Yelp Inc (YELP) 2014 Q2 法說會逐字稿

Welcome to Yelp Q2 2014 Earnings Call.

My name is Alexandra, and I will be your operator for today's call.

(Operator Instructions)

Please note that this conference is being recorded.

I will now turn the call over to Wendy Lim.

Wendy, you may begin.

Good afternoon, everyone, and thank you for joining us on Yelp's Second-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 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 reflect 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.

Thanks Wendy, and welcome everyone.

We had a great second quarter.

Revenue increased 61% year over year, marking our tenth consecutive quarter of 60%-plus growth since our IPO.

For the first time as a public Company, we achieved profitability.

Our mission is to connect people with great local businesses.

To that end, the consumer experience is our top priority.

By empowering consumers to share their opinions about local businesses, we have revolutionized how consumers discover businesses and make purchase decisions.

With over 61 million reviews contributed and approximately 138 million unique visitors, we believe Yelp has become the preeminent destination for local search.

Consumers are increasingly engaged with these local businesses, making phone calls, mapping directions to businesses, and booking reservations, among many other activities, all directly on Yelp.

Recently, we added another innovative way for our community to contribute and connect.

Consumers can now capture and post short videos to Yelp business listings.

While it's still early, we've been delighted by the high-quality videos that have been posted to date.

Our focus on community and the mobile experience has yielded great results.

In Q2, monthly mobile unique visitors grew over 50% year over year to 68 million, and nearly 40% of new reviews were written on mobile.

We also delivered more than 50% of our ad impressions on mobile.

Closing the loop with business owners has also remained a focus.

In June, we revealed our Message the Business feature, which allows consumers to contact businesses directly through Yelp.

For example, in the first three weeks after this functionality went live, a Mexican catering business received over 30 messages with requests for price quotes and availability.

Giving consumers the power to interact directly with businesses on Yelp enhances the consumer experience, while delivering high-quality leads to businesses.

Since its launch, consumers have sent about 100,000 messages to businesses through Yelp.

In May, we introduced Yelp Reservations, a free, light version of SeatMe's front-of-house restaurant management product.

Restaurants that aren't big enough or busy enough for the robust functionality of SeatMe can in minutes start accepting online reservations through their Yelp business account.

This feature has been well received, and one of the early adopters of this new product has already seated over 900 diners.

We now have thousands of restaurants using Yelp Reservations, and we look forward to rolling this product out worldwide.

Internationally, the Yelp brand continues to become more prevalent.

Last quarter, we launched in Argentina and Japan, our 26th and 27th countries.

In the first two months since its launch, our community of active contributors in Buenos Aires grew faster than any other Latin American market.

We've also been particularly pleased with the Japanese market.

In June, Japan led all international countries in Yelp iOS app downloads, which is encouraging, given its mobile-centric culture.

Based on our successful launches in these new countries, we are excited to see Yelp reach even more people around the world.

Let me take a moment to acknowledge Yelp's 10th birthday, which we are celebrating this summer.

A decade ago we founded Yelp in San Francisco as a better way to connect people with great local businesses.

Today we're a profitable global country, with vibrant communities in 27 countries around the world.

Still, we believe the opportunity before us is enormous.

There are tens of millions of local businesses in the countries we're in, and our sales teams are educating thousands of business owners daily about online advertising and the value of Yelp.

Product and engineering continues to enhance the consumer experience and drive value for local businesses.

The entire Company's hard work and dedication has led to our outstanding performance quarter after quarter, and I'm proud of everything we've accomplished in our first 10 years.

Looking to the next decade we see tremendous opportunity, and remain focused on our mission to bring local consumers to the doors of the best businesses worldwide.

Now I'll turn the call over to Rob for the financial details.

Thanks, Jeremy.

Please note that we have posted a few slides on our Investor Relations web page that accompany the financial portion of the webcast.

As Jeremy mentioned, in the second quarter our revenue grew 61% year over year to $88.8 million.

To put this in perspective, this was greater than the revenue we generated in all of 2011, just a short 2.5 years ago.

