Yelp Continues to Expand, Extends in Chicago and Chile

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Online local guide, Yelp Inc. (YELP) recently announced that it will open a new office in Chicago’s Merchandise Mart in 2015. Per the lease agreement, the company has agreed to take an area of around 50,000 square feet on lease at the Merchandise Mart, which has lately evolved into a hub for tech startups.

Over the next one and a half years, the online review site plans to hire about 300 personnel in Chicago for the same. The company also announced that a majority of these jobs will be related to sales and marketing.

Yelp’s Chicago office will be its seventh worldwide after San Francisco, Scottsdale, New York, London, Hamburg and Dublin. The company selected Chicago owing to a strong lineup of local businesses, a flourishing tech community and a talented workforce.

Yelp continues to extend its foothold in South America. The company recently expanded into Chile, which has a better economic stability and prosperity among Latin American nations. Chile is the twenty-eighth nation worldwide to get Yelp’s services. In 2014 itself, the company has opened its services in Japan, Mexico, Portugal and Argentina.

In the recently concluded second quarter of fiscal 2014, total international traffic grew 80% year-over-year to approximately 31 million unique visitors on a monthly average basis.

We believe that the international expansion initiatives undertaken by the company will help in boosting ad revenues going forward. However, these will increase selling and marketing expenditures considerably, which in turn may lower profitability going forward.

For the first time in its history, Yelp reported a profit in the recently concluded second quarter of fiscal 2014. Management provided an optimistic guidance for the third quarter and full year. The positive guidance reflects strong growth in user base (particularly mobile), its entry into new markets (both domestic & international) and also new partnerships.

Moreover, the acquisition and integration of its European competitor, Qype, has led to a contribution of 1.8 million reviews and 1.4 million photographs.

Although fierce competition from the likes of Facebook (FB), Google (GOOGL) and Twitter (TWTR) in the brand related revenue market and rising product development costs remain headwinds, we believe that Yelp will benefit from robust growth in active local business accounts and improving mobile customer engagement.

Currently, Yelp has a Zacks Rank #2 (Buy).

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