Buyer search is on by Yelp (YELP, Financial). The company is facing slow growth and at a time when the cost of survival is rising in the market. The choice that faces prospective buyers is whether it’s a smart buying option or they are supposed to leave the company behind and move ahead.
The rumor of Yelp’s acquisition might have got you in the end of March and gave the company’s share prices a boost of 1% but is the same happening now. We can judge after knowing the related parties take on the matter.
Small business’s view
If you ask small business owners, they are unhappy with this decision of Yelp. They already feel that this is not a right kind of business; they think that it’s an extortion business. Their experience with the company is that the company is charging them in order to gain positive reviews and on top of that a hefty amount. If the amount is not paid or is not satisfactory, the reviews will adversely affect their businesses.
Users’ view
Users say the negative reviews are rectified after paying the desirable amount to the company because the reviews of many are unsatisfactory and the company has lost a lot of reliability because of this.
Equity analyst take
Global equity research analyst Trip Chowdhury said that the small businesses have a lot of grudges and complaints against Yelp. They are certainly unhappy with the company. Users also have a negative response.
He was quoted as saying that “They don't have a nice feeling toward Yelp, when it comes to the monetization. It's not easy. It is very complicated. Is there any life left in Yelp? Or is a company better off by putting their own review sites on Facebook (FB, Financial) that people can review and the owner can respond on a one-to-one basis?”
Yelp has evolved with time, but that does not seem to be enough from the business point of view. They needed to upgrade and add more to it. It is now a platform where users come, leave comments and move on. The novelty effect in the website was its USP, and now that’s no longer there so what is left of Yelp?
The analyst believes that Yelp has value, but the value is certainly not more than $500 million. The company is asking for six times its worth from the market that certainly is not happening for the company. The amount of $3 billion does not make sense.
Will Google be the right fit?
Google (GOOG, Financial) certainly would be the right fit because even the rumor of Google acquiring the company will skyrocket its value and association with such a brand, and business will flourish, but the problem is that there are a lot of regulatory reasons and due to that Google will not be able to even if it wanted to.
We still have Yahoo …
An activist pushed Yahoo! (YHOO, Financial) to acquire AOL (AOL, Financial). The dream ended when AOL was acquired by another company. But will the same situation happen again? Will they miss out on this opportunity as well? “Google, I think, wouldn’t buy it, but Yelp is more of a Yahoo! kind of thing,” Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, was quoted as saying to a magazine. But even Udall said the right price will be in between $400 and $500 million.
Conclusion
The deal is not bad, although the business has started to sink, but it is still far from ending the streak. Investors should wait before the business is acquired by a well-known brand. The short investment or speculation over the shares would work if there is any rumor of acquisition related to the company, but the investment should be for a short term only.
