Information is King- Yelp IPO

Remember, this is the era where information is king…

Today, amidst the frenzy of big Internet IPO’s like Linkedin and Groupon, Yelp has reportedly signed on help from Goldman Sach’s and Citigroup for its IPO, targeting a valuation in the range of $2 billion. Now, this is the age where information and user generated content is supposed to be heavily valued, yet Yelp is only seeking a $2 billion dollar valuation when Groupon found a valuation in the area of $16 billion+.

Therein lies my problem with all of this Internet debauchery. The media, and monkeys alike, noted that there is essentially nothing proprietary about Groupon, except maybe a first mover advantage or goodwill. Groupon aside, how do we valuate companies like Yelp that are essentially hoarding information?

Facebook is the holy grail of information. It’s the Pandora’s box of advertising, but unleashing all that information to the free market is as sketch as driving through Camden, NJ at night. But when seemingly ridiculous $50 billion plus valuations came about, people started noticing that Facebook only takes in about $2 billion in revenue, only a fraction of Google’s profit. Now comes Yelp, with only a tiny portion of their valuation coming from advertising revenue, but also with stars of information on restaurants, nightclubs, and bars across America.

My sense is that the initial venture capitalists and I-banks (like Morgan Stanley who reportedly collected $17 million in fees from Groupon’s offering) are just praying to continually profit off the recent waves of hype. But my hope is that none of us are left swimming naked with shares of an overpriced advertising firm when this tide runs out.