Yelp Inc (YELP) 2014 Q1 法說會逐字稿

Welcome to the Yelp Q1 2014 earnings call.

(Operator Instructions)

Please note that this conference is being recorded.

I will now turn the call over to Wendy Lim.

You may begin.

Good afternoon, everyone, and thank you for joining us on Yelp's first-quarter 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 our 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.

And with that, I will turn the call over to Jeremy.

Thanks, Wendy, and welcome, everyone.

2014 is off to a great start.

In the first quarter, revenue grew 66% and again we saw strong growth across our key metrics.

Yelp's mission is to connect consumers with great local businesses.

Our goal is to be wherever consumers are looking for a local business, no matter where they are in the world or how they access our content.

More than ever before, our brand is becoming synonymous with local search, as evidenced by the 132 million unique visitor who came to Yelp on a monthly average basis in Q1.

Many companies recognize our leadership.

This quarter, we announced partnerships with Yahoo and YP.com.

In addition, we power Bing Local search and Apple Maps and have integrations with several car navigation systems.

We would not be where we are today without our community of writers whose high-quality rich content makes Yelp relevant for consumers.

In March we held our annual Community Manager week at our headquarters in San Francisco and I was struck by the overwhelming enthusiasm in the room.

CMs are Yelp's brand ambassadors and are growing vibrant Yelp communities globally.

I'm proud of all of their hard work and excited for what lies ahead for Yelpers around the world.

We also continue to roll out new features to enhance the experience for our community of contributors and readers.

We've been working to improve the mobile web experience, and in the first quarter, we launched the ability to add photos via mobile web.

The strong engagement we're seeing across mobile is a result of the investment we have made over the past year.

Approximately 35% of new reviews came from mobile and about 60% of all searchers came from mobile in the quarter.

We also revamped our business listing page by increasing the number and size and photos and improving review highlights to emphasize the information that consumers find most useful.

Our international communities are also experiencing increased traction and brand awareness.

In January, I spoke at the DLD conference in Munich, Germany, and visited our Hamburg office.

I was excited to see first-hand the communities that have taken root there.

In Germany alone, the numbers of contributors has increased over 350% since we completed the Qype integration in October 2013.

In Q1, our total international traffic grew 95% year over year to 23% of total traffic, and reviews grew 210% compared to last year, to comprise 11% of total reviews.

We also recently launched in Mexico and Japan, our 25th and 26th countries.

I visited Japan for our launch this month and am thrilled with the warm reception Yelp has received from both consumers and media in our first few weeks.

We continue to provide new ways to close the loop with local businesses.

Earlier this month, we integrated our latest Yelp Platform partner, Booker.

So now consumers can book spa and salon appointments directly on Yelp.

We look forward to integrating additional platform partners throughout 2014.

We're also seeing good traction with the products we've rolled out last year.

Call to Action is a popular feature with both advertisers and consumers; although we only launched CTA last summer, it's already generating approximately 100,000 leads for advertisers every week.

Also, the customer activity feed, which we launched in Q4 of last year, provides business owners with details of each lead.

For example, yesterday at 5:30 PM, a man in his 30s from New York called your business from the Yelp mobile app.

We think consumer desire to find great local businesses is universal and this creates a large global opportunity for us.

I'm excited about what's in store for the rest of the year.

We'll continue to focus on what's has made us successful, supporting and engaging our community of contributors, developing innovative products to enhance the consumer experience, and helping local business owners see the value that Yelp delivers to them.

And now, I'll turn the call over to Rob for the financial details.

Thanks, Jeremy.

As Jeremy mentioned, we had a strong start to the 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 were very pleased with our performance.

In the first quarter, revenue grew 66% year over year to $76.4 million.

Adjusted EBITDA was $8.5 million in the first quarter, compared to $3.2 million in the first quarter of 2013.

Moving on to key operating metrics for the first quarter, cumulative reviews grew 46% year over year to approximately 57 million, as we added about 4 million reviews in the quarter.

Active local business accounts, which now include SeatMe customers, grew 65% year over year to approximately 74,000.

Our average monthly unique visitors grew 30% year over year to roughly 132 million.

Average monthly mobile unique visitors grew 52% year over year to approximately 61 million.

