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Operator
Welcome to the Yelp Q4 2013 Earnings call.
My name is Leslie, and I'll be your operator for today.
At this time, all participants are in a listen-only mode.
Later, we will conduct a question and answer session.
Please note that this conference is being recorded.
I'll now turn the call over to Ms. Wendy Lim.
Ms. Lim, you may begin.
- Head of IR
Thank you for joining us on Yelp's Fourth-Quarter and FY13 Earnings conference call.
Joining me on the call today are CEO Jeremy Stoppelman and CFO Rob Krolik.
And COO Geoff Donaker will join us for Q&A.
Before we begin, I'll read our Safe Harbor statement.
We will make certain statements today that are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially.
Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
Please refer to our SEC filings as well as our financial results press release, for a more detailed description of the risk factors that may affect our results.
During our call today, we will discuss adjusted EBITDA, a non-GAAP financial measure.
In our press release issued this afternoon and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding this non-GAAP financial measure and a reconciliation of historical net loss to adjusted EBITDA.
With that, I will turn the call over to Jeremy.
- CEO
Thanks, Wendy; and welcome, everyone.
2013 was a phenomenal year for Yelp, highlighted by strong performance across all of our core metrics and accelerated revenue growth of 69% year over year.
A year ago, we introduced three key themes that would be the focus of our business; and we made significant progress in all three in 2013.
We improved the mobile experience by rolling out new features for both contributors and consumers.
We expanded internationally, focusing specifically on Europe with the Qype integration, as we became more of a global brand.
And we introduced new tools to close the loop with business owners that help demonstrate the value they're already getting from Yelp.
Even with the tremendous progress we have made, we're still just scratching the surface of the enormous local opportunity.
Each year, we get closer to achieving our goal of becoming the de facto local search engine for the world, and we expect more progress along this line in 2014.
As smartphone and tablet usage continues to skyrocket, we have placed special emphasis on becoming platform agnostic so that consumers can get the same great experience on Yelp on a range of different devices.
With this goal in mind, we released a number of new mobile features and functionality in 2013 -- most notably, the ability to post reviews.
In the fourth quarter, 1.1 million reviews, or 30% of new reviews, were posted on mobile.
In Q4, we also launched a pre-loaded app for the Kindle Fire and began powering local search for the Kindle platform, adding yet another way for consumers to access Yelp content.
With 47% of ad impressions shown on mobile and a majority of searches coming from mobile, it's clear that our initiatives have been successful as consumers use Yelp to find great local businesses wherever they are and on whatever device they're using.
Our second area of focus in 2013 was international expansion.
In Q4, we completed the Qype integration with Germany, Qype's largest market, and migrated approximately 1.8 million reviews and approximately 1.4 million photos to Yelp.
In 2013, we also expanded our European sales efforts with ad products and in-language support for France, Spain, and Germany.
Our international initiatives have put Yelp on the path to becoming a global brand.
At the end of the year, we had vibrant communities in 117 Yelp markets in 24 countries around the world, with 21% of our Q4 traffic coming from the outside the US.
Our third area of focus in 2013 was closing the loop with local business owners.
Some notable examples include the revenue estimator, which helps businesses value the leads they get from Yelp; Yelp Platform, which enables consumers to go from discovery to transaction, where we are now seeing over 10,000 food orders each week.
Additionally, our call-to-action feature has seen great traction with local businesses and national advertisers alike, driving more than 40,000 customer leads per week to Yelp advertisers.
In July, we acquired SeatMe; and in November, we integrated their reservation functionality on our site.
Over time, all of this data we collect about consumer transactions will be fed back into the business dashboard, adding another type of customer lead to demonstrate the value of Yelp.
Our key themes for 2014 are the logical extension of our work to this point.
We'll continue bringing Yelp to the world by opening new markets and countries.
We'll introduce new features to help business owners close the loop with consumers.
And we'll nurture the source of Yelp's rich content, our community of writers, with online and mobile features and offline events.
Finally, I'm particularly proud of the Yelp Foundation and its support for local nonprofits.
A few months before going public, Yelp issued a 1% equity stake in the Company to create the Yelp Foundation.
Its mission is to support consumers and businesses in the communities in which we operate.
In 2013, the Foundation issued grants to number of nonprofit organizations, including some specific to San Francisco, the city where Yelp was founded and is headquartered.
These grants to local groups included -- Kiva, the Women's Initiative, and 826 Valencia.
In addition, the Yelp Foundation matched employee donations to 121 charitable organizations.
Today, the Yelp Foundation has approximately $30 million in assets, enabling it to provide even more support for our local communities in 2014.
I want to thank each employee for their hard work and dedication to Yelp.
I'm proud of everything we accomplished this year.
