Yext, the “knowledge engine” of business listings, has filed to offer stock to the public after 11 years of challenging growth. Between 2015 and 2016, Yext saw net revenues rise 49.5 percent to $89.7 million while net losses increased by 53.1 percent. Yext estimates that location-based information is a $10 billion market in 2016. That may be true, but the paths to that revenue are complicated and packed with competitors from traditional YP to emerging mapping and logistics services.
The opportunity for Yext will be defined by its ability to make location and business context available through a variety of channels, which requires a robust API and developer support strategy. BIA/Kelsey projects that revenue in the traditional YP business will fall by more than 18 percent over the next four years. Internet YP services are expected to grow 5.3 percent by 2020 from $2.34 billion in 2016. That’s a far cry from the $10 billion Yext projects as the market for its services.
Yext’s growth opportunity is in mobile services, where it can provide the link between a point on a map and the actions a customer can take when interacting with a business through a map or app. Here, the industry will grow intensely by 202o, to $29.4 billion from today’s $12.8 billion in size. BIA/Kelsey agrees with several of the underlying assumptions driving the Yext strategy:
- Half of all SMBs and most VSBs and independent businesses will never have a web site of their own. Instead, they will rely on listings services, marketplaces and other online settings that Yext information enables. The question is whether Yext can get developers to use its data in breakthrough experiences.
- Accurate listings data is difficult to compile and maintain. Yext’s focus on data quality is important, however the range of data that a business must expose to be found, be relevant and to offer compelling reasons to engage is expanding. Name, address and phone information is only the tip of the spear in the business information industry. Additional contextualizing information is key to new services.
We question whether Yext Pages as a platform for business presence is a viable long-term strategy, because of the growing permeability of social and business networks. Deeper engagement with that information depends on Yext’s engagement with developers who will bring new context and uses to Yext data. The company has a solid selection of application programming interfaces (APIs) to provide developers real-time access to company data, and it must continually expand on those capabilities to provide support for more application experience.
Yext’s data service includes comprehensive data about 800,000 businesses. There are approximately 28 million businesses in the United States. That provides Yext plenty of additional targets, but it also suggests that many other competitors could aggregate larger listings data sets than Yext, which should keep Yext focused on growing both the breadth and depth of its business data. With growing losses, however, Yext needs a catalyst in the short term to spur its stock value.
Several publications have suggested that Yext’s IPO is an effort by local and directory companies to tap into the revived tech IPO market on the heels of SnapChat parent Snap’s 40 percent IPO pop on its first day of trading. Snap’s stock has languished since the offering.
Yext is seeking $100 million from the public market, approximately 83 percent of the $117 million in venture capital it raised. With a loss-making business, the IPO may represent Yext’s high-water market, unless it demonstrated substantial growth in listings and revenue in 2017.