Yelp came armed with some real serious statistics about how local businesses have reaped outsized gains by signing on with Yelp. The average lift was $8,000 via a free business-owner account, with a $23,000 average gain if the business advertised with certain categories like auto, home and local service. The local usefulness explains how 36% of the users have found businesses via the Yelp mobile app, up from 25% a year ago. That's how you get local revenue up 81%, which in return gave Yelp a 58% year-over-year lift in revenue.
These are remarkable numbers from Yelp. They are a testament to how this company, even more than Groupon, is uniquely suited to the mobile model.
More important, though, I believe neither company could be doing as well as these numbers now indicate they're doing if the American consumer weren't going out more and shopping more. That gives these two companies both secular and consumer growth, which are the real reasons behind their surge.
Given that one-third of Groupon's market capitalization is cash, and the rate of decline has slowed, I can see why people might be willing to pay high single digits for the stock. I remain somewhat skeptical because, in the end, it still isn't making money. New management has clearly helped the cause, though.Yelp, on the other hand, could break out to remarkable profitability rather quickly. But its nearly $2 billion market cap gives little room for growth, so it too might not have all that much upside. Still, for the moment, they are hot once again because of their mobile and local qualities. That said, given the lifecycle of non- Google (GOOG), non- Yahoo! (YHOO) Internet companies, nothing's assured and nothing can ever be taken for granted. At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.