Adjusted EBITDA was $17.2 million in the second quarter, compared to $7.8 million in the second quarter of 2013, more than 120% increase.

For the first time, we generated net income of $2.7 million.

Moving on to the key operating metrics for the second quarter, cumulative reviews grew 44% year over year to approximately 61 million, as we added about 4 million reviews in the quarter.

Active local business accounts, which includes paying SeatMe customers, grew 55% year over year to approximately 79,900.

Paying local businesses were 1.8 million, up 43% year over year.

Our average monthly unique visitors grew 27% year over year to roughly 138 million.

Average monthly mobile unique visitors grew 51% year over year to approximately 68 million.

International traffic grew over 80% year over year to approximately 31 million unique visitors on a monthly average basis.

In June, international traffic declined month over month, due to Google's algorithmic change in late May.

The effect was seen primarily in markets with smaller communities.

We believe that by continuing to focus on community growth and high-quality content, our international traffic will increase as we've seen in the US, where domestic traffic did increase with the algorithmic update.

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

We are seeing continued growth across all revenue sources.

For the second quarter, local revenue accelerated to $75.7 million, up 69% year over year, driven by accelerating revenue growth across all three of our cohorts.

We have also been particularly pleased with the success of our performance-based advertising products.

We have been working to enhance our CPC offerings over the past 18 months, and while it's still less than 20% of total revenue, CPC revenue has been growing quickly.

Brand revenue was $9.1 million, up 28% year over year, and other revenue increased 27% year over year to $4 million.

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

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

Gross margin was 93%.

We continue to see leverage in the model while investing to capture the vast opportunity ahead.

Total sales and marketing was approximately 54% of revenue, compared to approximately 56% last year.

Sales headcount in the second quarter grew 62% year over year.

Given the results we've seen, and the large market opportunity ahead of us, we intend to continue to invest in sales and marketing.

Product development was approximately 17% of revenue, compared to 15% in the second quarter of last year.

G&A was 15% of revenue, compared to 18% in the second quarter of last year.

We generated approximately $11 million in cash from operations in the quarter.

For the third quarter, we expect revenue in the range of $98 million to $99 million, representing a 61% year-over-year increase.

We expect adjusted EBITDA for the third quarter to range between $18 million and $19 million.

We also expect stock-based compensation to range between $12 million and $13 million, and depreciation and amortization to be approximately 4% to 5% of revenue.

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

We expect full-year 2014 revenue to be in the range of $372 million to $375 million, or approximately 60% growth over 2013.

For the full year, we expect adjusted EBITDA to range between $67 million and $69 million, a 130% increase over 2013.

We expect stock-based compensation to be approximately $45 million to $47 million, and depreciation and amortization to be approximately 4% to 5% of revenue.

For modeling purposes, in the third quarter we expect our weighted average diluted share count to be approximately 78 million shares, and our weighted average basic share count to be approximately 72.5 million shares.

For the full year, we expect our weighted average diluted share count to be approximately 78.5 million shares, and our weighted average basic share count to be approximately 72 million shares.

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

Thank you.

(Operator Instructions)

We have a question from Youssef Squali from Cantor Fitzgerald.

Thank you much.

Two quick questions, please.

First, can you address the active local business accounts growth please?

I think you added about 5,900.

That was slightly below what you added in the prior quarter, and that includes SeatMe.

First can you quantify how many business accounts did SeatMe bring, and maybe why the sequential decline?

On the cohorts analysis, hats off to that acceleration in growth, but just trying to understand if there was anything specific that drove that.

Was CPC a major driver there, or was it something else?

Hi, Youssef.

Thanks, this is Rob.

On the active local accounts, and actually probably for both questions, in terms of our sales force, what they're given is a quota for the month, and they go out and they do a great job of hitting that quota.

There's no -- that quota's based on a revenue component.

In terms of active local business accounts, we're very pleased with where we ended up in the year to date.

Through June 30 we're at almost 80,000 paying local accounts, and we feel good about that number.

It obviously drove our revenue up, 61% year over year.

In terms -- there's no specific guidance that we give for paying local accounts.

