1.25 million. [2]

Mobile Yet To Be Monetized Even As Yelp Expands Internationally

The company expects full year revenues of $135-$136 million, which is a 62-63% y-o-y growth and adjusted EBITDA of $3-$4 million. Yelp is rapidly becoming “a de facto search engine” as users prefer Yelp over other search options when it comes to reviews. [3]

Yelp has a fairly large mobile user base with 7.2 million mobile devices accessing the site per month, up 70% year-over-year. Mobile penetration is high with almost 40% of searches occurring on mobile and 50% of photos contributed by users are also from mobile phones. Currently, Yelp does not run any ads on its mobile app and we can expect significant revenues from the mobile app in the future. Local ads generated $25.3 million, up 89% y-o-y, and brand advertising was $5.7 million, up 27% y-o-y.

Yelp currently operates in nearly 90 cities with Q2 witnessing launches in 8 new markets, including international markets such as Denmark, Finland, and Norway.

We currently have a $12 Trefis price estimate for Yelp, which stands nearly 50% below its market price. Here’s why we think Yelp is highly overvalued. We will revisit our price estimate following the earnings.

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Notes:
  1. Yelp Extreme Home(page) Makeover, officialblog.yelp.com, Aug 14, 2012 []
  2. Yelp Turn To Mobile, Though Monetization Questions Remain, www.seekingalpha.com, August 5, 2012 []
  3. Yelp Q2 Earnings, www.forbes.com, August 1, 2012 []
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