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Yelp must monetize mobile as use migrates away from desktop

March 5, 2012

The Yelp iPhone app

Yelp generates revenue from advertising on its Web site, but as mobile usage grows the company must find a way to monetize its mobile business as well.

In an initial public offering on Friday, local business review business Yelp Inc. saw its stock value jump 61 percent and sold 7.15 million shares at better-than-expected prices. However, the company said itself in a filing with the Securities and Exchange Commission for the IPO that mobile will play an important role in its future growth.

“They are trying to transition to the mobile environment, which is much  more location sensitive, time sensitive and requires delivering a great experience on various devices,” said Andrew Osis, CEO of Poynt, Calgary, Canada.

“It is a more technically challenging and difficult environment,” he said.

Poynt offers a local search application for mobile devices. Mr. Osis is not affiliated with Yelp and spoke based on his experience in mobile.

Marketplace matures
Yelp and other local search services are benefiting from several trends, including the growing popularity of online reviews and the movement move of local advertising to online sites.

On the mobile side, the space is maturing with competitors such as Foursquare, Poynt and others attracting more users every month.

“You are seeing same maturation of the marketplace,” Mr. Osis said.  The competitors are getting bigger and more sophisticated in their use.”

An average of 66 million unique users visit the Yelp Web site for its reviews of local businesses.

The San Francisco-based company also has a strong mobile business with its mobile application used on 5.7 million unique mobile devices every month.

However, Yelp does not currently offering advertising on its mobile app.

In the filing with the SEC, Yelp said that if consumers use the mobile app at the expense of its Web site, advertisers may stop or reduce advertising on the Web site.

This is a similar dilemma faced by Facebook and others as mobile use grows and consumers increasingly engage in activities via mobile that they traditionally did on desktop computers.

Location matters
If Yelp were to develop a mobile advertising offering, it could offer advertisers a way to deliver relevant, targeted ads on mobile devices to consumers while they are in the process of searching for a local business.

With location being one of the unique points of relevance offered by mobile, Yelp could offer advertisers a way to increase the relevancy of their ads by delivering ads about a business that users are near.

“It is a question of when and how they do [mobile advertising],” Mr. Osis said.

“The tide is definitely coming in on mobile advertising,” he said. “The mobile world is not carved up yet into one, two or three players that dominate.

“There is room and time for lots of things to happen over the next three to five years. The next two years will set the stage for the following five.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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