Yelp (NYSE:YELP) has done a great job of being the de facto platform for local search. The company has built a thriving social network around getting review information from web visitors and is increasingly becoming more of a social media platform and not a stand-alone review site. Yelp's fundamentals are robust, and the company is consistently growing its revenues in the 60%-70% range.

Yelp has a large addressable market and the management intends to make it bigger by expanding the company's reach across the globe. The big pullback in the company's stock price provides long-term investors a great chance to buy Yelp's stock because the company's valuation is a lot more reasonable compared to its recent highs but provides big upside potential in the long-run.

Long-term potential
The company continues to see its core fundamental metrics moving rapidly in the right direction. Yelp saw large increases in user traffic which stands at more than 132 million users including 61 million from mobile devices. The company's revenue growth in the last quarter stood at 66%, and even raised its revenue and EBITDA guidance for fiscal 2014. 

Yelp's social platform has seen robust growth in user-generated content (UGC). User reviews grew 46% year-over-year to 57 million, as Yelp is becoming a major social media platform like Facebook (NASDAQ:FB). Yelp is only at a fraction of Facebook's monthly audience of more than 1.28 billion global users, and has substantial growth room down the road as the company rolled out operations in recently in Japan, Mexico and Argentina. 

Yelp also has an extensive amount of usage on mobile devices just like Facebook. In the last earnings call, Yelp's management disclosed that 60% of all search queries are coming on mobile devices. For Facebook, almost 80% of its total monthly user base is coming in from mobile devices, so Yelp still has room to grow on that front. 

And most importantly, Yelp is growing the number of paying local businesses rapidly. In the last quarter, Yelp saw active business accounts grow to 74,000 and the number of listed local businesses grow to 1.5 million. In the years ahead, Yelp can easily grow the total number of listed business and paying local advertisers dramatically. 

Local ad market is huge
Yelp's management has laid out their intentions to grow the company's footprint globally. In the future, Yelp is likely to have a much bigger presence from current levels, and this translates into a lot of growth potential in terms of adding more user traffic, advertisers and revenues.

And the local advertising market is a huge one worldwide. According to a study by Google, consumers are increasingly using smartphones to figure out the business hours, directions and address of local businesses, and the online platforms like Yelp stand to benefit from this consumer trend. And advertisers are chiming in. According to eMarketer, national advertisers and local advertisers will spend $54.4 billion and $83.6 billion in 2014 to target local consumers in the U.S. 


Yelp currently gets a mere fraction of this advertising spend, but over time with increased web traffic more advertisers will find value in placing ads on Yelp's platform especially large brand advertisers. And thus the company has a huge opportunity in the years ahead.

Restaurant reservation platform
Yelp broadened its revenue potential with the acquisition of SeatMe in 2013, a company that offers reservation service to restaurants. Yelp will likely be more aggressive in marketing its SeatMe platform because it has a few competitive edges relative to OpenTable (NYSE:OPEN).

SeatMe offers its restaurant service with no upfront costs, and a fee of $99/month. This pricing from SeatMe underprices OpenTable which offers a pricier service. OpenTable charges $199/month and has one-time setup fees and recurring cover charges. OpenTable provides online restaurant reservations to more than 31,000 restaurants, and over time SeatMe can be a superior competitor and one that is substantially less expensive for restaurants. 

SeatMe can gain solid momentum in signing up newer restaurant clients, as its parent company has more than 130 million unique visitors, and that can prove to be a great bait for on-boarding restaurants. In addition, Yelp will allow restaurants with a profile page on Yelp to take bookings for free. Yelp is clearly delivering a compelling value proposition to local businesses, and in the process diversifying its revenue base. 

Going Forward
Yelp has gained a lot of traction in signing up new businesses and growing its consumer usage. The business doesn't have significant competition and has slowly built up a strong position on mobile devices. Yelp struck a deal with which should grow the number of advertisers on its platform. Yelp has a lot of intrinsic value and is worth far more than what it is trading for. The company is inching toward profitability, and should be a positive earnings story in the next few quarters. In addition, Yelp offers a lot of strategic value to numerous big Internet names including Facebook and Google and can be an acquisition target as well.