Yelp Inc. (
recently expanded its presence in Eastern Europe. The online
information service provider announced the availability of Yelp
in Czech Republic, where residents can create accounts on Yelp.cz
to post their views about local businesses and services.
Yelp's free application for
iOS devices will be available to the Czechs. The company
announced that free Yelp for business owners will also be
available to the thriving business community in the Czech
Currently, Yelp.cz is available in Czech, English, Danish, Dutch,
French, Finnish, German, Italian, Norwegian, Spanish, Swedish,
Polish, and Turkish languages. We believe that its availability
in so many languages will provide significant competitive edge to
Yelp against local players.
The Czech Republic is currently stuck in recession. The
International Monetary Fund (IMF) expects growth to remain weak
throughout 2013. However, the country's budget deficit is
expected to fall from 4.4% of its gross domestic product (GDP) in
2012 to 2.8% this year.
Although we believe that the expansion into Czech Republic will
boost Yelp's customer base, the current sluggish macro-economic
condition will not boost top-line growth in the near term.
Nevertheless, Yelp will continue to expand in the rapidly growing
markets of Eastern Europe and Asia. This will help the company to
offset sluggish growth in the domestic market. In the first
quarter of 2013, the U.S. contributed 94.0% of the revenues,
while the remaining came from international markets.
Currently, Yelp has a presence in 41 international markets. The
company expects to continue to invest heavily in sales and
marketing (up 50.0% year-over-year) to grow domestically and
internationally. Yelp also expects to spend significantly on
product development (up 75.0% year-over-year) to expand its
platform in mobile applications.
Although we believe that this incremental spending will hurt
profitability in the near term, the expanding product platform
will help Yelp to capitalize on the significant growth
opportunity from higher ad spending going forward. According to
research firm Forrester, ad spending on mobile devices will
represent 29% of total online ad spending in the U.S. by 2018.
Yelp's increasing mobile penetration (approximately 45.0% of all
Yelp searches were through mobile) will help the company to
better monetize the platform going forward. Additionally, Yelp's
partnerships with Apple and
and continuing international expansion are other positives going
Currently, Yelp has a Zacks Rank #3 (Hold).
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