I'm fortunate enough to where I have Pokemon Yellow and get all 3 Kanto Starters as opposed to having to pick one and only one to use for the entire game. However, despite Squirtle or Blastioise's versatility and power later in the game, Lapras has an edge over Blastoise in the following respect: Its part Ice Type. As such it learns Ice moves naturally, something that Blastoise does not and it learns Ice Beam relatively early too(level 38). Cloyster doesn't learn it until level 50 as a Shellder(same deal with Seel and Dewgong) and Vaporeon learns Aurora Beam at level 36 but not the stronger Ice Beam or Blizzard for that matter.
If you exclude the Legendary Bird Articuno, Lapras is without a doubt, the strongest Water/Ice Type in the game and rivals Blastoise in terms of power. The only knock on it, if it has one, is that its Speed could be better. However, if you want a balanced Pokemon with a Healthy Life stat, look no further than Lapras.
When I do a typical playthrough on Yellow, I honestly make the time to grind and level up Lapras to use for my team. It pays off later on in the game against Blaine, Giovanni and more importantly the Elite 4 where Lapras can essentially solo Lance's Dragons. The only problem with Lapras is that its a real grind to say the least thanks to it being in the Slow XP group.
My final Yellow Team typically is the following:
Pikachu: Electric
Charizard: Fire/Flying with Fly!! Yellow exclusive!
Venusaur: Grass/Poison
Lapras: Water/Ice
Sandslash: Ground
Flex Pokemon: Typically Butterfree due to early game and the fact it learns Psychic moves. Also been known to go with Snorlax since its a glutton for punishment or Dragonite because... why not?