Cramer: Two Possible Fates for Yelp

Who has mastered mobile? Who can make money in mobile advertising and not be crushed by programmatic brutalization?

Facebook (FB) can, and now we discover that Yelp (YELP) can, too. In fact, Yelp is thriving, with second-quarter sales up 69% on special initiatives that actually make mobile much better than any other device for the review-and-spend chain.

OK, review-and-spend is my term, but that's what you do on Yelp. You go, you find out what people say, you read the ads and you go spend money at that advertiser. From the looks of things, with huge retention and 62% growth expected, the site's a winner for both advertisers and for Yelp.

Not only that, but Yelp's introducing a "nearby" function that allows people to assess where to go on the fly in a way that sounds eerily like Facebook's graphical initiative where you can tap into what individuals you know like about certain places and things.

Mobile, social and cloud are the holy trinity of tech. Only a handful of companies have offerings that address the trinity, the foremost of which is Salesforce.com (CRM), which is a Yelp partner helping to organize the 100 million visitors to the site.  

This Yelp story's pretty amazing. It started with two employees of 2004 and an office in San Francisco to sell its service to small- and medium-size businesses in the area. It then rolled out to Chicago and then went national and is now international. It was a considered rollout, five new cities in the second year, then seven and they are now in 90 cities and 19 countries around the world. The combination of having fresh reviews -- 30 million to date -- and the sales force to hit up these companies that are being reviewed is a virtuous circle that works incredibly well. The reviewers create the content, not Yelp, and the advertisers pay Yelp to follow up on the leads.

Yelp's winning in several ways. First, as more and more reviewers come on it becomes incredibly important for the company being reviewed to have a presence on Yelp. Second, it is an easy sales call for Yelp and one that many advertising candidates feel they now have to do, no different from the first-generation product that Yelp improves on so markedly, the Yellow Pages. Finally, Yelp has morphed into the mobile Yellow Pages, something that represents a spectacular Web and mobile innovation, kind of the poster boy for this activity because, alas, think of it, can you imagine carrying around the old Yellow Pages? Can you imagine how targeted this advertising method is vs. placing an ad in the Yellow Pages because you are mining the traffic you already know is coming to your company.

This is a remarkably powerful and robust concept and it is working well even as small business, the lifeblood of hiring in this country, responsible for more than 60% of the jobs created, remains in the doldrums. If you get new business formation, Yelp should be able to leverage its model to huge success and profitability. It is still losing money with a penny-per-share loss in last night's quarter because of its aggressive expansion, although losing much less than the 4-cent loss analysts expected.

But here's my question about Yelp. It has a partnership with Apple (AAPL) that works. Apple needs a better social and mobile strategy. It would cost Apple a pittance to buy Yelp. It's a less-than-$3 billion company and it would be the platform Apple needs to protect its flank from Facebook and Google (GOOG). That's why I wonder if Yelp will ever get a chance to show profitability. It simply must be bought by a company that needs this Yellow Pages of the Future and Apple makes the most sense.

Two ways to win: oxygenated growth or takeover. That's the Yelp story after this remarkably robust quarter.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long FB and AAPL.