We look forward to continuing to enrich lives and communities by connecting people with great local businesses all over the world. ¶
And now, I'll turn the call over to Rob for the financial details.
- CFO
Thanks, Jeremy.
As Jeremy mentioned, we had a great year.
Please note that we have posted a few slides on our Investor Relations web page that accompany the financial portion of the Webcast.
Let me start with the financial results.
We achieved stellar results in all of our key metrics, with both revenue and adjusted EBITDA ahead of our guidance.
In the fourth quarter, revenue grew 72% year over year to $70.7 million, an acceleration over the prior quarter's growth rate.
For the full year, revenue grew 69%, to $233 million, an acceleration over last year when revenue grew 65%.
Adjusted EBITDA was $10.4 million in the fourth quarter and $29.4 million for the year, more than a six-fold increase over last year.
Moving on to the key operating metrics of the quarter.
Cumulative reviews grew 47% year over year to approximately 52.8 million, as we added about 5.4 million reviews in the quarter.
Approximately 1.8 million of these reviews added in the quarter came from the integration of the Qype Germany site.
Excluding these Qype reviews, the growth rate was 42%.
Claim local businesses was 1.5 million, up 50% year over year.
And active local business accounts grew 69% year over year to approximately 67,200.
Approximately 2,200 of the active local business accounts added in the quarter came from the Qype Germany integration.
Excluding advertisers from Qype Germany, year-over-year growth in active local business accounts still accelerated to 64%.
Our average monthly unique visitors grew 39% year over year to roughly 120 million.
We had approximately 53 million mobile unique visitors, 60% increase over last year, which includes 42.3 million mobile web users and 10.6 million through the app.
These financial results and operating metrics demonstrate that our playbook continues to deliver growth across Yelp markets.
To provide some additional color, let me run down the P&L starting with the revenue mix.
We're seeing great momentum across all revenue sources.
For the fourth quarter, local revenue was $58.1 million, up 71% year over year.
Brand revenue was $9.2 million, up 85% year over year, showing strong seasonal demand coupled with the result of all the hard work by the brand team.
Other Revenue increased 51% year over year to $3.4 million, which reflects the new partnerships entered into during the year.
International revenue contributed about 4% of total revenue in the quarter.
Our customer repeat rate, defined as the percentage of current customers who advertised with us in the past 12 months, was 70%.
Gross margin was 93%.
Total sales and marketing was approximately 55% of revenue, compared to approximately 62% last year, reflecting leverage in the model.
Domestic sales and marketing was 49% of revenue compared to 50% in the prior-year's quarter.
Sales headcount grew 43% year over year, and we intend to continue to invest in sales and marketing given our significant growth and large market opportunity.
Product development was approximately 17% of revenue, compared to 15% in the fourth quarter of last year.
This is a conscious effort to step up innovation as we grow globally.
G&A was flat versus last year at approximately 19% of revenue; and for the full year, it declined from 23% in 2012 to 18% in 2013.
We have made an effort to reduce spend as a percentage of revenue year over year and expect this trend to continue in 2014.
Turning to the balance sheet.
Our cash and cash equivalents position at the end of the quarter was approximately $390 million, which includes net proceeds of $277 million from the follow-on registered public offering in the fourth quarter.
We generated approximately $9.3 million in cash from operations in the quarter.
While 2013 was a very strong year for Yelp, there is more to do given our large addressable market.
BIA/Kelsey estimates that in 2017, online and offline local ad spend in the US will be approximately $149 billion; and we think international could be just as significant.
Given this large opportunity, we're focused on the long-term and choosing to invest in growing revenue and capturing more local ad dollars.
Over 67,000 businesses advertise with us today, which is a drop in the bucket compared to the opportunity; and over time, our goal is to be the first place new local businesses turn to for advertising.
With that thought fresh in our minds, let's turn to the guidance for the first-quarter and full-year 2014.
For the first quarter, we expect revenues in the range of $73.5 million to $74.5 million.
We expect adjusted EBITDA for the first quarter to range between $8 million and $9 million.
We also expect stock-based compensation to range between $10 million and $11 million, depreciation and amortization to be approximately 5% of revenue and negligible tax expense on a cash basis.
We expect full-year 2014 revenue to be in the range of $353 million to $358 million, or approximately 53% revenue growth over 2013.
For the full year, we expect adjusted EBITDA to range between $54 million and $58 million, a 90% increase over 2013.
We expect stock-based compensation to be approximately $43 million to $45 million, and depreciation and amortization to be approximately 5% of revenue, and again, negligible tax expense on a cash basis.
For modeling purposes, we expect our basic share count in the first quarter will be approximately 71 million shares and approximately 72.5 million for the full year.
I will now turn the call over to the operator to open the call up for questions.