In terms of the cohort analysis, I think that just continues to show that we have a lot of opportunity in the markets that we're already in, even our oldest markets.

Each cohort accelerated in growth from actually last quarter.

In terms of specific reasons, either CPC or whatnot, there's probably no specific reason.

I think just our brand ubiquity continues to grow.

The partnerships we've developed help that.

The fact we have more sales people calling into different markets now globally also helps.

Obviously product innovation.

We've done a lot of things on the Close the Loop that shows customers the value of our product.

I think all of those things are helping us accelerate in that area.

On SeatMe, any chance you can quantify that?

Yes, we're not giving out the SeatMe specific.

Maybe at some point in the future we will.

You can imagine that it's a pretty small percentage, or even number of that.

Okay, thanks a lot.

Thanks.

The next question comes from Mark Mahaney from RBC Capital Markets.

Hi, I wanted to ask on the broad topic of Google there have been some press reports recently about perhaps you're seeing greater -- obstruction's the wrong word, but challenges in getting leads.

At the same time, you made some comments about how paying in the international markets may have hurt some of your traffic because your assets weren't built up enough, but in the US it helped where your content would be more relevant.

Big broad question, how do you think about that as a channel?

For positive or negative, have the trends changed dramatically for you over the last year?

Thank you.

Hi Mark, this is Jeremy.

I think obviously we've been competing with Google over many years now, quite successfully.

We think that by focusing on great content and building fostering growing communities continues to be the right strategy.

In fact, where we have the largest communities in the US, we've seen actually an uptick as a result of the recent Google algorithmic change.

They are constantly making changes and alterations, some of which has been in the media.

Most of that really on a day-to-day basis doesn't have a material effect.

I think fundamentally we feel that everything is still in good shape.

Consumers are flocking to our content.

You can see that in our overall traffic growth.

We're just going to continue to focus on community building and content quality.

Thank you, Jeremy.

Brian Fitzgerald from Jefferies is on line with a question.

Please go ahead.

Thanks, guys.

On the call to action side of the business, can you give us some qualitative penetration or usage rates?

How do you feel about how it's being deployed into your local customers?

Has it been a helpful way to acquire those who maybe haven't been paying for the service before, or paying you for services before?

In terms of the user engagement, is there any way you can differentiate between clicks to call versus clicks for directions, in terms of either usage or monetization of those two different buttons, if you will?

Thanks.

This is Geoff.

Thanks for your questions.

First off on the call to action, that's been a great product that has been another arrow in the quiver of our sales team, as they are introducing Yelp products to a variety of different business owners out there.

There's no specific new metric that we have on that.

Certainly at this point a decent percentage of our advertisers do use the call to action product, and they are getting a variety of leads out of that.

But we haven't updated a specific metric around that.

I wouldn't say it's changed any sales trends or kind of meaningfully changed the conversation, but it is again one more nice arrow in the quiver as we're having those conversations with business owners.

Then Rob on the --?

Yes, thanks, Geoff.

Brian, on the number of phone calls and directions.

In order to give you a little bit of insight into that, we've generated about 46 million calls in the quarter, which is up about 41% year over year.

In terms of directions, which is also map views, we generated approximately 36.5 million directions or map views.

That's up about 25% year over year.

We're obviously giving a lot of these local business owners high-quality leads for either people to call into them or actually go into the store by mapping directions.

The next question comes from Kaizad Gotla from JPMorgan.

Great, thanks for taking the questions.

Your international -- I'm sorry, your other cohorts continue to witness really strong accelerating growth.

I'm wondering if you're continuing to hire a lot of sales heads to support that growth?

Just trying to understand sort of the profitability trends in the older cohorts?

Thanks.

Sure, thanks for the question.

I think one of the things that's important to understand about the cohorts is that we did break those cohorts out back when we went public to help people understand metrics on a city-by-city level relative to the age of those Yelp markets.

That having been said, when we think about sales person allocation into those cities and cohorts here at Yelp, we're really not focused on managing to any kind of city or cohort level.

Yes, our sales team has increased pretty significantly.

