Ouch! As of the latest look, Yelp (NYSE:YELP) was down more than 30% since reporting its third-quarter earnings after Thursday’s close, and that’s on top of the 16% setback YELP stock has dished out since its September peak.

The prod? The company’s top line fell short of last quarter’s estimates, although the bulk of the loss can be attributed to (very) disappointing revenue guidance for the quarter currently underway. The company says operational issues and a stonewalled sales force are increasingly chipping away at growth.

It doesn’t make the given explanation untrue, but conspicuously missing from the company’s official explanation of its slowdown is the fact that Facebook (NASDAQ:FB) is increasingly better at “local.” So is Google-parent Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). Ditto even for Groupon (NASDAQ:GRPN). Localized business directories have essentially become a commodity, and although Yelp arguably operates the best such venue, it’s just not the draw or destination it once was.

A Fatal Flaw

For the unfamiliar — though anyone reading this likely knows exactly what Yelp is — the company in question is a website that groups information about local business by city, making it easy for consumers to search for deals, venues and reviews that are geographically relevant to them. It’s not unlike the Yellow Pages, but it’s so much more in that it allows for public user reviews of those businesses.

As is the case with any open platform though, if Yelp can be abused as a means of winning business or hurting a competitor, it will be. And it has been, hurting the review site’s credibility. That’s not the business model’s overarching terminal flaw, however.

It’s been largely unvoiced because it’s such an intangible, philosophical premise. But, the bigger Yelp gets via the addition of new advertisers and even new non-paying business listings, the less effective it becomes as a localized directory. The charm and effectiveness of a smaller, more-curated site seem to fade with size, making Yelp less marketable to small businesses and less useful for consumers.

Yet, the venue has to become increasingly crowded for the company’s top and bottom lines to grow … a serious catch-22, particularly when other popular online gathering places like Facebook and Google get incrementally more effective at connecting local business with nearby prospects.

The end result is a significant number of disappointed small business owners that found paid sponsorships/placements at Yelp.com to not be worth the cost.

Last quarter’s numbers from Yelp tacitly reflect this slow but relentless shift.

Yelp Earnings Recap

For its third quarter ending in September, Yelp turned $241.1 million worth of revenue into a profit of 17 cents per share. Earnings were better than the profit of 10 cents per share of Yelp stock analysts had modeled, though the top line fell short of the $245.4 million the pros were calling for.

The company’s third-quarter letter explained, “We do not believe there was a single or predominant factor that led to the shortfall relative to our expectations, but rather a combination of smaller operational factors that negatively affected productivity.”

Although Yelp doesn’t believe there was one predominant factor serving as the foundation for its headwind, the development of the current headwind largely coincides with the company’s decision to begin offering no-term advertising contracts … ads that business owners can stop purchasing at any time.

Those small business owners appear to be pulling the plug more quickly, when they have the option of doing so.

Those local proprietors are also dodging Yelp’s salespeople when contacted to renew ad-purchase contracts. COO Joseph Nachman acknowledged the Yelp was finding an increasingly “lower success rate in reaching local business decision makers through outbound sales calls.” The company’s Q3 letter also conceded “The pace of new account growth that we saw in the first half of 2018 slowed in the third quarter.”

Things aren’t apt to get better anytime soon either. Yelp said it’s now looking for fourth-quarter revenue of between $239 million and $243 million, versus analysts’ outlook $259.7 million.

Bottom Line for YELP Stock

None of this is a prognostication of inevitable doom. Yelp will survive, one way or another. The worst case scenario is, the struggling company is acquired by a bigger player that wants the name and a chance at reinventing Yelp.com from the top down. That, however, is a scenario that’s miles down the road if it happens at all. The organization’s management appears to have every intention of rekindling its previous growth pace.

Still, considering the current slowdown and the mounting challenge that lies ahead, Yelp stock may be too much of a liability to own … particularly when there are so many other better opportunities out there.

The company is a major project, at best, with no real assurance it will be able to overcome the inherent flaw in its current business model. That is, anything Yelp can do, a bigger, better-funded outfit can do better.

As of this writing, James Brumley held a long position in Alphabet. You can follow him on Twitter, at @jbrumley.