Operator
(Operator Instructions)
Our first question comes from Mark Mahaney with RBC Capital Markets.
Please go ahead.
- Analyst
Thanks.
I just want to ask a question about the local advertising revenue growth.
If you look at the cohorts -- and this cohort analysis is always extremely useful -- you see this acceleration in three cohorts that you've traditional outlined.
Yet the overall growth rate decelerated a little bit, not a lot.
Is there a read in there that the more local -- the more recent cohorts, the '11, '12 cohorts, you started to see a falloff in spend there?
Or, a material falloff in the growth of spend there?
Any way you could reconcile what looks like clear acceleration in the older cohorts with a little bit of deceleration overall?
- CFO
Mark, this is Rob.
Thanks for your question.
When I look at the cohorts, we feel pretty good about it.
The first and third cohort actually accelerated in the fourth quarter.
The first cohort was 62% revenue growth, the third cohort, 2009, 2010 cohort was 101%.
I think the 2007, 2008 cohort was at 74%, which is matched Q3 growth rate.
So, in terms of overall, I think how we see it is it's still growing at a fairly rapid rate, and at the end of the day, we feel like we're pretty underpenetrated in these particular markets.
So, I think we feel pretty good right now.
The second cohort is generating about $1.1 million on a quarterly basis, which obviously on an annualized basis is pretty robust.
Operator
Next question is from Brian Fitzgerald with Jefferies.
Please go ahead.
- Analyst
Hello.
It's [Suchin] sitting in for Brian.
Question on the SeatMe acquisition.
Can you give us an update on the kind of the monetization efforts there?
How competitive of a space is it?
And, do you kind of primarily -- are you primarily marketing starting your efforts with existing advertisers?
Thanks.
- COO
This is Geoff.
Thanks for your question.
SeatMe today has about 400 customers, restaurant customers.
It's still obviously a very nascent effort for us.
We just completed the consumer side integration over the last couple of months.
Today, it's being sold by a small part of our inside sales team here at Yelp.
Our intention is to continue to sort of experiment with that go-to-market strategy over the coming months and hopefully to bring it out to a larger part of our sales force relatively soon.
As to the overall market, certainly it's a competitive marketplace.
We are offering SeatMe to current Yelp advertisers, but as well as the roughly 1.5 million businesses that are claimed on Yelp, too.
So, it gives us a pretty good pool to begin to fish in.
Operator
Next question is from Youssef Squali with Cantor Fitzgerald.
Please go ahead.
- Analyst
Thank you very much.
Congrats on a very nice quarter.
Can you talk about 2014 operating leverage, and maybe just talk about the increase in revenues versus the increase in operating expenses?
It looks like at the midpoint your EBITDA margin is about 15.7%, which is great, nice improvement from 2013.
But certainly, not the type of leverage we saw from 2013 -- from 2012, excuse me, to 2013.
Just trying to figure out is there a pause to the leverage that you're seeing in the model?
Or, are you trying to err on the conservative side since it's a brand-new year.
Thank you.
- CFO
Thanks, Youssef.
It's Rob.
The way we're looking at it is we've got a ton of opportunity that is in the marketplace, and we want to go capture that.
So, as we see it, we see that -- yes, we're experiencing great growth, so we want to continue to invest in that great growth and we want to hire some more salespeople.
We want to invest in technology and maybe even a little bit of marketing spend from experimental purposes.
So, we see a great opportunity ahead of us, and we feel like now is the time to put the pedal to the metal on that.
Operator
Next question is from Heath Terry with Goldman Sachs.
- Analyst
Great.
Thanks.
Wondering if you could give us a sense of what kind of traction you're seeing with the platform relationships?
Whether MINDBODY and Constant Contact that you signed last year, and to what degree you see there's sort of being additional services or opportunities to add to those relationships in the coming year?
- CEO
Sure.
This is Jeremy.
So, we're really thrilled with how platform has been going right now.
We've got Eat24 and delivery.com live, and as I mentioned earlier, we're seeing 10,000 orders per week, and so really nice performance there, closing out transactions.
We have announced a handful of partners that we hope to have live very soon.
And, there's a long list.
There's quite a backlog of folks that are interested in other verticals that would like to work with platform.
So, we see this as a big build-out year for that part of the service and really excited about it overall.
Operator
Next question is from [Kazad Gatlow] with JPMorgan.
- Analyst
Great.
Thanks for taking the question.
Your retention rates have been hovering in the 70% or so range for a few quarters now, and I was wondering if retention is going to be more of a focus going forward?
Maybe you can just talk about sort of the top few reasons why merchants discontinue advertising on Yelp?
And then, separately, I think you said international was 4% of revenue this quarter.
I think that's down from 5% last couple of quarters.
Anything you can call out there?
Thanks.
- COO
Hi, thanks for your questions.