I think we said over 60% in the last year.

We'll continue to grow that sales team pretty aggressively, given how high performing the team has been.

That having been said, again they're not really focused on any one particular market or any particular cohort.

Rather, as we bring new sales reps in, we go ahead and assign them into territories based on where we have the most new content and opportunity to sell.

Thanks.

The next question is from Lloyd Walmsley from Deutsche Bank.

Thanks.

Wondering if you can give us any impact -- update on the impact of some of the marketing tests you're doing, either in terms of consumer traffic in those regions, or better margin acquisition or retention?

Wondering if you would consider reinvesting some of the strong incremental profits into expanding those tests and perhaps using that to re-accelerate traffic?

Hi, thanks for that question around marketing tasks.

A couple of thoughts.

First off, we have over time experimented with a variety of different marketing programs, both in terms of business owner acquisition, as well as some different marketing programs on the consumer side.

Last quarter we talked a little bit about some of the out-of-home marketing tests we had been running in a few different European cities.

So far those have looked promising.

We've continued to sort of invest and test in a variety of marketing programs, both off and online.

I think you will continue to see us reinvest in Q3 and beyond, and that is baked into Rob's guidance.

We have a question from Heath Terry from Goldman Sachs.

Great.

Rob, curious if you could give us a sense.

You've talked in the past about markets where you've been more aggressively trialing CPC.

Curious if you could sort of talk us through what you're seeing in those markets as they've matured under that format, and what that's telling you about the opportunity to move more of your inventory to performance-based advertising over time, if that's even something that you think is the right thing for Yelp to do?

Within that, where you are in some of the earlier-stage ad formats like Click to Call and offers that you've used in the past?

Yes, hi Mark.

Thanks for the question.

Heath.

Oh, Heath.

Sorry, Heath.

No problem.

In terms of the -- we did I think a year or so ago some trials in some particular markets to see how it would work out in terms of maybe moving some specific geos, specific verticals into a CPC buying opportunity, and that actually worked out fairly well.

We're at the point now where we're effectively agnostic as far as people buying from us.

If they want to buy in a subscription manner like they have done for years, and going back to the Yellow Page days they had done for many decades, we're happy to entertain that and provide them value.

We're also happy if they are a little bit more into performance-based marketing and are fully understanding the CPC dynamic and the option bidding process, then we're also happy to sell them that.

We're kind of moving into a phase where we really are agnostic as far as how people buy our product.

What we want to do is we want to just deliver the best value that they can get.

We think that either way they go, they will get great value, and I think that's what we're seeing.

We have seen nice growth in the CPC, but we're also seeing great growth in subscription revenue.

I think long term, and I think we've made this comment before, and this could be anywhere from 5 to 10 years out, we think that a lot of our revenue actually will be from performance-based marketing, but that right now is definitely not the case.

The majority is from subscription base.

To your question about Click to Call, that's a pretty small piece of our business.

We don't have a ton of customers in that arena in terms of the offer, the deals product.

That continues to grow nicely, and people are involving themselves in offering deals; but that's more of a self-serve product, anyway.

It's not something our salespeople actively engage with our customers on the phone.

It is a nice revenue stream.

We have a question from Stephen Ju from Credit Suisse.

Okay, thanks.

Jeremy or Geoff, I guess for the older cohorts you may still have users coming to your desktop site, but for the newer cohorts in the mix -- is the mix of traffic from mobile disproportionately higher by comparison?

Another way to ask this question is from a user perspective, whether your newest users are accessing the content primarily through mobile as opposed to desktop, especially as you roll out increased functionality on the app?

Jeremy, I know we talked about this before, but wanted to check in to see if there's any philosophical change in your willingness to bring on resellers for Yelp's advertising products?

Because it certainly feels like Yelp platform is just there for lead gen revenue?

Thanks.

Hi, Stephen.

I'll take your first question which is around cohorts, and then specifically the mix of mobile versus desktop users.

We have looked at that mix of mobile versus desktop users in a variety of geographies in both the US and abroad.

