Facebook Inc (NASDAQ:FB) does not care for convention. The company has willfully entered tangential businesses like healthcare, gaming, and search in years past, but now it’s taking aim at a new vertical: consumer review sites.
This could be the dagger for the long-overdue Yelp Inc (NYSE:YELP) stock.
Facebook Place Tips, the newest additional FB feature, poses a unique threat to Yelp stock in particular because of its social, location-based nature.
The idea is this: When traversing the town, Facebook Place Tips will use your location to scan businesses nearby that you may be interested in. Then, a pink beacon will appear atop your News Feed, populating photos and posts by friends about those businesses.
Note: Facebook Place Tips will only be available on the Apple Inc. (NASDAQ:AAPL) iPhone.
The FB feature will initially roll out in some big-name locations, so early tests of the service should be fairly definitive. According to Facebook’s post announcing the new feature, Place Tips will debut in areas like “Central Park, Brooklyn Bridge, Times Square, the Statue of Liberty and JFK Airport.”
YELP stock owners may want to brace for more losses, even after woeful one-year performance of -30%.
YELP stock isn’t the only stock that could feel an adverse impact from the new FB initiative. The social network’s iconic young CEO Mark Zuckerberg has increasingly focused on mobile as a source for revenue, and a whopping 69% of FB ad revenues came from mobile in the fourth quarter.
Facebook Place Tips is another way to monetize the increasingly important mobile user, and with FB conveniently offering you reviews, discussions from friends, menu items and more as you stroll by businesses, Yelp quickly becomes irrelevant in those situations.
Yelp Needs Help, But It’s Not Alone
While the strength of FB’s 1 billion-plus member network poses an existential threat to Yelp and Yelp’s stock price, the local business review site isn’t the only company that should feel the heat after the move.
Facebook Place Tips offers a natural segway into the world of digital coupons. In particular, RetailMeNot Inc (NASDAQ:SALE) loses whatever competitive juices it had to begin with. While I applaud RetailMeNot for championing the worthy business of offering in-store digital coupons, SALE stock is on a sale of its own now after a precipitous 57% decline in the past year.
While FB hasn’t announced any such digital coupon initiative in conjunction with Facebook Place Tips, that vertical is just a hop, skip and a jump away from a location-based consumer review service.
There’s no way around it for Yelp stock: Zuckerberg is gunning after your business, and he’s gonna take some. RetailMeNot, on the other hand, could either be crushed like a bug, or seize the moment as an opportunity to partner with FB in the early stages of disruption.
While I’m sure investors in SALE stock would appreciate the massive potential in an eventual FB partnership, Facebook has little incentive to play nice, and I fear RetailMeNot stock, along with Yelp, could be due for another half-off sale. The synergies are too great to ignore.
As of this writing John Divine owned shares of AAPL stock. You can follow him on Twitter at @divinebizkid.
