The social media parade towards Wall Street continued on Thursday with Yelp filing its S-1 form for a $100 million initial public offering. The local recommendation site's numbers pale in comparison to other recent IPOs like Groupon and LinkedIn. Though revenue is up 80 percent this year to $58.4 million, Yelp is running a $7.6 million loss, and in fact, the company has never been profitable. Nevertheless, Yelp's estimated $1 billion to $2 billion valuation is well above the $550 million offer from Google that the company turned down in 2009. Based on the gritty details in Yelp's admitted risk factors, though, Google may have the last laugh.
It's long been known that Yelp gets about half it's traffic from Google, who recently acquired Yelp's fancier local reviews competitor Zagat. Yelp knows this is a problem and recently testified against Google at the search giant's anti-trust hearing, arguing that Google could turn off the firehose any time they wished to promote their own (soon-to-be Zagat-powered) local listings business. Addressing these concerns in the risk factors section of the S-1, Yelp sounds almost bitchy about being in Google's stranglehold:
Google in particular is the most significant source of traffic to our website accounting for more than half of the visits to our website from Internet searches during the nine months ended September 30, 2011. Our success depends on our ability to maintain a prominent presence in search results for queries regarding local businesses on Google. Google has removed links to our website from portions of its web search product, and has promoted its own competing products, including Google’s local products, in its search results. Given the large volume of traffic to our website and the importance of the placement and display of results of a user’s search, similar actions in the future could have a substantial negative effect on our business and results of operations.
If you followed the anti-trust hearings, though, you know that Google has sharply denied the accusation that they would block a competitors' link. Senators more or less likened Google's position to organized crime, but so far, no serious regulations have been levied that might protect companies like Yelp from getting cut off from good search results in the future.