The Yelp IPO. Who Wants In?

Yelp is going public.
Last week the business-review website operator filed with the SEC for its initial public offering. Sometime in early 2012, you should be able to buy publicly traded shares of Yelp stock. But will you want them?
We can’t seem to make up our minds about Yelp.

We love Yelp.
It’s the mother of all review sites. We barely remember a time when we ate out without consulting it.

We hate Yelp.
Like the old adage says: Everyone’s a critic. On Yelp that includes the uninformed, the unqualified, and the perpetrators of unchecked spelling and grammar.

Yelp is a runaway success.
Yelp draws 61 million monthly visitors to its database of 22 million user reviews.

Yelp is a failure.
Losses total $32 million and counting. Some believe Yelp can never turn a profit.

Merchants can’t make up their minds either.
Exposure on Yelp can drive real traffic to small businesses. Amid a sea of competing delis and pizza joints, a couple of good Yelp reviews can make all the difference. But merchants complain about the lack of transparency to Yelp’s review filter that selects what’s posted publicly, and have suspected that the filter is manipulated to benefit paid advertisers. Class-action lawsuits have been filed that accuse the company of extorting ad fees in exchange for withholding negative reviews.

Then there’s Yelp’s love-hate for Google.
Google may be the pipeline to Yelp’s customer base, but these days there’s not a lot of love passing between the two sites. A few years ago, Google paid Yelp for access to its review database to populate Google Places, a local business add-on to Google Maps. After that agreement ran out, Google tried to buy Yelp, and when the offer was turned down, Google continued to mine Yelp’s pages, without payment, for unlicensed content.

This fall Google bought the Zagat reviewing brand, removed most of the pay wall and pitted it directly against Yelp. Yelp has seen its content pushed to the bottom of online searches as Google tinkers with rankings to favor its own Zagat results. Since more than half of all of Yelp’s traffic comes from Google searches, this could be a disaster in the making for Yelp.

Unconditional love for Yelp’s IPO.
Yelp is the Web’s de facto reviewing authority with killer brand recognition, millions of devoted Yelpers, and a ready-made stock symbol (YELP). Despite grumbles from readers, lawsuits from retailers, and imploding tech partnerships, the IPO is expected to be a great success. Groupon’s recent public offering demonstrated that investors will line up to buy a piece of an over-valued, unprofitable tech company with a shaky future.

More detail about Yelp’s IPO can be found in the S-1 registration statement the company filed with the SEC.

 

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