Yelp IPO WIll Propel Mobile Expansion
With a service focused on local business reviews, Yelp has always been a natural fit for mobile devices, since people use it to look up nearby places on the go. The company’s filing Thursday for an IPO to raise $100 million only underscores the growing role that Yelp expects mobile to play in its expansion.
Yelp’s mobile app, launched in 2008, is now used on 5 million unique mobile devices on average a month, as of the end of September. While it attracts 61 million monthly visitors via the desktop and mobile Web, the app accounts for 40% of searches on Yelp overall.
“Our mobile app also provides new ways to contribute content to our platform through features that allow consumers to “check-in” at local businesses and submit photos and “quick tips” directly from their smartphones,” states Yelp’s S-1 filing.
Indeed, the proliferation of smartphones has played a key role in swelling Yelp’s mobile user base. Smartphone penetration in the U.S. is estimated at about 40% overall, and the filing cites data from research firm IDC projecting that there will be 1 billion smartphones worldwide by 2015 and 14 billion app downloads by 2013.
It also points to a Gartner forecast predicting that mobile advertising worldwide will increase from $1.6 billion in 2010 to $15.6 billion by 2014.
To date, Yelp hasn’t run paid advertising on its mobile app, other than its scaled-back Deals offering. But the company says it plans to pursue opportunities to monetize the app, which supports all major smartphone platforms, including iOS, Android, BlackBerry and Windows Phone. In the Risk Factors section of the filing, Yelp goes so far as to say: “We may be unable to attract new advertisers unless we develop effective mobile advertising solutions.”
At the same time, Yelp acknowledges it must ensure than any mobile ad solutions it comes up with “do not adversely affect our users’ experience.” Other Internet companies including Facebook, have also held back from expanding advertising to mobile, in part because of similar concerns about alienating users with overly intrusive ads in a medium considered more personal than the PC-based Web.
Yelp derives the majority of its revenue from local advertising, with the rest coming from brand advertising and other services, like Yelp Deals and various partner arrangements.
In its newly released 2012 local advertising forecast, Borrell & Associates expects mobile to attract a growing share of dollars. The research firm projects that local mobile ad spending will jump 66% from $2.6 billion this year to $4.3 billion in 2012. The Borrell estimates skew high compared to other forecasts.
For instance, eMarketer predicts all U.S. mobile ad spending in 2012 to reach $1.8 billion, while Forrester projects $2.7 billion. The broader trend is strong growth in the sector, which Yelp clearly aims to capitalize on. Beyond cell phones, the company also said it plans to expand to new platforms and distribution channels, such as automobile navigation systems, Web-enabled televisions and voice-enabled mobile devices. Call it the Yelp Everywhere strategy. It also highlighted relationships it has with companies like Apple and T-Mobile to help expand its presence across different-connected devices.