That mix actually has more to do with overall market dynamics, not for Yelp in terms of how old the Yelp market is; but really in terms of what you see user behavior in those countries being.

You might imagine that some of the Asian countries that were so early in mobile tend to have a higher percentage of traffic coming through mobile than desktop.

Whereas some of the Eastern European countries are a little bit further behind in terms of mobile adoption, and so we're seeing a higher percentage on desktop.

That's really more the trend we've seen, rather than anything having to do with the age of the Yelp market.

Jeremy, do you want to talk about platform?

Well, I wasn't sure.

Was the question about reseller partnerships, or Yelp platform?

Maybe Stephen you could help us clarify that a little bit?

I think it was about reseller partnerships.

It's something historically we've dabbled in.

We've got a partnership with Census, for example.

On a related front, we recently announced a partnership with YP, although that's a bit different.

In general, we're open to exploring all sorts of monetization opportunities.

I would say reseller partnerships in the Census vein, where we actually have folks out there selling Yelp ads, isn't something we're particularly focused on.

Something that we spent more time is something like Yelp platform, where we're able to go out and find partners and bring them right into Yelp, the Yelp experience, so the consumers can actually transact with local businesses.

A great example of that would be in the food delivery category, consumers can go and for a number of partners, find the food they're looking for, go through the menu, pick the dishes they're interested in, and then put in their credit card and have that food show up at their door without ever leaving the Yelp application.

We've on-boarded a number of partners there in that category.

There's a number of other partnerships we've talked about in other verticals.

So far it's doing really well, and we're very excited about that.

We have a question from Kevin Kopelman from Cowen and Company.

Hi, thanks a lot.

Could you talk a little bit about advertiser satisfaction, and just the feedback you're getting on the ROI from your ads.

I think in the past you've talked about churn rates being relatively stable.

Is that still true?

Thanks.

Hi.

Well, let's start with the question around retention.

There are a host of ways that we think about and can manage retention.

The one that we've shared in the past has been the repeat rate, which talks about effectively advertisers in this past quarter who also advertised with us in the previous 12 months.

That number this quarter was 75%, which is pretty consistent with the range it's been in really since we went public.

As to advertiser satisfaction and ROI overall, we don't have any new studies to report on that.

However, given Rob's comments on performance-based advertising in general, we are constantly looking at things like advertising performance rates and lead-through rates, and advertiser satisfaction.

While you can imagine there's a very wide range of all those things given our 80,000-odd advertisers today, generally the trends have been really good.

We continue to introduce new products to help make sure advertisers are getting as much value as they possibly can from our product suite.

The next question comes from Jason Helfstein from Oppenheimer.

Thanks, two questions.

One, wanted to ask about international.

I think as a percent of revenue it's still roughly around 3%, so no change from the first quarter.

Can you just talk about some of the initiatives that you guys have in place as you try to just push more advertising international?

Secondly, we continue to see other services slow, as far as on a year-over-year basis.

Can you kind of talk about why that is?

Does it have to do with just if advertisers are getting enough value out of the ad product, they don't need some of the other services?

Maybe just talk about that philosophically?

Thanks.

Okay.

Hi, Jason, thanks.

It's Rob.

International was about 3%, or right around $2.6 million for the quarter, up slightly from a dollar standpoint from Q1.

You're right, the same percentage from Q1.

We're doing the same or similar things that we did in the US six or seven years ago, when we started out selling advertising on Yelp in US.

We're doing some of the same things in Europe and specifically in our Dublin, London, and Hamburg offices.

We feel good about the direction that's headed, just in terms of we're gaining content, we're gaining traffic.

Now we just need to go out and monetize that.

It's going to take awhile.

We've obviously said that for a bit, as well.

But we think that the play book obviously plays out not only in the US, but internationally.

To your question about other services, I think you're referring to the other line item, which is the $4 million in the quarter.

That consists of a couple of things.

That includes our partner revenue from say Google, OpenTable, the food delivery services, those types of -- that's all net revenue in that line item, as well as Deals is in there.

There's a hodgepodge of items in there.

It is growing quite nicely.

Obviously Deals is growing a bit.