Claimed local businesses were 1.6 million, up 47% year over year.

Let me run down the P&L starting with the revenue mix to provide some additional color.

We are seeing great growth across all revenue sources.

For the first quarter, local revenue was $65.2 million, up 67% year over year; brand revenue was $7.5 million, up 57% year over year; and other revenue increased 56% year over year to $3.8 million.

International revenue contributed about 3% of total revenue in the first quarter.

Our customer repeat rate, defined as the percentage of existing customers from which we recognize revenue in the immediately preceding 12-month period was, 75%.

Gross margin was 93%.

Total sales and marketing was approximately 59% of revenue, compared to approximately 61% last year, demonstrating leverage in the model, while we continue to invest in hiring, as well as launching new country sites in Japan and Mexico.

Sales headcount grew 55% year over year.

We intend to continue to invest in sales and marketing, given the large market opportunity we see in front of us.

Product development was approximately 18% of revenue, compared to 16% in the first quarter of last year.

Again, this reflects our strategy to invest in product innovation, such as improving business profile pages, integrating additional platform partners, and supporting new languages and communities.

G&A was 17% of revenue, compared to 19% in the first quarter of last year.

Separately, we recorded a tax benefit in the quarter related to the release of a valuation allowance against our foreign net operating losses.

Turning to the balance sheet, our cash and cash equivalents position at the end of the quarter was approximately $400 million.

We generated approximately $9 million in cash from operations in the quarter.

Before turning to our outlook, I'd like to take a moment to remind everyone about our investment strategy in 2014.

We see a multi-billion dollar global opportunity in the local space.

Our strategy is to continue to invest in growing the Yelp product and footprint to maximize long-term revenue and local advertising market share.

Given our results in Q1, we think this strategy is working.

For the second quarter, we expect revenues in the range of $85 million to $86 million, representing a 55% year-over-year growth rate.

We expect adjusted EBITDA for the second quarter to range between $11.5 million and $12.5 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.

I am pleased to announce that we are increasing revenue and adjusted EBITDA guidance for the year.

We expect full year 2014 revenue to be in the range of $363 million to $367 million, or approximately 57% growth over 2013.

For the full year, we expect adjusted EBITDA to range between $56 million and $60 million, a 97% increase over 2013.

We expect stock-based compensation to be approximately $43 million to $45 million; depreciation and amortization to be approximately 5% of revenue; and negligible tax expense on a cash basis.

For modeling purposes, we expect our average weighted basic share count in the second quarter to be approximately 72 million shares, and for the full year, average weighted basic share count is expected to be approximately 73 million shares.

I'll now turn the call over to the operator to open up the call for questions.

(Operator Instructions)

First question is from Youssef Squali from Cantor Fitzgerald.

Please go ahead.

Thank you very much.

Two quick questions, please.

Starting with Jeremy, if I look at the international business, so you're in 26 countries right now, you've been in some of these countries for a few years -- for several years now.

International contribution to revenues is still relatively small, you stated 3%.

If you were to dream the dream, how big do you think international can be over the not-too-distant future, in the next two or three years?

Can international for you be similar or is there any structural difference or challenge that would prevent your international business from over time becoming, say, one-half of your business -- obviously not over the next two or three years but over time?

I'm just trying to understand your thinking about the ramp-up of monetization as you open up more countries and as more and more traffic starts coming from international?

And then Rob, your EBITDA for both Q1 and Q2 was a bit shy of expectations, yet if I look at the year it was higher, as you just stated in your guidance.

So what happens in the second half to get you there?

Thank you.

Hi, Youssef, this is Jeremy here.

Thanks for the question about international.

We continue to be very happy with our consumer growth, our audience growth there, as well as contributor growth, which, as you know, comes before the revenue piece.

That's essentially how our model works is we roll out market by market, develop the community, see a big audience of consumers, and then turn on monetization over a period of years.

And as far as our expectation of what can we achieve over the next several years, we think it's something like 30% to 40% of revenue could be coming from international over the next 5 to 10 years is how we think about it.

That's our goal that we've set out for ourselves.

Hey, Youssef, it's Rob.

To follow up on the question about EBITDA, we did -- we had about $8.5 million in EBITDA in the quarter, Q1, and then we had not, obviously, given any expectations about Q2 as of yet.

