Yelp Revenue Rises 57% In Third Quarter

Yelp enjoyed strong sales growth in the third quarter, but a weaker-than-expected outlook for the fourth quarter overshadowed its results.

The local ratings and reviews service on Wednesday reported a 67% increase in revenue to $102 million in the third quarter. It posted a profit $3.6 million, or five cents a share, compared to a net loss of $2.3 million, or four cents a year ago.

Analysts polled by Thomson Reuters had expected Yelp to report an adjusted profit of three cents on revenue of $99 million.

Among key metrics, Yelp said active local business accounts -- or the total of businesses that advertise with the company -- rose 51% to 86,200 in the quarter. That compares to 55% growth in the second quarter. The company had about 139 million monthly active users globally at the end of September, up 19% from a year earlier.

Yelp’s mobile audience continued to grow much faster, increasing 46% to about 73 million. Cumulative reviews on the site grew 41% year over year to about 67 million.

Yelp on Tuesday announced rolling out online booking for hotels and wineries on its Web site and apps as continues expanding beyond just local ratings. In the last year or so, it has added the ability to order food delivery, and make restaurant and spa reservations. Merchants can integrate the new e-commerce services using the Yelp Platform.

In a research note today, Macquarie Securities analyst Tom White suggested the push to increase transactional activity would help boost Yelp’s core ad business. “If Yelp can succeed in attracting consumers to transact on pages, then participating merchants will come to view Yelp as a source of measurable commerce/inbound volume, and may be more likely to buy ads to drive traffic to their Yelp pages,” he wrote.

Yelp says about 28,000 business with a presence on the site are now handling transactions. But along with rivals such as Google, YP and Facebook, the company faces stepped-up competition from daily deals site Groupon, which on Wednesday introduced pages for local businesses. The new online directory launched with 7 million pages that feature user reviews, offers and other information.

RBC Capital Markets analyst Mark Mahaney in a research note indicated still has room to grow its ad business outside the U.S. The service is now available in 28 countries and 16 languages. “Yelp’s international markets are now generating significant traffic but only contributing a small percentage of total revenue,” he wrote.

For the fourth quarter, Yelp said net revenue is expected to be between $107 million and $108 million, representing about 52% compared to the year-earlier period. That range, however. fell below analysts’ forecast of $111 million in sales, sending Yelp’s stock down about 15% in after-hours trading. Its shares closed Wednesday at $70.23.

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