Obviously Platform, which is new in this quarter -- meaning it didn't exist in Q2 of 2013.

That's obviously been ramping up pretty significantly.

Then our partnership arrangements, so we have Loku and some other partnerships we've been garnering revenue from.

It's a hodgepodge of things.

We're pretty pleased with how it's growing.

It's growing north of 25% year over year.

We see some good things coming out of that.

Thank you.

Tom White from Macquarie is on line with a question.

Great.

Thanks for taking my question.

It has to do with the transactional side of your business.

You guys shared some stats around Yelp reservations.

I was wondering if you could share some metrics around some of the newer platform offerings, like restaurant delivery take-out, and beauty and spa.

Just on Platform, it's been about a year I think since you announced it, and you've rolled out those three verticals.

Anything specific holding you guys back from rolling out some of the additional categories that you've hinted at, or is it just a question of prioritization?

Thanks.

Thanks, Tom.

This is Jeremy.

We're quite happy with our progress with Yelp Platform.

We don't have numbers to give out at this time, but the thing's been growing really quickly.

There's a number of partners we've been working with in a bunch of different verticals, most of which we have announced.

I think the area where we're seeing the most leverage in what we've built is food delivery.

We've on-boarded a number of partners, and now there are quite a few restaurants covered all over the country.

That's having obviously a positive impact on order volume, et cetera.

We feel good about that investment, and there's no shortage of partners that are waiting to get on-boarded.

Great, thank you.

We have a question from Ron Josey from JMP Securities.

Great, thanks for taking the question.

Rob, I wanted to ask a little more about leverage in the quarter.

I think you mentioned sales and marketing was somewhat better.

Can you also talk about pricing here that maybe might have driven that, and also the guidance?

Good to see mobile users here at 68 million.

I'm wondering if you can break that out in terms of number of mobile web versus app?

I think last quarter you said there were about 10.9 million app users?

Thank you.

Hi, thanks, Ron.

Thanks for the question.

In terms of leverage in the quarter, I mean what we've seen is that sales and marketing we're experiencing nice leverage.

On a year-over-year basis it was 54% of revenue versus 56% last year.

Obviously we're hiring a lot of people, but we're continuing to experience a leverage that we've always believed that we can achieve.

EBITDA margins are growing.

G&A as a percent of revenue also is decreasing.

We're obviously investing in all the areas that we can, but we are seeing the leverage that we've always been talking about.

I think long term we've always said that our adjusted EBITDA margins would be 30% to 35%-plus.

The way we're looking at it is we're experiencing the things that we said that would come to pass.

On an adjusted EBITDA basis we're right at about 19%, which is up significantly year over year.

We're happy with where we're at, and we're also continuing to invest.

We're doing marketing programs, and obviously like I say we're hiring.

In terms of your question about mobile, we had a little over 50% growth rate in mobile.

We added 68 million.

At this point we're going to not give out the app usage versus the mobile web.

I can rest assured that actually app usage is growing.

The number's higher, but I think going forward what we want to do is focus on the total experience.

What's happened in the last probably 6 to 12 months is we made the app and the mobile web experience very similar.

We rolled out photos, the ability to take photos last quarter in Q1.

They're becoming more and more synonymous.

We feel like we have great growth in that, and that's how we want to characterize it.

Thank you.

We have a question from Justin Post from Merrill Lynch.

I'd like just to follow up to one of the other questions about the repeat rate.

Do you see a lot of people leaving Yelp and then coming back?

What percent of people try other platforms and then come back?

What are you seeing there?

Secondly, on Japan, how important is that country to you?

Are you seeing any different on the usage or ramp-up patterns there, versus any other market?

Thank you.

Hi there.

This is Geoff.

First on the repeat rate, we absolutely do see people advertise in one period and then not for a period of time, and then come back again.

I think this is not at all dissimilar to what you might see on a variety of other platforms, presumably how people advertise on Google, and may buy or sell in some time periods but not others on eBay.

Certainly, we do see that with seasonal businesses, as well as businesses who just try other platforms, or are busy for a period of time and not advertising.

