Yelp IPO Makes Angie's List Look Like A Bargain (YELP, ANGI)

Yelp Inc. (NYSE: YELP) is now open after pricing at $15.00 and the unofficial opening bell price we saw was $22.01 per CNBC and now shares are up around $24.10 or so.  You can assume that the overallotment option was exercised here.  The value at the IPO price was about $900 million, so after a 60% gain you can count the market capitalization rate of Yelp at more than $1.4 billion.

We have covered Yelp in detail, so we have one other observation to make.  Yelp now makes Angie’s List, Inc. (NASDAQ: ANGI) look dirt cheap on the surface and we wanted to take a much closer look.  The companies focus on different aspects of a peer review market, but both companies are peer review sites and there is some overlap.

At the end of 2011, Angie’s List had some 1.07 million total paid memberships and revenue by about 70% to $27.4 million for the last quarter.  Angie’s List lost money last quarter.  This one came public at the end of 2011 at $13.00.

Yelp counts 66 million unique visitors per month and approximately 25 million cumulative local business reviews of restaurants, boutiques and salons to dentists, mechanics, plumbers, and more.  So there is an overlap in Angie’s List base.

If you look at the 2011 versus 2010 annual revenues the companies look more and more similar, despite the differences in the business models:

Angie’s List total 2011 revenue was $90.0 million, up about 52% from $59.0 million in 2010.  Yelp’s total 2011 revenue was $83.3 million, up about 75% from $47.7 million in 2010.  Both companies lose money as they are aggressively spending for growth and to establish a foothold in their markets.

Here is how the underwriters originally valued Angie’s List in coverage with more details on price targets.

These business models are somewhat different, yet somewhat the same if you consider the overlaps (and consider future business models).  Rather than an apples-to-apples comparison, this might be an oranges-to-tangerines comparison.

Yahoo! Finance shows a current market value of $670.6 million for Angie’s List based upon a $16.27 share price.  Yelp’s post-IPO value was more than twice that of Angie’s List as of the open.

This might not mean that Angie’s List is a “screaming buy” nor that Yelp is a “screaming sell.”  It certainly does imply that there is at least a disparity between the two valuations right now.  This certainly is not the first time that this has happened in internet history and it certainly won’t be the last time it happens.

JON C. OGG