Online review site Yelp preps for IPO

Sally Herships Feb 29, 2012

Kai Ryssdal:Even if you’ve never used it, you might still have heard of Yelp. It’s the website that offers up user reviews — two stars, three stars, that kinda thing — for everything from restaurants and bars to barbershops. We’re bringing it up because later this week, Yelp’s going to be getting its own review — of a different and perhaps much harsher kind. The company is set to offer its stock for sale to the public on Friday.

Sally Herships reports.

Sally Herships: Yelp has 66 million unique users. That’s probably worth a couple of stars. It’s one of the best known review sites on the web. Star worthy. And it’s worked its way into popular culture.

Pretend Waiter: Welcome to the City Grill, please have a seat.
Pretend Yelper1: Look at this weird fork, yelping.
PretendYelper2: It smells like food in here. Yelped.

That’s a video from the folks at Funny or Die. They’re reviewing a pretend restaurant, but Yelp hopes to raise $100 million with a real IPO.

Sandeep Dahiya teaches finance at Georgetown. He says Yelp’s rapid growth may make the company look stronger than it is.

Sandeep Dahiya: It’s easy for Yelp to have shown the growth rates it had shown, because it was very small. It still is very small.

Dahiya says the hype around the IPO is bigger than the company which depends on local advertising for revenue.

Rick Summer is an analyst with Morningstar. He says the company is not profitable and it’s facing growing competition from Google and Facebook.  

Rick Summer: Calling on local sales people that have questionable advertising budgets and asking for small amounts of money. It’s a real expensive way to try to make a buck.

That may be why Yelp’s revenues have been growing more slowly. But Summer says when it comes to engagement Yelp has one of the highest rating of any site out there.  Just listen to the rating “super Yelper” Dorise Gruber gives the site.  

Dorise Gruber: Five, five. Six if I could.

But Yelp has received an average of three stars from over four thousand reviewers – on its own site.

In New York, I’m Sally Herships for Marketplace.

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