We feel like continuing to invest in the Business, both in sales hiring as well as product, to continue to generate all of our great product initiatives, as well as hire these great salespeople who are doing great work.

And we feel, as you can tell in Q1, with a 66% growth rate, it's paying off.

So we do feel like as the year increments along we'll gain some leverage out of the model and we expect to drop about 20% of the incremental guidance down to EBITDA.

The next question is from Jason Helfstein from Oppenheimer.

Please go ahead.

This is Jed on for Jason.

Just touching on international again, would you expect, just given as the weather improves, and looking at the seasonality last year or if there was any, for -- to see like an uptick in international just with more businesses spending just with better weather?

I don't know that we would necessarily relate the business at this point to better weather.

I previously worked at eBay.

I know that's a factor.

We're so nascent in the market at this point that we're only generating probably $2.5 million in the quarter from international.

But what Jeremy said earlier about the fact that international reviews are up 210%, international traffic is up 95% year-over-year, so longer-term, we expect international to contribute a great deal to our P&L, but it's just hard to say whether weather in the next few months will help us out or not.

Thank you.

The next question is from Tom White from Macquarie.

Please go ahead.

Thanks for taking my question.

On the guidance, it look like you expect the top-line trends to improve quite a bit over the remaining three quarters or back half of the year.

Could you maybe comment a little bit more on exactly why the raised outlook?

Do the deals with Yahoo and YP, do they factor into that at all?

And then just quickly on platform, in terms of helping drive consumer understanding or awareness of platform, not merchants but consumers, would you guys ever consider doing any traditional brand marketing?

Thanks.

Okay.

Hey, Tom, I'll take the guidance question.

For 2014, what we've seen at least in the first quarter is that our Business is really firing on all cylinders and so, as we look forward to the next few quarters, we feel like that momentum will carry through and that's why we updated the guidance to $363 million to $367 million for the year.

It's really coming from the business momentum that we have currently.

As you know, we haven't rolled out the YP.com partnership as of yet and our expectations are fairly modest for that.

That said, it's not reflected in our guidance, but I would encourage everyone to be cautious only because we'll be experimenting over the next year with YP.

And then, Tom, to your other question, this is Jeremy, around platform and can we create consumer awareness through some brand marketing.

We're really happy with the growth we're already seeing with our existing partners on platform.

There's a lot of leverage to be gained by adding additional partners, which we'll continue to do over the course of the year and we just launched Booker in the last quarter, which we're very excited about.

We'll never say never on experimentation with brand marketing.

We do have a program that we've been dabbling with, but it's not particularly focused on platform and it's really just experiments.

We're constantly evaluating different ways to get the word out about Yelp, but fundamentally the best way that we've found to get the word out about Yelp is just through our organic growth.

So of the traffic that we keep getting, the north of 130 million monthly uniques, it's really all organic.

We don't do any SEM at this point.

It actually is pretty difficult and expensive to move the needle when you have an audience of that size.

The next question is from Kaizad Gotla from JPMorgan.

Please go ahead.

Great.

Thanks for taking the question.

Just wanted to dig in a little bit on the YP partnership.

Wondering if you could just talk a little about the overlap between YP's advertiser base and yours and how many of them have a Yelp profile today?

And also I noticed the customer repeat rate was up quite a bit from 70% to 75% this quarter.

Wondering if there's anything you wanted to call out there or are you seeing more usage of some of the ROI measurement products that you've rolled out over the last few quarters that's boosting that number?

Thanks.

Hi, this is Geoff.

Thanks for your questions.

First on YP, we see this YP relationship as really a win-win, gives YP's advertisers access to our 138 million consumers and us an opportunity to tap into YP's 500,000 plus advertisers.

As to specific overlap between their advertiser base and our today, we actually haven't done that specific deduping so I don't yet know.

My sense is from some initial tests is that it's pretty small.

So we do think it will be mostly upside, though, as Rob said.

We really don't know what to expect there and in the first year we'll be doing a lot of iteration and experimentation.

To your question on repeat rate.

As you mentioned that repeat rate did notch up a bit this quarter, although really over the last couple of years, it's been pretty consistent in the low 70% range and so we haven't been managing or really reading too much into small fluctuations there, so nothing specific to report.