This is Geoff.
I'm going to start with the first part of your question around retention.
You're right that our repeat rate has been kind of hovering in the same range for quite a while.
It's a relatively stable metric or has been historically.
Will retention become a bigger focus for us in the future?
Certainly, although we're still in such early days that acquisition is going to be the primary focus of our efforts for probably some long time to come now.
With 60,000-odd accounts and the notion of tens of millions of prospective advertiser accounts, we feel like we're very much still getting started.
Absolutely, we're experimenting with a variety of different things on account management and retention and want to make sure our advertisers have a great experience and still the focus is probably going to remain on acquisition for quite a while.
I think Rob will answer the second part of your question.
- CFO
So, international revenue was about 4% of sales or about $2.6 million in fourth quarter.
As we planned, there was a migration of content as well as about 2,200 advertisers from Qype Germany to kind of what we call the cleaner Yelp user experience given what Qype looked like.
The cleaner Yelp UI has a lot fewer ad placements so that impacted that.
We feel really good about our traction in Europe.
International revenue in 2013 was up about 250% year-over-year.
And, if you look at Yelp international revenue in Q4, stripping out Qype, that was up about 275% year on year.
So, we feel like we're going into 2014 with a pretty strong plate.
Operator
Our next question is from Jason Helfstein with Oppenheimer and Company.
- Analyst
Thanks.
Can you go into a little bit more detail, just about the comment about perhaps testing some advertising.
I think this would be the first time you would be doing that.
And then, when you think about the $400 million or so cash you now have, and kind of the lots of different opportunities you can go to spend that, any desire to get directly into -- let's say, I don't know, a Company like Postmates, which does kind of the logistical part of it.
When you think about your platform, do you want to stay kind of agnostic at a very high level and partner with a Company like that?
I'm just using Postmates as an example.
Or, is that technology that would make sense for you to own over time?
Thanks.
- COO
Jason, it's Geoff.
I'll start with the first part of your question around the ads.
Yes, I think Rob's mention on the ads reflects a blog post that our team put out a couple of weeks ago.
We've been experimenting with some new outdoor ads in a couple of markets.
In many ways, this is really consistent with the way we've approached advertising since really I started here years ago.
And, that is we're constantly experimenting with different ad formats for both business owners and consumers.
It hasn't been a primary driver of traffic for our business ever, and we don't expect to it be in the near term nor a primary driver of expense.
But, it is something we're experimenting with in a few different markets now, and if it works well, we'll do more of it.
Rob, do you want to answer the question on the cash?
- CFO
Oh, yes.
So, as far as cash, we did raise the additional monies in Q4 and the way we're looking at it right now, if there's an opportunity that comes you along that makes sense we'll do something that gives us a lot of financial flexibility.
That said, from a platform standpoint, which I think was your specific question, we've chosen in most cases to partner with a bunch of different companies out there that have expertise in their particular verticals.
We'll see how that goes.
If there's an opportunity there, we can obviously take advantage of it.
Operator
Next question is from Kevin Kopelman with Cowen and Company.
- Analyst
Hi, thanks.
I just wanted to ask about mobile app users.
It was down a little bit Q over Q. Should we think about that as being seasonal?
And, was that a tough comp with the Apple maps occurring last year?
And then, how do you think about mobile app users as a kind of percentage of total going forward?
Thanks.
- CEO
This is Jeremy.
If you take a look at the mobile unique visitors number, you can see that it's actually 53 million on a monthly average basis which represents 60% year-over-year growth.
And, what you'll find is that users can tap into our content wherever they are, whether it's within an app or we have a great mobile website that has virtually the same experience or iPad or so forth.
So, wherever a user wants to get our content, we're happy to provide it, and the growth that we're seeing overall with mobile uniques is quite strong, and we're happy with that.
Operator
Next question is from Jordan Monahan with Morgan Stanley.
- Analyst
Hi, great.
Thanks for taking my question.
Actually one, maybe two questions.
One just to follow up on the prior question from Kevin.
Is your visibility for some reason improving in Google search results on mobile?
And, is that potentially one of the reasons why you're seeing a lot of traction on mobile web relative to mobile app?
And then, just a question around pricing.
So, I think over the last five quarters your revenue per business account has come up, but I think you've held your nominal prices about the same.
Is that just a function of markets maturing and businesses wanting to buy more leads in more mature markets?
Or, is there another factor there?
- CEO
I'll touch on the mobile web question.
We're seeing great performance of our content on mobile web, and so I don't know that there's a massive shift there.
But, certainly as more users have turned to mobile web, they are finding our content, and we're getting a lot of traffic there.
- CFO
Jordan, it's Rob.
As far as pricing, as you said, we really haven't changed our pricing structure.
