In December 2013, I watched a documentary on Netflix called Blackfish. I found it so compelling that I wrote a piece entitled "After You Watch This on Netflix, You'll Never Go to SeaWorld Again."
As it turns out, I wasn't alone. Following the addition of Blackfish to Netflix's streaming catalog, SeaWorld's (NYSE:SEAS) attendance plummeted. Various musicians boycotted the park. Losses mounted, and its CEO resigned. If I had shorted SeaWorld stock after viewing the film, I could've made a lot of money -- SeaWorld shares have fallen nearly 40%.
Could a similar fate await Yelp (NYSE:YELP)? The local deals giant has come under fire, and an upcoming documentary -- Billion Dollar Bully -- could soon devastate Yelp's image.
San Francisco or Sicily?
Billion Dollar Bully has not received a firm release date, but it's scheduled to make its debut sometime this year -- in the late fall or early winter. Still, the trailer, which has been released online, gives a fairly clear indication of the company's allegations: Yelp is the mafia of the digital age.
"It is a racket what they do. I mean, they really forcibly make you pay for their services or you get more and more negative reviews and it negatively affects your business," Chris Pastena, a restaurant owner, alleges.
"If the mafia had done what Yelp is doing, they'd be thriving in every county and every jurisdiction in the United States by doing it over the Internet, " says attorney Lawrence Murray.
"To me... it's a language that has been invented in Sicily around the 1930s... The mafia... they are," concludes Davide Cerrentini.
A history of allegations
This isn't the first time Yelp has faced such allegations. Since at least 2009,, small business owners have publicly accused the company of extortion, claiming that Yelp representatives would threaten to rearrange reviews if it they did not agree to pay for its advertising services. Yelp was even sued over the matter, though it emerged victorious -- last year, the 9th U.S. Circuit Court of Appeals ruled that Yelp could sequence reviews as it saw fit.
Despite these allegations, Yelp has continued to grow at a rapid pace. Although shares have fallen more than 45% in the last three months, traffic has continued to climb. Last quarter, for example, mobile monthly unique visitors rose to 83 million, an increase of 22% on an annual basis. Yelp's total local advertising accounts rose 40% to 97,100, and its total revenue jumped 43%.
A potentially devastating development
But as Blackfish demonstrates, it's clear that a well-made documentary can have a significant effect on a company's public perception, bringing mainstream attention to a controversial issue.
After all, SeaWorld was the target of widespread criticism years before the release of the film -- animal rights groups had publicly called for its parks to be closed since at least 2010. It took a movie to capture the public's attention.
Whether Billion Dollar Bully will be as well made or well received remains to be seen, but investors should be mindful of that risk. Yelp's management has consistently denied the claims made by the filmmakers, but it will mean little if it succeeds in swaying public opinion. If Billion Dollar Bully succeeds in casting doubt on the viability of Yelp's revenues, users could turn away from the website in droves. Traffic could drop, and its revenue could plummet -- shares could head even lower.
At the very least, investors should keep a close eye on the film.