The next question is from Lloyd Walmsley from Deutsche Bank.

Wondering if you can just give us a little bit more color on the Call to Action ad unit.

In the past, you've said that your customers adopting it saw a 15% lift in engagement.

Any update there and can you maybe give us color on what percent of your customers are using that?

And then a follow-up if I may?

Okay.

Thanks for -- this is Geoff again -- thanks for your question about Call to Action.

Yes, as Jeremy mentioned, that is actually starting to a drive material number of leads.

It's more than 100,000 leads to our customers in the last period.

I don't have an updated number for you on that.

We had previously done a study that suggested 15% uptake or uplift in leads per page view for those advertisers who had the CTA turned.

We haven't updated that study yet and so when we do we'll share that back out, but nothing new to report there at this point.

I also don't have an update on the percentage of total customers who have turned that on, but it's fair to say at this point that they all should know about it and anybody who is a paying, enhanced profile, or branded profile customer has the ability to turn that CTA unit on, assuming they have a landing page they'd like to point people towards.

Did you have a follow-up part of that?

Yes.

Then just wondering how integrated Call to Action and Yelp Platform statistics are now into the customer dashboard; any update there?

Call to Action is incorporated into the customer dashboard.

Those customers who have Call to Action turned on can see how many leads they're getting from that Call to Action button.

The Yelp Platform component is not yet integrated into the business owner dashboard and so that is still to come and so some uplift there for those customers to be able to see how many transactions they're actually getting through Yelp Platform.

Great.

Thanks a lot.

Sure.

Thank you.

The next question is from Stephen Ju from Credit Suisse.

Please go ahead.

Thank you.

Jeremy, I've been noticing that Yelp has been gathering additional information about venues whenever I check into the location -- do they take reservations, that sort of thing.

So having more data so you can present a richer search experience to users is pretty straightforward, but are there other use cases for the data that Yelp has not yet fully exploited?

This is also probably more of an anecdotal question, but I've noticed that legacy Qype users do not really seem to be contributing content for London, for instance.

So is this just a matter of these guys being fully integrated now and now have a Yelp ID and hence the review no longer needs to be highlighted as a Qype would be or have you lost some of the Qype users?

Thanks.

This is Jeremy.

Thanks for the question.

The feature that you're referring to is after you check in, we ask you a number of questions that are optional that you can answer.

We call those attributes and they help you understand things about the business, is the place dressy or casual, is it good for kids, is it good for groups, et cetera, et cetera.

It's been a great way to collect additional information.

It's actually something that we've always been doing when you write a review on the desktop.

And so really that is nothing new in and of itself, it's just been now brought to mobile and we're seeing very nice uptake there and we are gathering quite a bit of data from that, so we're happy with the performance of that.

Your question was are there other uses of both this and other data.

The answer is absolutely yes.

We have an enormous amount of data, be it check-ins, as well as all this attribute information, not to mention reviews and tips and photos.

Fundamentally, that is what our consumer product team is most focused on, is releasing features that take advantage of this insight that we uniquely are gathering at a rate that basically no one else is capable of.

And that is part of the moat around Yelp, is our ability to leverage all of this data that we've been gathering for, frankly, years and only scratched the surface on.

Really quickly to your Qype question, and maybe Geoff can chime in here as well, we actually are seeing quite a bit of lift across the board in Qype communities, or formerly Qype communities, after the integration, and so we're very pleased with both how traffic has performed, as well as contributions.

Certainly we didn't expect all of the Qype users, many of which may have not been participating actively on Qype, we didn't expect them all to come over, but we certainly did expect some of them and in fact that's what we've seen.

I have really nothing else to add there.

The next question is from Justin Post from Merrill Lynch.

Please go ahead.

A couple questions.

First, when you look at engagement, is the primary metric reviews per user and are there other things that you look at, and how are they trending?

Then the second question, little bit of controversy in the quarter on merchants maybe wanting to see reviews.

Do you have controversies like that in international countries?

Or how do you look at those markets maybe being different than the US?

Thank you.

Hi, this is Geoff.

I'll try with your first question around engagement metrics.

There are a host of different engagement metrics that we've looked at internally over time, but I can't tell you that there's any one predominant metric that we find to be important.