I think what's really driving that was we were picking up international revenue from Qype, yet as we mentioned at the time, we weren't including the numbers of advertisers in the active local business accounts because they counted it differently.
Now that we have that information and it's on the Yelp Platform in Q4, we added about 2,200 German advertisers.
So, I think what you'll see is if you kind of do a year-over-year comparison and take out the Qype revenue, it's about the same.
So, on a -- I know we don't really look at ARPU or those types of metrics because it's not as meaningful to us.
Our sales force is comped really on a total dollar amount.
If you do do the math, it's -- on a comparable basis -- it's pretty even.
Operator
Our next question is from Tom White with Macquarie.
Please go ahead.
- Analyst
Great.
Thanks for taking my question.
It's around platform and your strategy there.
So, Yelp Platform obviously provides you some e-commerce revenue, but am I correct in thinking still that the primary objective there is to help draw more merchant adoption of your core ad platform?
And, are there any maybe metrics you can share about local merchants who maybe have participated in the platform initiative and also being purchasers of advertising?
I'm just curious if that contributed at all to the acceleration we saw in active local accounts in the quarter, ex-Qype.
Thanks.
- CEO
Sure, this is Jeremy.
Platform has been going particularly well.
Our focus there really starts with the consumer.
Obviously, there is really great data that we're able to generate as transactions are closed on the site that we can then pass to business owners.
But, I guess to where your question was going, is this really having an impact on ad sales?
I don't think that's the case right now.
I think platform is still just in it's early days of build-out, but the growth that we're seeing is really nice.
I think previously we had said that we were getting something like a few thousand orders per week.
Now we've said we're getting north of 10,000 orders per week, and so it's really working for the partners that we've got.
We've got a really great lineup of additional partners that we'll be rolling out over the course of the year.
Operator
Next question is from Lloyd Walmsley with Deutsche Bank.
- Analyst
Thanks for taking the question.
A couple if I can.
First, just looking at the net new active business accounts in the quarter, it looked like a nice step-up, even ex-Qype.
Can you just talk about really what was driving that?
And, it looked like on a sales force efficiency front, you're seeing a lot lower sales and marketing spend per net new account.
So, curious what's driving that?
And then, on the Yelp Platform e-commerce user behavior, are you seeing a lot of repeat usage from people once they try it?
Are they coming back and using it and using it across different providers there?
- COO
Hi, this is Geoff.
I'll try to take the first part of your question there around the growth of local advertisers this quarter.
Certainly, we were happy with that overall number, the net add of 10,000.
It looked really great.
And, I think there are a number of factors there.
One is the addition of the Qype advertisers that Rob mentioned earlier, so that's certainly a one-time event.
Beyond that, we have seen a couple of other factors.
One, the sales force has been performing tremendously well and just had a blow-out quarter.
But, the other factor is some of our self-serve products have also gone really nicely.
Self-serve CPC advertising in particular has added some portion of those new accounts, too.
You're really seeing an addition of all three of those factors working together, and hopefully, those trends will continue with the exception of the Qype one-time.
- CEO
This is Jeremy.
On your question around platform and repeat usage, we definitely are seeing quite a bit of repeat usage.
I don't have the specific stat in front of me right now, but when we looked at that, it was quite high.
Operator
Next question is from Ron Josey with JMP Securities.
- Analyst
Geoff, I wanted to follow up quickly on your CPC comment -- how it was adding new accounts and doing well.
I think historically you said that that product was more for more advanced type of marketers.
I'm wondering if you're seeing a broader attraction there?
And then, for Jeremy, wanted to get your thoughts, or see if you see anything in terms of reviews or overall engagement given some of the court hearings around defamation and things like that on Yelp.
Thank you.
- COO
To the question on CPC advertising, self-serve in particular -- overall, I think my historical comments there probably still hold, which say that that self-serve contingent tends to be a more advanced user.
Somebody who's comfortable self provisioning Internet advertising and wants to manage their budget themselves.
What we do see in the overall market is still that the majority of local business owners would prefer to talk to somebody on the phone and be hand-held through it and really kind of be in more of a set-it-and-forget-it mode.
I expect that that split will hold for a number of years yet to come.
That having been said, we want to offer both avenues in order to work with Yelp.
- CEO
On your question around some of the legal cases that have been making headlines, we continue to see great user engagement.
We do everything we can to obviously protect free speech online.
The number of cases that we see given our size is extremely rare.
And, they just don't impact our business.
Operator
Next question is from Blake Harper with Wunderlich Securities.
- Analyst
Hi, thanks.
Geoff, I think you talked about the sales productivity, but could you just maybe offer some more details there of how your sales productivity has trended since you seem to look at that more than like an ARPU number to drive the business?
