Yelp, the local business review website and social network, has apparently broken off acquisition talks with Google (GOOG). Rumors were flying that Google was prepared to get into hyper-local content, which several portals and large websites already have, by purchasing Yelp. Its local business evaluations could have been incorporated into a number of Google searches, and and integrated with Google Maps, which are often used to find directions to business locations.Google was allegedly ready to pay as much as $550 million for Yelp. But like Facebook and Twitter, Yelp has decided its future is brighter as an independent company, and that its value could rise still higher, perhaps into the billions of dollars. That's a long shot because Yelp's revenue is believed to be tiny. Nonetheless, BusinessInsider reports that Yelp is moving toward an IPO. With the stock market higher and the IPO market making a comeback, the dream of going public is probably realistic, depending of course, on valuation.
The risks Yelp's owners take by not taking Google's money and running are obvious. An economic downturn could drive down the valuations of all the "hot" internet start-ups. The lack of revenue models could also eventually undermine what venture capitalists are willing to put into these companies. And, in Yelp's case, the market is getting crowded. The local news and review market can only support so many successful companies. Yelp might not be one of them.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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