Sure, reviews per user is interesting, but also what percent of months in the user's first year on Yelp they contribute or participate is interesting, the number of photos that they add, you how often do they open a Yelp product or do a search.

So there are a variety of ways we might look at engagement.

Interestingly enough, at scale, what I would tell you is those engagement curves have looked pretty darn comparable over the years, even as we've grown so much and into new geographies.

So there's no outlying anything specific to share there.

As to the second question, Jeremy?

To your second question on controversies surrounding reviews and have we seen anything internationally.

With 57 million reviews on the site, there's bound to be some consternation over reviews, given that they are opinions and business owners may not always agree with those opinions.

One thing to keep in mind is about 20% of our reviews on the site are negative, so the majority is neutral to positive and so that negative review is far less frequent than you might imagine.

Internationally, we do see complaints from time to time and with the big rise in traffic; in Germany in particular, we saw some uptick in noise in that market.

But we actually do hear from time to time from just about every market that we're active in.

And it's the same type of stuff that we see in the US, usually concerns over reviews, some of which are reviews that fundamentally violate our review guidelines and therefore are removed by our team and then others it's just difference of opinion and that's just the nature of the beast.

That said, we have gotten better and better over time at communicating how do we police the site and keep it a level playing field.

We have our recommendation algorithm that recommends certain reviews and doesn't recommend others and it shows about 75% of content.

We found that while that does occasionally cause frustration for business owners, it's actually been incredibly effective at keeping the site useful for consumers.

Right.

Thank you, appreciate it.

Sure.

We have a question from Mark Mahaney from RBC Capital Markets.

Please go ahead.

Thanks.

Jeremy, in the press release you talk about the innovative products to close the loop with business owners later on through the rest of the year.

Could you provide any more color on what some of those products -- or maybe what broad area you're thinking about?

And then I want to get to the idea on products and pricing for really local targeted ads, which is essentially what Yelp is.

And Google on its earnings calls keeps saying that long-term, they believe, mobile CPCs will be higher than desktop CPCs, i.e., local search has this real monetization opportunity.

You are that opportunity.

Could you talk about whether you think you have the products currently in place, versus the next five years, that would really help people realize the value of local leads and whether or when you think you'll have the ability to turn that lever and maybe charge a little bit more for really hyper-local targeted ads?

Thanks.

Sure.

I'll take the first half of your question there around innovative products and what areas are we focused on.

I'd say there's, aside from continued international expansion, which maybe isn't necessarily new products, but just new countries, there's two areas in particular that we've been looking at and one of these you probably heard in a number of previous calls, which is closing the loop with local businesses.

That's a pretty broad area, but some of the stuff that we've done there, particularly recently, had been Yelp Platform, for example, where you can actually have transactions happening on the site.

We also purchased SeatMe and have integrated that -- from a consumer perspective -- integrated that fully into Yelp so you can book reservations right on the site.

And then there's just more and more information that we can provide about leads that Yelp generates and pass on to local businesses in the business dashboard.

We talked about some demographic information that we just recently added to that dashboard.

So say a man in his 30s in Sausalito, California called your business, we can log that and show that to you in real-time.

We'll continue to roll out features in that direction of helping business owners understand the value that they're getting from Yelp and the value of their advertising.

On the consumer side, one area that we're focused on is contributions and really engaging the community.

A feature that we -- I just talked about on an earlier question is a new feature where we're collecting information on mobile from users after they check in.

That's just one example.

But there's so many other ways that users can contribute to the site.

We launched mobile reviews that now comprises over 30% of our of reviews contributed and so we're going to continue iterating in that direction as well, providing new ways for users to add content to Yelp.

And hey, Mark, this is Geoff.

You also asked a question about packaging and pricing of our ad products and where we are today.

Broadly speaking, we do sell ad products in three rough categories today.

One is a pure self-serve ad product.

The second is direct subscription pricing with a flat rate product that includes both ads and enhanced profile features.

Then third is this thing that we've talked about the last couple of quarters which is called Packaged CPC, that is really a blend of the first two.

You get effectively auction or bidded ads on a CPC basis, plus some of the enhanced profile features.

Broadly speaking, what we're really shooting for here is more selection and better merchandising of these various package options so that every local business can buy whatever ad package makes most sense for them.

