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You know what usually works for a company that is looking to grow in a highly volatile market?  Discipline, consistency (high performance), a credible business strategy, and taking lots of small steps forward quickly.  It also takes maturity and not being greedy.

Is what Yelp doing right?  It is not rushing out to raise capital without what appears to be a proper plan.  Turning away the Google offer was not a wise move on the surface.  However, Yelp’s slow and steady growth appears to be the result of a well-executed plan that did not rely on having a financial advisor overinflating its value or withholding information about the true nature of the company and its management.  Yelp focused on using local customers reviewing local businesses.  In other words, Yelp found a way of mining the local advertising market by using the customers themselves as the reviewers.

I am a big believer in local advertising revenues.  I have written numerous pieces on the value of local advertising as opposed to big box name brand retail outlets.

With so much scrutiny now going on regarding the conduct of financial advisors, CFOs, and executive management, I appreciate Yelp’s seemingly modest IPO and measured efforts.  The company actually looks like it has a credible management team.  The IPO is giving the company access to public cash.  The company has consistently lost money since 2004, yet the company is growing.  Financial losses in this case are not a catastrophic area of concern.  The early stages of a company’s life are usually characterized by losses; be concerned but do not panic.

Yelp’s strategy does not rely on curated reviews of businesses, which may appear to be bad but in fact I believe that since many people tend to believe curated reviews are paid for in some way, a customer-based review may be considered less biased.  Anyway you cut it you can find pros and cons for curated reviews and customer-based reviews.  It all depends on how you want to look at it.

The company’s $1.5 B valuation is partially due to its business plan, performance, and of course Google.  When Google offered $500M for Yelp, Google set the company’s valuation; getting to $1B would be relatively easy.  Yelp’s valuation is more credible than Groupon’s valuation.

It is obvious Yelp’s mobile app may be the company’s secret weapon in the competitive marketplace.  The company’s mobile app will enable it to serve the dominant mobile customer segment.  It is a no-brainer; local search will continue to shift to wireless devices.  The company ought to consider teaming up with a wireless location technology company.  This is Concierge Service Plus.