And then, what you think of going forward as far as sales hiring, and what productivity could be for some of those -- for the -- looking forward to 2014?
- CFO
Hey, Blake, it's Rob.
Maybe I'll help, and then if Geoff wants to add some color, that would be great.
In terms of sales productivity, we have seen a slight increase over the last year or so, and I think there's a multitude of reasons why that is.
Maybe brand ubiquity.
Perhaps businesses are actually seeing obviously the fruits of our labor and the consumers that are coming to the site, so good ROI.
So, there's probably a number of reasons.
But, we've been in the market specifically in the US for a while.
We're not having the conversations exactly what is Yelp.
So that's, I think, helping.
So, in terms of productivity, we are seeing increase.
We also have increased our sales force by about 50% year on year, so we have many more salespeople.
I think at the end of 12/31, we ended at around 2,000 employees, and we had about 60% of those in sales now.
So, obviously, that's a big increase over the last couple years.
And, they're reaching out to more businesses and helping them understand what Yelp is and what they can do for their business.
Operator
The next question is from Eric Sheridan with UBS.
- Analyst
Thanks for taking the question.
Two questions.
One, when you look out to the guidance for 2014, wanted to see if we could drill down a little bit more on it on how much expectation is around international growth versus domestic growth, so we might see the percentage of international revenue as a percentage of the total move up as we move through 2014?
And, second question which is a bigger picture question around pricing.
Given how many people are chasing after the local advertising opportunity, what's the likelihood you test various other formats or price points around pricing?
Maybe even variable pricing longer term to expand the TAM?
Thank you.
- CFO
Hey, Eric.
I'll take the guidance question, maybe Geoff will help us out on the pricing.
In terms of guidance, the way we are looking at it, interestingly enough, obviously the domestic market represents quite a bit, 96% of our revenue.
It's growing at an incredibly fast clip.
Local revenue grew at 71% year on year, which obviously most of that is domestic.
The way I kind of probably think about it is that international is growing, and it's growing fairly rapidly.
But, I think as a percentage of the total, it's probably in line with how it's been trending over the last year, 4% to 5% at the end of the day.
But, we're excited about the opportunity that we think that international will be eventually very large for us, but given where we are at in our life cycle, domestic is growing at such a rapid rate it's almost eclipsing -- especially from a size standpoint -- international.
- COO
And, as to the question about pricing, we continue to experiment very regularly with all kinds of different pricing formats.
You did mention variable pricing in there, and I should point out that our CPC product today is already auction-based.
There is a dynamic pricing component going into that all the time.
But, yes, we continue to sort of experiment with new ad formats and price formats.
I think you can expect us to continue to for the coming years.
Operator
Next question is from Steven Ju with Credit Suisse.
Please go ahead.
- Analyst
Jeremy, you probably saw Google roll out app indexing which can push users directly into the relevant content on the native apps.
Do you think this flow of traffic will be something you will accept and implement?
And, also this year you closed a major gap in terms of the mobile app functionality with reviews.
But, there are still features like events and messages which are still not yet available.
Are these important and well-used functionalities on the desktop at all?
Thanks.
- CEO
Thanks for the questions, Steven.
What you're talking about is when there's links showing up in Google, you can specific on Android have people open up the app if they have it.
I know that is something that we're looking at, and I think that's a nice feature so I can imagine we'll be rolling that out.
And then, on the functionality side, one of the things I mentioned previously or a little bit earlier in this call was continuing to build out features, particularly for the community on mobile is one of the priorities for this year.
And so, you can expect to see some of the things that you mentioned rolling out pretty soon.
We are focused on bringing all of the functionalities of the desktop web to mobile.
We've just been kind of knocking through our priorities.
We have more to come this year on that.
Operator
Next question is from Neil Doshi with CRT Capital.
- Analyst
Good afternoon.
This is actually Rob on the call for Neil.
Just wondering if you could give us a little more color on the strong display performance in the quarter?
And then also, given the easier comps that you've had the last couple of quarters and the fact that may change going into next year if you could give us a little sense of how seasonality should play out into 2014 as well?
Thank you.
- CFO
This is Rob.
The way we're looking at it is our priority continues to be on local revenue, and it's such a huge opportunity.
We want to make sure we're capturing those local ad dollars.
That being said, the brand advertising team I think did a great job in 2013 and will continue to obviously sell in that area.
We feel good about where we are with that team.
Kind of the other part of that is that I would expect a seasonal decline in Q1, so Q4 was particularly strong for that team.
But obviously, it's seasonality that's contributing to that.
So, Q1 will probably see seasonal decline, Q2 and Q3 as kind of last year is fairly flat, and then there will be obviously a little bit of a tick-up in Q4.
If I was modeling it out, it would probably be somewhere around 10% in 2014 in brand versus 2013 because as I said, I think our focus is really going to be on the local revenue line item.
