In my article I wrote yesterday, Angie’s List was going public and I said Yelp was right around the corner. However, I did not think it would be immediately the next day.
Yesterday (Thursday), Yelp filed with the SEC in order to raise over $100 million in an IPO. They are joining several other young internet companies as they look to expand in the current market. With such a high demand to not lose pace with competitors once one company dips their foot in the water, immediately after the others are diving in head first.
Yelp is a San Francisco-based website that provides local listing of restaurants, bars, and other businesses, as well as reviews written by the sites users. Its scope of cities includes dozens of U.S. cities and overseas locations.
The company, which was founded in 2004, said that it now has over 22 million reviews on the site and an average of 61 million users a month. Although it has high traffic, it posted a net loss of $9.6 million last year and $7.6 for the 3rd quarter ending in September.
Revenue has increased to $58.4 million, up from $32.5 million in the prior year, but this falls short of the $117.6 million some analysts at Greencrest Captial were forecasting. 71% of this revenue was from local advertising, rather than brand advertising which means small businesses are taking advantage of a system that allows them to reach out to a local target audience.
After Angie’s List went public yesterday, its shares shot up 25%, which in my opinion would over value the company. The hardest part about these kind of companies going public is that internet advertising is still very susceptible to rapid change. A company may have $100 million in ad revenue one year but the next it could be cut in half even though they have the same amount of users. Considering most the companies going public are also posting losses, I am going to closely watch how they perform and report back to you guys at a later date if I change my mind about wanting to invest in this sort of industry.