Yelp is down 8.% after being one of the best IPO performers this year. Even though the company beat revenue forecasts, it is clear that its operations are profitable. Analysts still aren’t’ convinced by Yelp, even though Yelp has had fourth straight quarter of revenue increases. Will Yelp be able to beat competition coming from Google? While its revenue is increasing, it is not profitable and the competition from other companies such as Google is increasing. Google recently bought Zagat, a fancier review competitor. And Yelp also gains most of its traffic from Google itself, so if Google heavily promotes Zagat, Yelp’s consumers group could be at risk. Yelp clearly needs to be able to innovate and set itself apart from the Google powerhouse in order to maintain its advantage of its competition. As the leader currently, they should be able to maintain their consumer base for a while because they are so heavily consumer focused, with their consumers providing reviews.
While many technology companies have outstanding IPOs, it seems that many are not able to maintain their success or convince investors that they will be sustainable and profitable in the long run.