Yelp open to partnering
Consumer review aggregator Yelp, which analysts say could face intense competition from Facebook’s “graph search”, is open to partnering with the social networking website’s latest offering, Yelp’s Chief Financial Officer Rob Krolik told Reuters.
Facebook, in January, unveiled its graph search feature, available in a beta version, letting users trawl their network of friends to find everything from restaurants to movie recommendations, bringing it into direct competition with Yelp.
Analysts have viewed this as a big negative for Yelp as companies such as Facebook have a lot of opportunity to imitate smaller companies, and over a larger audience.
Yelp open to partnership with Facebook (image credit: mashable)
“We are actually happy to partner with Facebook (for graph search) if that’s something that they’re interested in,” Krolik said. Facebook declined to comment on any possible partnership.
Yelp’s mobile app makes it easier for people to discover local businesses. It combines Yelp’s reviews and other relevant information with knowledge of the consumer’s location. It also allows consumers to “check-in” at local businesses.
Google, through it’s Google Plus Local product, also recommends businesses to its users based on circles, past reviews, location and allows them to publish reviews and photos of favorite places.
“Facebook and Google and some other players really are attacking the local space via technology,” Krolik said.
Krolik said Yelp, which is integrated into Apple’s Maps product and their Siri product, would definitely monitor Facebook’s graph search and see what it’s all about.
“I just don’t think people go to Facebook to find a great local business. I think they connect with their friends, see a lot of photos,” Krolik said.
Macquarie Research analyst Tom White said it was not particularly likely that the partnership would happen, because Facebook thinks they have enough data to do it themselves.
He, however said, if it was to happen, it would benefit Yelp, and would cut down competition from Facebook. “It would mean broader distribution for their reviews, and more people reading their reviews,” White said. “It’s not directly a revenue generator, but in theory it would increase the value of advertising on Yelp, just because you’re getting it out to more people.”
The success of graph search, which will rely heavily on local information, depends on Facebook launching a mobile app. In addition, graph search lacks the depth of review content offered by Yelp.
If Yelp were to partner with Facebook for graph search, the consumer review aggregator would be in a better position to compete with Google, Jefferies analyst Brian Fitzgerald told Reuters.
Yelp already has a tie-up with Facebook Connect, which allows users to login with their Facebook credentials without having to create separate accounts for different websites. A Yelp user can see if a Facebook friend has reviewed a business.
Jefferies’ Fitzgerald said Yelp could also make a good acquisition target for Apple, Google or Facebook. “Any one of those guys could acquire Yelp and they would be able to use it pretty productively,” he said.
Yelp was founded by former PayPal engineers Jeremy Stoppelman and Russel Simmons as a start-up idea in a business incubator in 2004. It has never been profitable since its inception.
Analysts expect the company to post its first profit of 1 cent per share for the first quarter of 2014, according to Reuters. The company’s earnings quality score on Thomson Reuters StarMine rose to 7 out of 100, from 5, after it reported its earnings for the January-March quarter. This compares with a sector median of 63.
The earnings quality model rates companies according to the sustainability of their earnings. Yelp shares, which have risen about 80 percent in the last year, closed marginally down at $29.81 on the New York Stock Exchange on Friday. They had fallen 6 percent on January 15, when Facebook unveiled its graph search.