At the core of it, we're agnostic.

We're happy to sell people advertising on a CPC basis or a CPM basis, on a flat rate basis, whatever works for them.

To the second inherent part of your question there, which was should mobile CPCs be higher, the reality there is it really depends, it depends on the situation and what's going on.

We can all conjure up that use case if, hey, I'm looking for a cup of coffee and I'm 10 feet away from a store, then a higher price might make sense and package that accordingly.

On the other hand, if you're looking for a plumber, the value of that plumbing lead is probably the same irrespective of where you're sitting or what platform you're using.

Some of those are some of the things that will take care of themselves over time as long as we get that selection in merchandising right, which again will take several years, as we continue to roll this.

Thanks, Geoff.

Thanks, Jeremy.

We have a question from Ron Josey from JMP Securities.

Please go ahead.

Thanks for taking the question.

A question on mobile here.

Given UVs [or uniques] grew around 52%, I wonder if you can give a break-out between just mobile web and app.

I know the Company and you all have said that it's relatively agnostic where traffic's coming from but is there -- are you all focused at all on driving app usage and if so how?

And then a quick follow-up if possible.

Thank you.

Hey, Ron, it's Rob.

So app was about 10.9 million in the quarter, so app users, and that's not downloads, just to be absolutely specific.

That's actually people using our app and then we had about 51 million, 52 million mobile web users.

And on the how are we driving app usage side, that's our mobile product team and so we're constantly rolling out new features that engage user base.

In fact, we just rolled out to our elite squad a new feature, which is as of yesterday, mobile messaging.

So certainly that would have an engagement impact, is one example.

But also continuing on the theme of contribution, collecting more information from our passionate user base.

You can see that engagement just in the 35% of reviews that are now coming from mobile, that these are really some of our best users, the ones that are compelled to not just tap into a great local information, which you can get with a comparable experience on mobile web, but actually take that extra step and download that app.

So we're going to continue to push the app.

We think it's a great experience.

But frankly if you go and you use mobile web, it's basically all the same functionality.

And in the last quarter, we did add an important contribution feature, you can now add photos from the mobile web.

And so the difference between the two experiences is becoming more and more narrow and so there isn't really a strong preference either way.

If you're a die-hard Yelp user, we'll take you on the mobile web, we'll take you in the app, or we'll even take you on desktop.

That's great.

Very helpful.

And the quick follow-up is just, with international revenue, it was around 3% of total, Rob.

Is that pretty much due to the integration of Qype in Germany, where they had lower valued ads that were removed to improve the overall engagement or was it something else?

Thank you.

Hey, thanks, Ron.

Yes, so just to answer your question, it's really in the process of integrating the Qype customers and moving them over to Yelp.

There were some customers that didn't come over, which is fine.

They were selling a bit of a different product where they were providing access versus advertising.

But as we look at it and the prognosis for Europe and international in general, given the review and traffic growth that we cited earlier, of pretty strong year-over-year growth numbers that we're seeing internationally, we're in pretty good position with our sales efforts.

So stay tuned for that.

Thank you very much.

We have a question from Michael Purcell from Stifel.

Please go ahead.

Thanks for taking the question.

Guys, a question on the cohorts.

Your level of growth both in cumulative reviews and average local rev per market has maintained a very healthy rate this quarter versus last and has accelerated before that.

I'm wondering if you could just help us understand or -- what do you attribute this to, that you're able to maintain such a high level of growth in your older cohorts?

And I'm wondering underneath that, if that renewal rate of 75%, that's the highest that you've given us.

Is that from within the cohorts and is that helping the overall growth (inaudible)?

Hi, Michael, thanks for your question.

This is Geoff.

Thanks for noticing, too, those cohort growths continue to be pretty good.

Our oldest cohort grew revenue at 62% year-on-year in the latest period -- or 62% last time, 61% in this most recent quarter.

The short answer to the question is just the TAM is really big in these markets and we can evaluate TAM in a whole bunch of different ways.

When we look at census and whatnot, the numbers that we're coming back with is are about 25 million local businesses in the US and something like that, again, in the European, and other Yelp markets.

So we just feel like we're still very much getting started, even in our oldest cohorts like San Francisco and Los Angeles and New York.

