The Internet has spawned a proliferation of review sites with Tripadvisor (NASDAQ: TRIP)
, Yelp Inc (NYSE: YELP)
and Angie's List (NASDAQ: ANGI)
being the leading online review sites that investors can invest in. However, a review site is only as good as the reviews or rather its legitimate reviews and there have been a number of controversies over fake reviews which are said to be plaguing the Internet. With that in mind, what’s the best online review stock for investors, Tripadvisor (TRIP), Yelp Inc (YELP) or Angie's List (ANGI)? Here is a quick review:
Tripadvisor (NASDAQ: TRIP) Has Had Issues With Fake Reviews
Tripadvisor is an online travel research company that enables users to plan and have a trip by featuring reviews and advice on hotels, resorts, flights, vacation rentals, vacation packages and travel guides with close to 56 million unique monthly visitors, 32 million members and 22 million mobile application downloads. On Thursday, Tripadvisor rose 0.54% to $33.42 (TRIP has a 52 week trading range of $23.99 to $47.81 a share) for a market cap of $4.76 billion plus the stock is up 32.6% since the start of the year. It should be noted that Tripadvisor just got downgraded from outperform to sector perform by RBC Capital but a bigger concern would be the issue of fake reviews coming up again for the company. In fact, Tripadvisor was investigated by the Advertising Standards Agency (ASA) last year after criticism of its failure to monitor fake comments while in February 2012, ASA banned the company from claiming that the reviews on its website were from real travelers. Hence, all it would take would be a major revelation that could immediately impact reviews plus there Tripadvisor competes with a number of online travel websites that arguably do a better of job when it comes to reviews as the reviews come from people who booked their reservations through the site. For example: When I book accommodations on Agoda, I will get an email after my stay asking me to rate the property. Of course, even sites that do things that way can be gamed by someone determined enough to make the effort to do so. Otherwise, investors should keep in mind that despite reporting a 7% sequential increase in revenues to $197 million the last time earnings were reported, Tripadvisor’s stock price plunged around 24% because net income fell from $54.1 million a year ago to $53 million – a bit of an over reaction.
Yelp Inc (NYSE: YELP) Aggressively Screen Reviews to Weed Out the Fakers
Yelp Inc allows users to contribute reviews of every type of local business, from restaurants, boutiques and salons to dentists, mechanics and plumbers while its platform also provides local businesses with a range of free and paid services. On Thursday, Yelp Inc rose 2.18% to $26.24 (YELP has a 52 week trading range of $14.10 to $31.96 a share) for a market cap of $1.61 billion plus the stock is up 6.75% since March according to Google Finance. However, it should be noted that Yelp Inc debuted at $15 a share in March and promptly soared 64% the first day it traded. Then back in August, Yelp Inc reported its second earnings report as a publicly traded company and beat Wall Street estimates by posting a 67% revenue increase to $32.7 million, a 52% year-over-year increase to 78 million in monthly unique visitors and a smaller-than-expected net loss of $2 million. More importantly and when the lockup period ended near the end of August, Yelp Inc failed to tank. As for fake reviews, Yelp Inc aggressively screens reviews but the company’s filter can sometimes prevent both good and bad reviews from showing up – leading to complaints (the company does explain how they filter reviews on their blog here
and of course they can’t go into to much detail without aiding those trying to game the system).
Angie's List (NASDAQ: ANGI) Began Tanking After the Lockup Period Expired (Not a Good Sign…)
Angie's List operates a consumer-driven solution for its members to research, hire, rate and review local professionals for critical needs, such as home, health care and automotive services. On Thursday, Angie's List rose 2.38% to $11.17 (ANGI has a 52 week trading range of $8.94 to $19.82 a share) for a market cap of $645.24 million but the stock is down 30.6% since the start of the year. Back in August, Angie’s List sank over 25% in the five trading days after the lock-up period expired – not exactly a ringing vote of confidence. In late July, Angie's List reported that revenues rose 74% from $20.9 million to $36.5 million but its net loss rose from $16.2 million to $23.4 million. And while Angie's List added members, its seems like the new members did nothing to contribute to the bottom line. Otherwise and on the review front itself, Angie’s List claims that their employees read every single report as it comes in plus members can only report on each company once every six months. The Bottom Line
. While Yelp Inc (YELP) looks stronger than both Tripadvisor (TRIP) and Angie's List (ANGI), its important to remember that trust will ultimately determine whether an online review stock succeeds or fails – especially when consumers need to pay for membership.