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Yelp Shares Jump as Sales Top Estimates on Mobile Growth

Yelp Inc. (YELP) had its biggest gain in more
than a year after first-quarter revenue topped analysts’
estimates, helped by an expansion into new markets and a jump in
local advertising on its consumer-review website.

The stock climbed 27 percent to $32.22 at the close in New
York, the biggest gain since March 2, 2012, the first trading
day after Yelp’s initial public offering. Shares of the San
Francisco-based company have more than doubled since the IPO.

Yelp also issued a forecast for second-quarter sales that
may exceed analysts’ projections. Chief Executive Officer Jeremy Stoppelman has forged partnerships with companies such as Apple
Inc. (AAPL)
and ramped up marketing spending to woo local advertisers,
which made up 79 percent of revenue last year. At stake is a
local online ad market that may rise to $41.1 billion in 2017 in
the U.S., from $23.1 billion in 2012, according to researcher
BIA/Kelsey.

“The integration of Yelp’s platform into Apple’s iOS
remains a driving force in both growing users, as well as
expanding the advertising base for Yelp’s customers,” Brian Blair, an analyst at Wedge Partners Corp. in New York, wrote in
a note to clients last month. “This has been a core piece of
our positive thesis on Yelp’s fundamental growth story.”

Sales Jump

First-quarter sales climbed 68 percent to $46.1 million,
the company said yesterday in a statement, topping the $44.5
million average analyst prediction compiled by Bloomberg. The
first-quarter net loss narrowed to $4.8 million, or 8 cents a
share, from $9.8 million, or 31 cents, a year earlier. Analysts
on average were projecting a loss of 6 cents.

Second-quarter revenue will be $52.5 million to $53.5
million, the company said. That compares with the average
analyst projection of $50.4 million, according to data compiled
by Bloomberg.

Total reviews on Yelp’s sites, where consumers rate and
comment on local businesses such as coffee shops, hair salons,
pet shops and plumbers, increased 42 percent to more than 39
million, while average monthly unique visitors grew 43 percent
to about 102 million, Yelp said.

The company expanded search ads to its mobile application
in the fourth quarter and display ads in the first three months
of the year, something that will continue to expand customer
reach “significantly,” according to Blair. About 45 percent of
Yelp searches originated on the mobile app in the first quarter,
the company said.

While Yelp previously showed ads on its desktop website and
mobile browser, its customer base is increasingly logging into
the site through its mobile application. More than 75 percent of
Yelp usage will be on mobile apps in the next 12 to 18 months,
Blair estimated in a February note.

‘Big Opportunity’

Yelp charges customers for a package of advertising
impressions, and then distributes the ads across its mobile
browser version, desktop website and mobile app.

“Still a relatively very small percentage of local
merchants in these markets are paying customers of Yelp’s,” Tom White, an analyst at Macquarie Capital USA Inc. in New York,
said in an interview. “Some people view that as a big
opportunity.”

In the first quarter, 36 percent of local ads were shown on
mobile devices, Yelp said yesterday, an increase from 25 percent
in the fourth quarter. The app was used on about 10 million
unique mobile devices on an average monthly basis in the recent
period.

Yelp entered its 21st country — New Zealand — yesterday,
and has also started selling ads in France and Spain, Stoppelman
said on a conference call following the report.

The company is eventually aiming to have 30 percent to 40
percent of revenue come from non-U.S. markets, Chief Financial
Officer Rob Krolik said on the call. International markets
contributed 6 percent of sales in the first quarter.

The company said it acquired Qype GmbH, Europe’s biggest
local-review website, in October for about $50 million to expand
outside its U.S. base and step up competition with Google Inc.
and Facebook Inc. for users and advertisers.

To contact the reporter on this story:
Danielle Kucera in San Francisco at
dkucera6@bloomberg.net

To contact the editor responsible for this story:
Tom Giles at
tgiles5@bloomberg.net

(179)

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