Yelp needs help, and buyout may be the answer

Reuters News
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Posted: Jul 29, 2015 5:38 PM

By Arathy S Nair and Lehar Maan

(Reuters) - Selling itself could be one of the few options left for Yelp Inc <YELP.N>, which is struggling to win advertising dollars in an increasingly crowded market that already includes Google Inc <GOOGL.O>, TripAdvisor Inc <TRIP.O> and GrubHub Inc <GRUB.N>.

Yelp, owner of consumer review website Yelp.com, reported a second-quarter loss on Tuesday and forecast revenue for the current quarter that was far below expectations.

The news pushed down the company's shares almost 30 percent on Wednesday to their lowest in more than two years, wiping out more than $735 million in market value.

As of Tuesday's close, Yelp – now valued at about $1.8 billion – had already lost 39 percent of its value this year.

Unless Yelp can come up with a strategy to boost its financial performance, the San Francisco-based company should consider selling itself, several analysts said.

Yelp put itself up for sale in May but then decided not to proceed, Bloomberg reported this month.

Yahoo Inc <YHOO.O>, Amazon.com Inc <AMZN.O> and Priceline Group Inc <PLCN.O> would be possible buyers, analysts said.

Yelp declined to comment. Yahoo, Amazon and Google did not respond to request for comment, while Priceline said it did not comment on acquisition rumors.

"... A Google competitor interested in an advanced local position could view Yelp as an attractive strategic alternative," Evercore analyst Ken Sena said in a client note.

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Yahoo in particular would be a good fit, according to Brean Capital's Tom Forte and Piper Jaffray's Gene Munster.

"When I think about Yahoo ... I think Yelp checks a handful of boxes," Forte told Reuters, noting Yahoo's push into local markets and mobile advertising – an area where Yelp is strong.

Barclays analyst Christopher Merwin was skeptical, though, saying Yelp would be "an awfully big acquisition" for Yahoo.

Yelp's website and mobile app allow users to rate a variety of local businesses, including restaurants and home services.

"The content that they have is very valuable and it would be attractive to a lot of players in the advertising space," said an investor in the company, who declined to be named.

Yelp, which has been profitable in only three of 13 quarters since it went public in March 2012, could also attract activist shareholders, the investor said.

"I would say that holding management accountable for financial performance ... is something that the entire Street would welcome. It's not okay just to grow, you have to grow and deliver profits," the investor said.

Analysts had expected Yelp to post a small profit in the second quarter. Instead, it posted a small loss.

(Reporting By Arathy S Nair in Bengaluru; Editing by Ted Kerr)