Shares of Yelp climbed Thursday after Piper Jaffray released a note stating Yelp's (NYSE:YELP) reviews grew faster than reviews on Google (NASDAQ:GOOGL)(NASDAQ:GOOG) Plus. Over the past year, Yelp saw a 130% increase in the number of reviews on its site, compared to a 75% increase in reviews at Google, according to Piper Jaffray's data.
Although reviews are not of material importance to Google, they are a pillar of Yelp's business. Google has struggled to disrupt Yelp and its local ad business for more than eight years. Nonetheless, Yelp maintains its advantage as the place for consumers to post reviews of local establishments.
Let's take a look at what may have led to Yelp's strong review growth, and if investors should expect Yelp to continue growing its user reviews.
Driving growth internationally
Yelp continues to expand to new markets and new countries. Last year, the company launched its platform in four new countries and 20 new markets. Last quarter, the company added Mexico and Japan, its 25th and 26th countries.
A significant part of growth from last year, however, came through the acquisition of Qype. The European review site added 1.8 million reviews from Germany in the fourth quarter. In the past year, Yelp migrated about 1 million additional reviews from Qype's French and British sites in addition to hundreds of thousands of reviews from Spain, Italy, and Ireland.
Naturally, those additional reviews from Qype are one-off instances. On top of the reviews, however, Yelp gained a large number of new European users Qype spent years accumulating. In Germany alone, the Qype integration helped grow the number of contributors 350% since October.
Although not every Qype user migrated to Yelp (many were inactive on Qype), Yelp is seeing a good conversion of legacy users. The increase in users ought to have a positive impact on reviews and engagement well into the future.
Engaging mobile users
Yelp added the ability to post reviews through its mobile app or website in August of last year, and users are taking advantage of the feature. Yelp continues to improve its mobile experience, and last quarter it enabled users to add photos through the mobile web.
Yelp attracts about 46% of its visitors through mobile, and the vast majority of mobile users find the site through the mobile web. The ability for Yelp to maximize engagement of its mobile users is increasingly important as mobile user growth is outpacing overall growth.
Since the rollout of mobile reviews last August, Yelp has seen increasing popularity of the feature each quarter. In the third quarter, 25% of reviews came from mobile. That increased to 30% in the fourth quarter and 35% last quarter.
As growth in mobile users continues to outpace overall user growth at Yelp, management could very well expect mobile reviews to have a positive impact on review growth. On the company's fourth quarter conference call CEO Jeremy Stoppelman indicated that management plans on expanding the opportunities for users to contribute via mobile. The addition of photo uploads via the mobile web may be just the start. As stated by Stoppelman on the call, "We are focused on bringing all of the functionality of the desktop web to mobile, we're just kind of knocking through our priorities. So we have more to come."
Competing with Google
Stoppelman knows that Google is one of Yelp's more serious threats, but notes Google has struggled with building a community like Yelp. Google tried in the past with a program called Community Managers, which it wound down, and now City Experts is taking its place. It also launched and shutdown Buzz -- a social microblogging platform -- within two years.
Google says that Google Plus has 540 million active users, but with the ubiquity of Google and YouTube, it's hard to determine what constitutes activity on Google Plus. Despite the large number of active users, the engagement just doesn't seem to be on par with Yelp.
As Stoppelman put it, "I don't really worry too much that it suddenly makes Google a fun destination where people want to volunteer a lot of their time to writing really high-quality reviews."
Yelp's strength in user engagement got some one-off boosts over the past year, which may have led to out-sized growth in overall reviews. Yelp isn't sitting on the sidelines, however, and is making efforts to continue expanding internationally and engage users on mobile devices. As long as the company continues its consumer facing efforts, it should be able to maintain its position as the go to place to share opinions and volunteer information on local businesses.
Meanwhile, Google will have to think of something innovative if it wants to take on Yelp, because copying its playbook won't put much of a dent in its business.
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Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Google (A shares), Google (C shares), and Yelp. The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.