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Facebook Is Coming After Yelp Now

Evan Niu, CFA, The Motley Fool

Facebook (NASDAQ: FB) has unveiled a new app today called Local, which is essentially a rebranded version of the Events app that the social network launched last year. Events listed various types of local events that users may be interested in, while integrating with many popular calendar services. The app never really caught on, but Facebook is giving it a new lease on life with an overhaul.

In no uncertain terms, Facebook Local is taking a shot at Yelp (NYSE: YELP).

Interface of Facebook Local

Facebook's new Local app adds local listings for businesses. Image source: Facebook.

Facebook's social advantages

In addition to listing local events like the older Events app, Local takes it a step further by adding listings for restaurants and bars -- along with reviews. Local also offers check-ins so users can see where their friends are currently visiting or frequently go. Instead of just scheduled events, Local is now more about finding local businesses. These are all features that people typically use Yelp for.

Unlike Yelp, Facebook isn't looking to monetize Local with advertising (yet). Like many of Facebook's experimental apps, it offers them for free initially to see if they resonate with users. Only if a new app or service proves popular does Facebook then turn to potential monetization. At the same time, Facebook can leverage its social strengths and potentially find more relevant recommendations based on what a person's friends like. Users will likely value their friends' opinions more than unknown reviewers on Yelp. Besides, Yelp's review filter algorithm has always been somewhat controversial.

Since Facebook has access to a much broader set of user data that's shared across all of its services, its ability to integrate this data and other services has the potential to really differentiate Local and set it apart. Even though Local won't have ads directly, this integration with Facebook's broader social ecosystem still encourages businesses to maintain and expand their presence on Facebook's core platform, since review data is pulled from Facebook Pages.

Facebook isn't giving up on local anytime soon

Facebook has been trying to expand more into local commerce and e-commerce for years with offerings like Marketplace and now even local food delivery. It just so happens that Yelp is stepping away from the local food delivery market, recently selling its Eat24 food delivery platform to GrubHub for $287.5 million, which Yelp had previously acquired in 2015 for $134 million.

The new Local app is just the latest effort. Local is a stand-alone app, so at least investors know that Facebook's unbundling strategy isn't totally dead.

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Evan Niu, CFA owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool recommends Yelp. The Motley Fool has a disclosure policy.