Yelp debuted today on the NYSE and skyrocketed more than 60% by 4 p.m., begging the question: is this just another Internet IPO fad destined to fade the way of Zillow, Groupon and Pandora?
My answer is simple: No. And a resounding one for several reasons.
First, the YELP IPO works on a diversified platform in which they rely on advertising and user donation to fund their website and do not require users to create an account or pay a subscription cost. They also have built a good reputation among users for their reliable and non-biased reviews which are both monitored and edited for content so it can be used by users of all ages.
YELP also has room to grow--with only an estimated 1/4 of regular Internet users currently visiting the website as unique visitors each month, their appeal can only grow as they expand their reviews into different genres. They also have little to no overhead cost, so they work off the same model as Facebook, whose IPO is sure to attract an ever larger first-day price increase.
I'm a buyer of YELP since people of all ages and backgrounds are always looking for advice and reviews, an the websites which can offer these services or free are the ones that are going to survive.
Look for its price to rise closer to $30 over the next few months or even a year, which is really the top of where it can reach before they demonstrate a solid ability to generate the type of revenue warranting a high share price for a "dime-a-dozen" Internet company.
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