Yelp Sales Top Estimates as Reviews Grow 54%

Expansion Into New Regions Boosts User Base

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Yelp Inc. shares rose as much as 12% after the online review website reported second-quarter sales that topped analysts' estimates, as an expansion into new regions helped widen its user base.

Revenue rose 67% to $32.7 million, the San Francisco-based company said yesterday in a statement, beating the average analyst prediction of $30.5 million compiled by Bloomberg. The net loss was $1.98 million, or 3 cents a share. Analysts on average were projecting a loss of 5 cents.

As rivals Google Inc. and Facebook Inc. add local content, Yelp is spending more on marketing, adding mobile features and pushing into new countries such as Denmark. The company also announced a partnership with Apple Inc. to integrate its local content into software for the iPhone and iPad, as well as a deal to include local features in Microsoft Corp.'s Bing search engine.

"It's pretty strong revenue growth," said Aaron Kessler, an analyst at Raymond James & Associates in San Francisco who rates Yelp market perform and doesn't own the stock. "Mobile is definitely helping drive traffic."

Money spent on sales and marketing, the company's largest expense, increased 65% to $20.3 million in the second quarter after surging 67% in the previous period. Yelp expanded into eight new markets in the quarter, including Finland and Norway, bumping total active markets worldwide to 90.

At the same time, more users are coming to the site and reviewing businesses more often. Reviews increased 54% to more than 30 million, while average monthly unique visitors grew 52% to more than 78 million, Yelp said. The company's mobile applications were used on 7.2 million unique devices a month on average.

In last year's second quarter, the company posted a net loss of $1.17 million, or 8 cents a share, on sales of $19.6 million. Third-quarter revenue will be $34.5 million to $35.5 million, Yelp said, compared with the average analyst estimate of $34.3 million.

The company's shares rose to $21 at 9:31 a.m. in New York. Through yesterday, Yelp is up 25% since its March 1 initial public offering.

Yelp was co-founded by Jeremy Stoppelman and Russel Simmons in 2004. Its services will be featured in software coming later this year from Apple to let mobile users check in at local businesses and broadcast their whereabouts to friends.

While Google and Facebook together may control almost 40% of the U.S. online display-advertising market by 2014, Yelp isn't projected to be in the top five, according to researcher EMarketer Inc.

-- Bloomberg News --

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