Yelp Revenue Up 65%, Mobile Helps Spike

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Yelp on Wednesday reported that its fourth-quarter revenue climbed 65% on local advertising growth buoyed by increased mobile usage.

Revenue in the quarter reached $41 million, up from $25 million a year ago. Yelp posted a net loss of $5.3 million, or eight cents a share, compared to $9.1 million, or 56 cents a share in the year-earlier period.

Active local business accounts, or the total of businesses that advertise, rose 68% to 39,800 in the fourth quarter. The company had about 86 million monthly active users at the end of the 2012, up 31% from a year ago.

"2012 was a tremendous year for Yelp," said Yelp CEO Jeremy Stoppelman in the earnings release. "We completed a successful IPO, launched new products to improve the Yelp experience for consumers and business owners, expanded into new markets while increasing our presence in existing ones, and completed our first acquisition."

He added that the company this year would further increase its presence in Europe and continue to make mobile monetization a top priority. During the fourth quarter, Yelp reported that its mobile app was used on about 9.2 million devices, on average, each month.

The company began rolling out local ads within its app for the first time in the quarter.

A JP Morgan analyst report estimates 45% of total searches (mobile and desktop) take place on Yelp’s app. The firm projected that increased advertising on the mobile side would help the firm increase local advertising 85% to $33.7 million, while brand advertising would be flat at $5 million.

Yelp has also been aggressively expanding its international footprint. In October it acquired Qype -- its biggest European rival -- for about $50 million in cash and stock to aid its international expansion. It also opened an international sales office in the U.K. last year and pushed into the Asian market last year with a Singapore launch.

In the fourth quarter, it also went live in Poland and Turkey, bringing the total number of countries where it operates to 20. The global push over the last year, however, also contributed to its wider-than-expected loss. The company’s total costs and expenses came in at $46.3 million for the quarter, up from $33.7 million a year ago.

Posing a potential threat to Yelp’s growth is Facebook’s new social search offering -- Graph Search. Launched last month, the upgraded search tool lets users make natural language queries to get local recommendations from friends, among other things. Yelp’s stock sank 6.2% the day Facebook announced the beta release of Graph Search.

Yelp already competes with services like Yahoo Local, Local.com, Google Local and Foursquare. Looking ahead, the company projects revenue in the range of $44 million to $44.5 million for the current quarter, representing 62% growth. Analysts had been expecting revenue of $43.8 million.

Yelp shares closed Wednesday at $22.38, but had fallen about 3% in after-hours trading following its earnings release. 

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