We're not doing anything specifically different other than we just continue to branch out and acquire more consumers, which then enables us to reach out to more local business owners and offer ad products and whatnot.

If there was a second part of your question I'm afraid I missed it.

I think you hit it.

It was just really if the renewal rates, if you're noticing that they are different versus the average platform as you've been in the markets longer, do the renewal rates -- are they better?

There's nothing significant to call out there that we've seen in any recent period.

Thanks, though.

Great.

Thank you.

Heath Terry from Goldman Sachs is on line with a question.

Your line is open.

Great.

Thanks.

Jeremy, could you give us an idea of -- is your ability to invest or your increasing ability to invest as margins improve and the business grows shortening the road map that you have for taking new markets from launch to scale to profitability, whether it's been newer international markets like Japan or even newer markets in the US?

And then second, Rob, what uptake are you seeing on self serve?

Is there any typical profile of business that's using that platform?

Do they tend to be existing Yelp customers that migrate or are they new to the platform -- smaller, larger, particular verticals where that's been particularly successful?

Jeremy here.

I'll talk about international and our ability to invest there, whether or not the timeline has changed.

From my perspective, certainly the product gets better and better, but I wouldn't say that our expectations have changed in any dramatic fashion as far as how fast a given market can develop.

It still takes a period of years.

That said, we do see market-to-market variation and there's a lot of factors that go into that.

It could be that the particular culture is very excited about American Internet products coming versus other markets that are maybe more kept skeptical or skittish.

We've seen slower development and faster development and we've often tried to draw theories explaining what is the difference and so we come up with ideas like that.

But we don't really have a definitive answer for why does one market grow a little bit slower than the others.

But the good news is, on the whole, all of the markets do grow and grow at a rate that we're pretty happy with.

So we feel good about international expansion and continuing to invest heavily there and roll out new markets.

This is Geoff.

Your second question was about the self-serve products that we offer and who are those customers.

You actually asked are those customers who might have been full-serve customers and then move over to self-serve.

I'd say that's actually the exception to the rule.

If anything, it tends to go the other direction, which is to say, people find their way into Yelp using our free tools and then go to classic premium; they start to experiment with our lower-priced entry products, whether that's Yelp Deals or it's self-serve CPC.

And as that starts to work for them, they're very likely to actually speak to a sales or account representative here at Yelp and then actually upgrade to more of our full-service offering and take advantage of having an account manager and whatnot.

You could go the other direction, but that would be much rarer.

Great.

Thank you.

Brian Fitzgerald from Jefferies is on line with a question.

Please go ahead.

Thanks, guys.

Two quick clarifications.

With regard to the YP deal, is that -- I assume that's not exclusive so you could do something similar with Dex?

Then as you're looking at Qype, as you moved over to the Yelp model, you inherently added in a performance component so that should raise pricing.

Are you seeing that pricing lift as you have migrated over and people are using Qype more?

Okay.

Thanks.

This is Geoff again.

On the first question, you asked about YP.

We haven't shared specific terms on that deal.

We do have other relationships with other reselling agents out there, but I wouldn't want to go into any specifics about the YP deal or how that's going to work in detail.

You also asked a question around Qype pricing.

The easiest way to think about this is Qype was offering a really different kind of an ad package at, yes, lower, but just different package at different kinds of pricing when they were selling themselves a year and more ago.

Now that we're offering Yelp pricing, it is true that if you were to look at revenue per customer of a Yelp client versus a Qype client, it would certainly be higher, but frankly it's totally a different package that we're offering today and it's almost not real relevant to compare the two.

Okay.

Great.

Thanks, Geoff.

Thank you.

We have Peter Stabler from Wells Fargo.

Please go ahead.

Good afternoon.

Thanks for taking my question.

Going back to the topic of self-serve, when we on-boarded a local business a month or so ago, we felt like we were pushed towards the self-serve and nowhere in the process -- which was pretty easy, really easy, by the way -- nowhere in the process did we ever really get an understanding of the impression bundles that were available and we had -- kept an eye out, but then we'd get a menu of different offerings.

It really felt like we were pushed to self-serve.

So my question is, can you talk a little about the education process?