Operator
Next question's from Kerry Rice with Needham & Company.
Kerry Rice, your line is now open.
We'll go to the next question from Shawn Milne with Janney Capital Markets.
- Analyst
Yes, thanks.
Thanks for taking my question.
I know it's been asked a couple times, but, Rob, if you could go back to just the change in net local accounts, it dipped sequentially into Q3.
And then, of course, we get the rebound even ex the Qype addition.
Was there any change in sales force compensation plans or anything else there that you could call out that created that dynamic?
Thanks.
- COO
Hi, this is Geoff.
I'll answer your question there.
The short version is that the mix of local advertisers is changing all the time.
No, we didn't make any material changes to sales force growth or compensation.
Those guys have been continuing to do their thing and do it really well.
Within that local advertiser number and the net number that you're looking at, there is a mix of the self-serve accounts that are showing up in CPC.
There is folks who are selling Yelp deals on Yelp, and then there's, of course, the individual advertisers we're going out and selling through the sales team.
So, that mix probably changed a bit from quarter to quarter, but I don't think any material change in trends.
Operator
Next question is from Gene Munster with Piper Jaffray.
- Analyst
Good afternoon and congratulations.
Just kind of getting back to the deeper in the transaction.
Can you remind us just high-level how you see that, those different features, whether it's integration with other third parties starting to impact the model?
Is it just to continue to drive ad revenue?
Or, could they be kind of separate businesses in themselves or separate add-on products?
Thanks.
- COO
Hi, this is Geoff again.
Yes, in the particular product area that you're talking about I believe which is Yelp Platform and then our relationship with OpenTable and now SeatMe as well.
When we offer those products, that's really all on a part of a concerted effort to help close the loop between consumers and local businesses and have that happen right on Yelp.
We think when that happens, whether you make a reservation or you buy a product directly through the Yelp site, it actually just makes your overall consumer experience on Yelp better.
And then, of course, gives us data we can share back with the business owner to help them understand exactly who was transacting at their business when on the Yelp Platform.
The more we can bring consumers and business owners directly together on the Yelp Platforms, we think the better off we are.
Now, to the kind of downstream effects of can we monetize those transactions, and/or can we upsell those businesses into advertising?
We think so in the medium to long term, but that's definitely not the short-term focus.
Operator
Next question is from Sameet Sinha with B. Riley.
- Analyst
Couple of questions here.
So, I'm just looking at the unique visitor number quarter-over-quarter.
It seemed like it increased about 2.6 million while international unique visitors increased by about 4 million.
Does that imply that domestic unique visitors dropped quarter-over-quarter?
Maybe it's just seasonality.
Secondly, what would the diluted share base be if you add in options?
- CFO
It's Rob.
So, on a unique visitor basis we were at about 120 million.
We did add Germany at the beginning of -- for international at the beginning of November.
So, that obviously had an impact on the numbers.
We're not seeing any trends that we would be concerned about.
I think year-over-year it's up fairly dramatically, 39% year-over-year.
Domestically, it is growing year-over-year.
Obviously, with the addition of the Qype property, international is growing at quite a rapid rate.
With regards to your comment -- or question about dilution -- so on an option basis, we would expect that anywhere between 8 million and 9 million shares would probably be needed to add back to our share count to account for any dilution if we had positive net income.
- Analyst
Great.
Thank you very much.
Operator
Next question is from James Cakmak with Telsey Advisory Group.
Please go ahead.
- Analyst
Hi, thanks.
So, I guess continuing with the theme of the Yelp Platform, certainly ramping up nicely with your first efforts on the food vertical.
And, you mentioned you had multiple partners there and with many on the backlog as well.
My question is how should we think about how seamless this is to roll out -- to integrate and roll out transaction features in the other categories now that you have the experience in food?
Is it something that's going to be as easy as flipping on a switch?
Or, how best to think about the timing of the roll-out of the -- from a technological standpoint of the other categories later this year?
And then, I guess, quickly on international, you're already in 24 countries and trying to reconcile the investments this year?
And, how much of those efforts would you say you are geared toward expanding existing versus entering new markets?
And then, any thoughts you have on some of the larger market opportunities perhaps in APAC or Russia.
Thank you.
- CEO
So, I'll take the platform piece.
And so, we have spent a lot of time trying to design platforms so that we can on-board different partners relatively easily and handle a number of them on-boarding at the same time.
There is a bit of extra work as we move from vertical to vertical, but adding individual partners to a vertical that we've already launched in this case, for instance, food delivery, isn't actually a whole lot of extra work.
So, I think as we do some of the heavy lifting this year, it will become easier and easier for us to on-board partners and work through our backlog.
- COO
As to your question about international expansion, at the high level our ambition is to bring Yelp to the world.