Not a big surprise there, and we certainly do see that kind of behavior.

You asked about Japan.

It's still extremely early innings in Japan.

I believe we just launched in April.

But off to a really great start.

Jeremy mentioned that in his opening remarks, and we're very optimistic.

Are there any things different in the Japanese market?

Certainly there are a variety of cultural differences.

One that we've seen that's exciting and interesting to look at is that the number of photos that people have added in the Japanese market appears to be particularly high.

Whether that's just the first users testing out Yelp or something different in that market, we don't yet know.

Thank you.

We have a question from Robert Peck from SunTrust.

Yes, hi.

Thanks for taking my question.

I have two, please.

One is, could you talk a little bit about the regional national chains opportunity?

How much have you penetrated into those types of stores, whether it be a Home Depot, a Chipotle, something like that, and how you see that progressing over time?

Jeremy, bigger picture, we've seen a lot of M&A and consolidation in broadly, let's call it the local markets -- OpenTable, Priceline, La Fourchette, Trip Advisor.

How is that impacting your strategies and your progression in the future over the next couple of quarters and years?

This is Geoff.

I'll take the first question, which was about regional and national chains.

Yes, there's a huge opportunity of course for us to reach out to businesses that are owned at a regional or national level.

There's also a very big franchise opportunity out there that we've only just begun to tap into.

The signs from that group -- we do have dedicated groups for what we call mid-market and national business.

We actually have a new group that's formed around the franchise businesses on our sales teams.

All three of those teams have been performing extraordinarily well for us over the last year or two.

While I don't have any specific new numbers on that, I can tell you that is an earlier part of our business, and what we think of as the local-local (technical difficulty).

Thank you.

The next question we have is from Eric Sheridan from UBS.

Please go ahead.

I guess one big-picture question for Jeremy would be are you seeing a lot of competitors, especially internationally now, push down the funnel and into areas like local discovery, especially with Priceline buying OpenTable, Trip Advisor, Google?

How do you think about your strategic positioning today, and how you might address that longer term, both organically and inorganically?

Then a more nuanced question on sales force productivity.

Curious if sales force productivity is going up, in terms of the ROI you're seeing from a new sales person once they age up the curve on sort of 8-, 12-, 15-month type basis, or if that's staying relatively static, and how you think about that developing longer term, in their ability to be able to sell into more accounts?

Thank you.

Eric, this is Rob.

I just want to jump in real quick.

We were dropped from the call, so we just dialed back in so apologies for that.

I'll let these guys answer your questions.

Go ahead.

Sure, this is Jeremy.

You were asking about international competition, so I'll take that part.

I think basically our approach remains unchanged.

There's obviously been some M&A activity, particularly international.

As you mentioned, Priceline, Trip Advisor with their purchases.

But I think fundamentally we remain focused on fostering growing communities and the content quality as the way to grow and penetrate into these markets.

We continue to see success in growing our communities, and we think ultimately as we have more and more high-quality content that will be recognized, and we'll become a stronger and stronger brand in the markets that we're operating in.

To your question about sales force productivity, it has remained relatively constant over the last couple of years.

Really nothing new to report there, one way or the other.

The next question is from Chris Merwin from Barclays.

Thanks.

With the Yelp Reservations feature, who are the early adopters of that product so far?

I realize you still have the partnership with OpenTable.

Is it fair to assume this is a different set of restaurants who are using Yelp Reservations?

Also, do you anticipate any change in that partnership now that OpenTable is part of Priceline?

Secondly, a quick one as it relates to mobile usage.

Can you comment at all about what the early impact has been from the messaging feature, in terms of usage and engagement?

Thanks.

Sure.

This is Jeremy again.

On Yelp Reservations, I think it's a fantastic product for restaurants that maybe would be over-served by a full front-of-house management product.

The way that it works is you kind of just click a few buttons, set a few configuration dials, and you're live with reservations on Yelp.

You can also grab a widget and put that on your own website.

You're accepting reservations in a very professional way, just as you would if you had an OpenTable.

But then the way you actually receive information off those reservations is just over e-mail.

