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Money Minute: Let's review Yelp's IPO [Video]

March 02, 2012|By David Lazarus

The review site Yelp has gone public, and Wall Street likes what it sees. The company's stock took off at the start of trading.

But is Yelp a good investment? Let's post a review.

First of all, Yelp is obviously a very popular Web destination, with 66 million unique monthly visitors and about 25 million reviews as of the end of last year. You can't argue with those numbers.

What should make people wary, though, is the little fact that Yelp has yet to earn a penny since its founding in 2004. Yup, it's been up and running for eight years and hasn't made any money.

I don't know about you, but that's the kind of thing that gives me pause. I'm funny that way.

Also, I get a little antsy about any enterprise that relies on millions of unpaid, unknown users to generate its chief asset: content. What if they stop posting reviews? What if someone comes along with a better mousetrap?

And I've heard from more than a few business owners that the quality of reviews on Yelp is spotty at best, and many seem to be have been posted by competing companies or are factually wrong.

I've also heard that Yelp tells businesses that they can improve their reviews by ponying up a little cash -- a business model with a decidedly "Sopranos" ring to it.

So I'm not saying Yelp is a bad investment. For all I know, it's the next Google or Ebay.

Or the next Pets.com.

RELATED:

Yelp stock jumps in first day of trading

Yelp sets price target for initial public offering

Yelp's IPO values the online-review company at $900 million

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