We think that consumer benefit of being able to find great local businesses really translates across every country and culture, and so over time that's our goal.
Now, as to any sort of specific markets, you mentioned APAC in specific, and I think we all understand that some of those markets are going to be a lot more complex than others.
So, not necessarily anything kind of big to report here now.
And then, in terms of overall dollars of investment, I think it's fair to say that while we'll be continuing to invest in international in 2014, in terms of our overall level of investment in 2014, still the bulk is going to be domestic as so much of what we do is hiring incremental salespeople and engineers here in the US.
Operator
Our next question is from Darren Aftahi with Northland Securities.
- Analyst
Thanks for taking my questions.
Just a couple.
It looks like product development grew pretty close to revenue growth in the fourth quarter.
Just kind of piggybacking on Jeremy's comments about extending the community features on desktop to mobile, where else will you be investing?
And then, as a follow-up, what was local as a percentage of -- or home and local as a percentage of vertical of total revenue?
Thanks.
- CEO
As far as product development, I touched on a big push for us, which will be some of these community features, feeding the source of all of our great content.
And then, there's also as Geoff has touched on, quite a bit of international expansion that we plan to do.
So, those are kind of the big buckets.
There's also continued iteration on the advertiser side and building out features that help us close the loop with local businesses and our advertisers giving them more information and helping them understand the value that Yelp provides.
- CFO
Darren, on the home and local, in Q4 2013 it was about 24% of local revenue.
That's versus about 22% in Q4 2012.
And then, just to round out the top five, it's restaurants at 16% in Q4 2013, beauty and fitness at 14%, health at 11% and shopping at 10%.
Operator
Next question is from Chris [Moran] with Barclays.
- Analyst
Great.
Thanks.
So, a couple questions.
First, after you've rolled out a lot of these closing-the-loop products, is there anything you can tell us about the ROI that merchants are getting by becoming paying advertisers now that you have more data behind that?
And, are there certain categories in local that have higher ROI than others?
And what, in your opinion, is the category that you think is the biggest opportunity to improve your penetration of paying accounts?
And then, as it relates to mobile, would you mind updating us on what percentage of queries are done in-app as opposed to mobile web?
And, is it a focus of yours to try to migrate more traffic into the app to maybe reduce some of the traffic that you get from other sources?
Thanks.
- COO
Hi.
This is Geoff.
I'll take the first part of your question there.
You asked about ROI and some of these close-the-loop features.
We, at the beginning of last year, did a study with BCG wherein we showed that Yelp advertisers generate an average of $23,000 in revenue from Yelp relative to $8,000 for those who just claim their free accounts on Yelp.
That's kind of a helpful starting point.
We haven't redone that survey in the last year.
I think it would probably be helpful to go back and do that again at some point.
Internal data and metrics are certainly positive in terms of the ROI that we see for the typical advertiser on Yelp.
But, I don't have any new numbers for you there.
I think there certainly is opportunity to continue to both generate more ROI as well as help advertisers better understand that ROI across all categories.
One of the ones that I've always been excited about is restaurants, just because we do have so much consumer traffic there, and the focus on restaurants in both our platform effort with the delivery as well as the acquisition of SeatMe which helps us offer reservation there.
Jeremy, I don't know if you wanted to talk about the app versus mobile app, or Rob?
- CEO
I'll mention -- give out a few of the numbers that we've given out in the past.
On percentage of searches that have come from mobile, it's about 59%.
And then, there's about 46% of searches that came from the app versus about 13% of searches that come from the mobile web.
And then, just to put this number out, we had about a 47% of ad impressions were served on the mobile in Q4, and that's about a 90% year-over-year increase.
Operator
Our next question is from Todd Van Fleet with First Analysis.
- Analyst
Hi, good afternoon.
Just curious how interesting you find the evolutions in the payment space in terms of helping you kind of build out what you're doing with Yelp Platform.
We see a lot of activity, a lot of different companies doing some very interesting things.
Just curious as to how interesting you find what's going on in that space?
Thanks.
- CEO
We're certainly monitoring all the different things that are happening in mobile payments, and I think we'll continue to consider any ways to make the experience from a user perspective even smoother and more seamless.
But, the current implementation seems to be working quite well for us, and we're seeing really nice growth.
So, we're happy with that.
But, as the industry continues to develop and there becomes more and more slick ways to pay on mobile, we'll certainly look at bringing those into our app as well.
Operator
Thank you.
I would now like to turn the call over to management for closing remarks.
- CEO
Thanks for joining us on the Q4 2013 conference call.
We look forward to talking to you next quarter.
Thanks.
Operator
Thank you, ladies and gentlemen.
This concludes today's conference.
Thank you for participating.
You may now disconnect.