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Yelp readies for the stock market

Bob Moon Feb 28, 2012

Jeremy Hobson: In the last year, Groupon, LinkedIn, Zynga and Pandora have gone public. Facebook will follow suit in a matter of months.

And this week, it’s Yelp’s turn. The website that offers user reviews of everything from restaurants to rug cleaners is trying to raise $100 million by selling stock to the public.

Here’s our senior business correspondent Bob Moon.

Bob Moon: Just how many stars — between one and five — does this company deserve?

Andrew Tonner: I’d put ’em right smack dab in the middle. I’d say three stars — a business that has a lot of upside potential, but a lot of uncertainty going forward.

Andrew Tonner is a tech analyst for the Motley Fool investor website. He gives Yelp a rave review for its loyal following, and its rising ad sales.

Tonner: They’re growing revenues at around 60 percent, and they’re growing their user base at equally impressive clips. You know, they have around 61 million active users, 22 million reviews on the site.

Problem is, selling advertising mostly among small local boutiques, salons and restaurants isn’t easy. Marketing expenses have grown — and Yelp’s losses actually jumped to $17 million last year.

The website is also cautioning would-be investors that it gets more than half its traffic by way of Google, which has lately been favoring its own competing sites over links to Yelp.

Tonner: They’re really quite dependent on Google, and that’s a huge threat for the company.

If he were reading a lukewarm review like this on Yelp, Tonner says, it’s not exactly the kind of recommendation that would draw him in.

I’m Bob Moon for Marketplace.

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