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Retail Top 100 2012, No. 35: Yelp

December 2, 2012

San Francisco-based user review website Yelp filed to raise as much as $100 million in a 2012 initial public offering, seeking to become the latest unprofitable Internet company to go public. Co-founded by former PayPal Inc. executive Jeremy Stoppelman in 2004, the website features more than 22 million reviews created by its 61.1 million users. “Investors are open to taking bets on companies that are generating losses,” says Tom Taulli, founder of IPOByte.com and author of “Investing in IPOs.” “No one knows how long this window is going to last, so I think Yelp is going to get out as fast as possible.”

Yelp faces competition from Google, Facebook and Yahoo!, all of which sell online ads to local businesses. The wrinkle here is that Yelp relies on these rivals to send visitors to its site. Google alone accounted for more than half of Yelp’s traffic in the first nine months of 2011. The search engine’s dual role as both competitor and ally may put Yelp in a difficult position in the future, according to Taulli. “Their main source of customers is coming from their competitor.”

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