It's a very lightweight, simple product.

I think as a result, it appeals to lots of businesses that really wouldn't have considered a full-service product like OpenTable, or even SeatMe's full-service offering.

I think what it really does that's exciting is it expands the overall market of potential restaurants who would be interested in online reservations.

I think that's reflected by the progress that we've seen since launching the feature, with thousands of restaurants now using that.

We're very excited at the direction that that's going in.

You mentioned is there any plans to change, or what's going on with the OpenTable partnership.

I think both we, and as far as I know OpenTable/Priceline continue to be happy with the relationship that we've got.

That continues on, and we continue to book lots of reservations through Yelp and the Yelp platform that go to OpenTable.

I think that remains unchanged.

Finally, I think you asked about mobile and particularly Message the Business feature that launched in the last quarter.

I think we've certainly seen a lot of early traction with that.

Consumers are messaging businesses.

In my comments we talked about a specific example where a Mexican catering business was literally received something like 30 qualified leads, and is able to interact back and forth just over e-mail with their customers, or with their potential customers.

It's again a very lightweight, simple product that's free for any business that claims, and it's showing traction and growth.

We're happy about that.

I think it's a win-win, where business owners are obviously getting to connect with potential customers, and consumers just have another really easy way to reach out and connect with those business owners.

Thank you.

We have a question from James Cakmak from Telsey Advisory Group.

Hi, thanks.

You guys are obviously still in investment mode.

Can you just talk about how you prioritize your investments across the different product categories?

When we look overseas, can you provide some detail on how we should think about the incremental costs associated with opening up new markets internationally?

Then on the Message the Business feature, that definitely sounds like it's off to a good start.

But can you discuss how you're thinking about the analytics around that, and potentially communicating additional ROI type of communications with businesses, to achieve potentially greater wallet share with them?

Thanks.

Thanks, James.

This is Rob.

For prioritizing investments I think what we're really right now in the mode of just hiring more folks to bring on board, obviously from a sales perspective, to reach out to the tens of millions of businesses that are out there, and help them identify that Yelp is a great source of leads.

Obviously engineering and product, we're always looking for great talented folks to come on board and do -- create all these wonderful products for our customers and consumers.

From that perspective, that's how we're looking at it.

I'd say from opening up new markets we are only in 27 countries at this point.

There's many more to go.

We obviously want to invest in those different countries and open them up.

The investment initially is a little big, but ongoing is fairly minor, only because once you say launch say Japan and you place somebody in say Kyoto or Tokyo, it's that community manager that sits and helps watch and support the community to grow it and nurture it so that it becomes a thriving community that contributes high-quality content.

That investment is not a ton on a dollar standpoint, but it does take a long time.

You're talking probably three or four years of that community manager developing and fostering that community of people to generate that great content.

I think we'll go as rapidly as we can.

We've always quoted the Goldilocks approach -- not too fast, not too slow.

I think we've been able to achieve that so far.

What's nice about it is we're also generating a profit now that we can clearly show the leverage that's occurring in the business.

The second part of your question about Message This Business, and how does that feed into analytics that help business owners and ultimately ROI around advertising and so forth.

I think it's a very natural -- it feeds very naturally into those things.

You can imagine that if you're a business owner and you're wondering hey, how do I get value out of Yelp.

Suddenly you're getting messages from real customers that are interested, or potential customers that are really interested in your business.

You're having a conversation through Yelp, because they're messaging you, you receive an e-mail.

It's Yelp branded.

You reply to that e-mail.

The consumer on the other end gets a response through Yelp.

Again, you have a back and forth.

It's actually very easy and very tangible in understanding how did Yelp play a role in helping you find that customer.

I think we will bake metrics into the Yelp business owner dashboard, but I think there's very few examples that are so clear-cut about how Yelp is driving value to you, the business owner, when you get one of those e-mails.

Thank you.

At this time, I would like to turn the call back to management for closing remarks.

Thanks, everyone, for joining us today.

Again, apologize for the glitch in the Q&A, we'll see you next time.

Thanks.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may now disconnect.