Geoff, you just spoke a little about the discovery, how small businesses are discovering different ways, but can you help us understand the proactive education process of the different options that a small business has when they're on-boarding and claiming their business for the first time?

Hope that made sense.

Thank you.

It did.

Thanks for teeing that up.

There's two pieces of good news in there.

One is you found it easy to self provision so I'm glad you tried and I'm glad it went well.

The other one is, yes, there's no shortage of opportunity for us to do even better to help you talk to a rep in that first conversation and offer you that full range of Yelp products.

This is what I was alluding to when I talked about our need for better selection and merchandising in the on-boarding process, a little bit earlier to Mark's question.

Frankly, we're just at the beginning of this.

We rolled out self-serve advertising a couple of years ago now as this entry point and until this point, although we've done a whole host of things, we haven't done a great job of making that selection in merchandising easy for the local business owner.

So there's actually quite a bit of upside in just doing that better in the months and years to come.

So the short of it is, we don't, you're right, today, do a good job of exposing you to the full range as a self-serve advertiser and what's going to tend to happen is you'll get a call from a Yelp rep potentially, months after you've signed up for self-serve and we should shorten that cycle significantly.

We have Gene Munster from Piper Jaffray online with a question.

Please go ahead.

Hi, guys.

A little bit earlier you mentioned being agnostic to pricing models.

I was just curious if you've given any consideration to charging for specific engagements like directions or actually charging for calls to businesses, that line of thinking?

Thank you.

Hi, Gene.

It's Geoff again.

We have.

We've certainly considered those pricing possibilities.

We do offer pay-per-call pricing in some situations.

That's a small but interesting part of the business.

Pricing on things like Call to Action engagement, other kinds of leads, clicks for directions and whatnot, those are all possibilities in the future.

As we've talked to local business owners and done the math on this point, I don't think that's very low hanging fruit.

Between our subscription impression-based bundles and CPC, we're going to capture the majority of the market interest as it exists today.

But those other pricing options are out there in the future and certainly will be things we explore as we get more interest from the marketplace.

Got it.

That's helpful.

Thank you.

Rob Sanderson from MKM Partners is on line with a question.

Your line is open.

Thanks for taking the question.

A couple, also, related to the cohort analysis.

Very strong growth again in each of the cohorts.

But depending on our assumptions for brand and other in the guidance, it looks like you see a pretty sharp deceleration in local ad sales.

And just wondering what might be contributing to that?

And second question, is I believe the deals are still opt in product and not really sold direct by sales force.

Why not push harder on the deals opportunity?

Hey, Rob.

We did see great growth in the cohorts.

Still pretty phenomenal.

Fairly flat to last quarter and that was 60%-plus and 70%-plus for the second cohort and it's still over 100% for the third one.

In terms of the assumption that you'd have to make, obviously you'd have to make those, we didn't give any specific guidance around the breakdown but you can -- what we feel like is the local revenue line item is growing quite fast and we feel good about that.

As far as brand, what we've seen at least in the past is Q2 and Q3 are fairly flat and then obviously you have a Q4 bump because of the seasonality of that particular line item.

For other revenue, if you maybe remember back to Q2 of last year, we signed a couple of deals whereby, it was Locu and SinglePlatform, that bumped that line item up quite a bit.

That's been fairly steady, maybe a little uptick on a quarter-over-quarter basis.

So I don't know that, that grows significantly over the next few quarters, given what I just said, so hopefully that helps you look at the three individual line items.

And you also asked about Yelp deals, and you're right, that's primarily a self-provision or self-serve product today.

We have experimented with the sales force outreaching specifically on deals in the past and while that's been okay, frankly, the economics for us and therefore our sales force have been better when we've just offered primarily lead with the ad products at this point.

So we mention the Yelp deals offering and then customers can go in and self-provision for that component if they want to.

We're always experimenting with these things and may continue to do in the future.

Thanks, Geoff.

Thanks, Rob.

Thanks.

We have a question from Kerry Rice from Needham.

Please go ahead.

We have a question from Kerry Rice.

Your line is open.

Operator, I think we'll -- go ahead.

I will now turn the call back for final remarks.

Thanks for everyone for joining us for the first-quarter 2014 call and we look forward to updating you on the next call.

Thanks.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for your participation.

You may now disconnect.