Can Yelp Overcome the Google Threat?

Yelp has accused Google of favoring its own services. What does this mean for both business?

Jul 17, 2014 at 6:00PM

Online local guide Yelp (NYSE:YELP) has appreciated remarkably over the last year, with shares gaining 80%. The company's key metrics have improved rapidly, and its focus on mobile should help it sustain that outstanding performance going forward. However, Yelp has raised a concern over the way Google (NASDAQ:GOOG) (NASDAQ:GOOGL) lists search results, claiming the company gives preference to its own services. Will this hurt Yelp's growth significantly going forward, or should investors ignore this concern, given Yelp's mobile moves?

Focus on mobile is delivering results
A look at Yelp's product development indicates that the company is gradually becoming more mobile-focused. It is trying to deliver a better mobile web experience to users and has added a new feature through which users can add photos to Yelp via mobile web.

The company is experiencing strong engagement in mobile, driven by the investment it made over the past few years. Management credited Yelp's solid first-quarter performance to higher revenue from local advertising on mobile devices. The mobile app combines reviews and other relevant information based on the consumer's location, which allows them to check in at local businesses.

According to Yelp, in the first quarter, 35% of new reviews and 60% of all searches came from mobile devices. The company also bolstered its business listing page by increasing the number and size of photos. It improved review highlights to focus on the information that consumers will most likely find useful. On the back of such moves, Yelp is trying to increase organic traffic and improve its mobile business.

Yelp's moves have helped it deliver strong results so far. For example, in the first quarter, revenue increased 66% year over year to $76.4 million, which was better than consensus estimates. Yelp's losses also declined to $2.6 million from last year's $4.8 million.  In addition, Yelp also boosted its revenue forecast for the current fiscal.

These numbers reflect Yelp's solid progress. In the first quarter, 132 million visitors visited Yelp on a monthly average basis, indicating the strength of its user base . Active local business accounts increased an impressive 65% year over year to 74,000. 

Features and partnerships are proving beneficial
Management says that the Yelp brand is becoming synonymous with local search. Yelp has also tied up with other players to improve its presence. For example, it is powering Bing local search and Apple Maps, besides integrating its services into several car navigation systems. It recently announced plans to partner with Yahoo! and 

Yelp is trying to make its platform better for advertisers, and it has launched certain products to address this. Last year, it had launched a new product, "Call to Action," which has gained popularity with both advertisers and consumers. It has been only a year since launch, and it is already generating around 100,000 leads for advertisers every week.

The company is continuously focusing on adding more features to its service to attract more advertisers. After acquiring Qype last year and integrating it into its platform, Yelp saw a significant increase in the number of contributors . In Germany alone, Yelp reported an increase of more than 350% in its contributors since October. More contributors will lead to more reviews, resulting in higher traffic, which will attract more advertisers to its platform.

Yelp has expanded its network to Mexico and Japan. International traffic grew 95% year over year in the previous quarter, and Yelp expects the trend to continue. The company is gradually trying to reduce its reliance on Google by making its own site feature-rich and aggressively promoting its mobile apps.

The Google threat
However, if Google is indeed altering search results to favor its Google+ and Google Places services, Yelp might be in for some short-term pain. According to TechCrunch, leaked documents from Yelp allege that Google is "blatantly highlighting its own products in searches made in the U.S., but not in Europe to avoid angering EU regulators who are reviewing Google antitrust complaints. "

A comparison between the growth in the number of businesses with reviews on Yelp and Google indicates that the search giant is cutting it close. As Fool contributor Adam Levy mentioned in his article, the number of businesses with reviews on Yelp was up only 3% last quarter, while Google+ saw a 2% jump. This is a point of concern going forward, and Yelp will need to continue innovating and aggressively pushing its own services to increase its lead over Google.

The bottom line
Yelp has done very well so far despite competition from bigwigs such as Google. The company's key metrics, such as active local businesses and mobile views, are increasing at a substantial pace, and it also increased its revenue forecast. Looking ahead, the company is expected to sustain its business momentum, as analysts expect its bottom line to increase at a compound annual rate of 72% over the next five years, making Yelp an enticing growth pick.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Sharda Sharma 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers