Yelp Inc. (YELP) continues to expand in Asia. The online information service provider announced the availability of Yelp in Hong Kong, where residents can create accounts on Yelp.com.hk to post their views about local businesses and services.
Yelp’s free application for Google’s (GOOGL) Android and Apple’s (AAPL) iOS devices will be available to Hong Kong residents. The company announced that free Yelp for business owners will also be available to the thriving Hong Kong business community.
Hong Kong is one of the leading business hubs in the Asia-Pacific region. This is due to a strong and well-regulated financial sector, trusted legal system, free press, no restriction on free flow of information, simple taxation system and a dense network of services firms.
Per Hong Kong Trade Development Council (HKTDC), in the first half of 2014, Hong Kong’s economy expanded 2.2% on a year-on-year basis, after growing 2.9% in 2013. For 2014, the economy is forecast to grow 2–3%.
Hong Kong is a highly attractive market for foreign direct investment. Its proximity to Mainland China is a major attraction for businesses. Hong Kong is the most important trading post of the Chinese mainland.
According to the HKSAR government statistics, in 2013, 62% of re-exports were of China origin and 55% were destined for the Chinese mainland. According to China's Customs statistics, Hong Kong is the second largest trading partner of the Chinese mainland after the US, accounting for 9.6% of its total trade in 2013.
We believe that Yelp’s expansion into Hong Kong will boost its Asian subscriber base. The availability of Yelp in traditional Chinese will also help it to gain significant traction within a short span of time.
Yelp continues to extend its foothold in the International markets. To-date, in 2014, the company has expanded into Chile, Japan, Mexico, Portugal and Argentina. In the recently concluded second quarter of fiscal 2014, total international traffic soared 80% year-over-year to approximately 31 million unique visitors on a monthly average basis.
We believe that the international expansion initiatives undertaken by the company will help the top line in the long run. However, these will also increase near-term selling and marketing expenditures, which in turn will hurt profitability.
Nevertheless, we believe that Yelp will benefit from robust growth in active local business accounts and improving mobile customer engagement amid intensifying competition from Facebook (FB), Google and Twitter. International expansions will further diversify Yelp’s revenue source over the long term.
Currently, Yelp has a Zacks Rank #2 (Buy).
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