Yelp Trims Loss, Quickens Revenue Pace On Growth In Mobile Ads, Int'l Users

Investor's Business Daily

Local reviews website Yelp (YELP) beat Wall Street's Q2 expectations with a slimmer-than-expected loss and increased mobile ad share, sending shares soaring in after-hours trading Wednesday.

San Francisco-based Yelp lost a penny a share, better than its 3-cent loss a year earlier. Wall Street had seen a wider 4-cent loss, according to analysts polled by Thomson Reuters.

Revenue rose 68.5% to $55 million vs. views of $53.3 million. That's the third straight quarter of gradual acceleration.

Executives say sales this quarter will be $58 million to $59 million, about a 61% gain. Wall Street had expected $57.4 million.

Yelp Is Moving

In a positive sign, mobile ads continued to "grow rapidly," Yelp said.

"Mobile is a huge opportunity for us, and the numbers bore this out," CEO Jeremy Stoppelman told analysts on a conference call.

About 40% of local online ads were on mobile handsets vs. 36% in Q1 and 25% in Q4 2012. That's a key metric for analysts as they see Yelp as one of the best situated Internet companies to benefit from local ads on mobile devices. Those ads have historically been less valuable than traditional desktop ads, but observers see their value increasing.

Yelp shares jumped 8% late after closing up 1 cent at 41.80.

Average monthly users rose 38% to 108 million, slightly slower than Q1's 43% annual gain.

About 17 million of those visitors were overseas. "That's up about 75% year over year," CFO Rob Krolik said, "so we're feeling good that we are getting some traction internationally.

More than 50% of Yelp's traffic still comes via Google (GOOG), executives said. But Google also is a potential threat. Google Maps is the top choice for local business information at 35% vs. 16% for Yelp, according to a June survey by Cowen & Co. Google bought review publication Zagat in 2011.

Yelp also has partnered with Apple (AAPL) to provide reviews for Apple Maps and search results for Siri. "Our relationship with Apple continues to be strong," said Krolik.

More than 6,000 businesses claimed their Yelp pages during the three months, bringing the total to 51,400. Not all of those are advertisers, but claiming "ownership" on the site often is the first step toward businesses placing ads.

Plumbing New Growth

That marked one of the largest quarterly increases since Yelp's 2004 founding, Stoppelman said.

Krolik says local businesses in the "home" category — like, say, a plumber — are a growing presence. They accounted for 24% of local ad sales in Q2, up from 22% in Q1. Yelp also is seeing an increase in regional chain stores using Yelp to advertise, although the site's main advertisers still are local, single-location businesses.

"International is also growing very strongly," Krolik said.

Users by the end of Q2 had posted some 42.5 million business reviews, up 41% vs. a year earlier.

Expanding To Payments

Yelp in July acquired SeatMe, a San Francisco-based reservation-booking company that could help boost Yelp's use and revenue in future, observers say.

It's a "relatively nascent" product that was "really about the technology and the people" says Krolik.

But that acquisition could "provide a boost over time to the recently announced Yelp Platform," wrote Cowen analyst Kevin Kopelman. The Platform will let customers pay for takeout or other services via Yelp.

"I think over the next year or so it's really going to build out" and lead to a lot of customers finding new businesses, CEO Stoppelman said.

Yelp is building features "around the consumer experience," he said, declining to give more detail. He reiterated the company is still focused for now on ads for much of its revenue.

"We continue to innovate on the ads side," Stoppelman said.

Yelp is moving into new headquarters in Q3, which could be "kind of an expense," Krolik said.

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