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Yelp Feels the Heat From Facebook

FB's upgraded Nearby service is a direct threat to Yelp's business


After hitting $28.89 in early October, Yelp‘s (NYSE:YELP) shares have suffered a grinding drop. They are now trading at $18.79.

What’s going on? Well, one issue is that Yelp is feeling more competitive pressure.

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Just look at Facebook (NASDAQ:FB), which recently improved its Nearby feature. Integrated on Apple’s (NASDAQ:AAPL) iOS and Google’s (NASDAQ:GOOG) Android smartphones, Nearby helps users find local businesses based on recommendations from friends (via such things as check-ins, Likes and 5-star ratings).

It’s true that Yelp has a great brand and will likely continue to grow, especially as it moves into foreign markets. But so long as Facebook’s Nearby service provides good choices — which seems likely because of its massive database — users may find it more convenient to use Facebook for local commerce.

Yelp may also feel some additional pressure from Apple, which appears to be getting cozy with Foursquare. While Apple has improved its mapping app, it has much work left to do. Foursquare can certainly help out and also provide Yelp-like services, such as ratings on local businesses.

There’s even buzz that Apple will purchase Foursquare, which may be amenable to a deal. After all, it looks like the start-up has had some trouble with its latest round of funding.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”  Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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