Yelp Inc (YELP) 2014 Q3 法說會逐字稿

Hello, everyone, and welcome to the Yelp third-quarter 2014 earnings call.

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

(Operator Instructions)

Please note that this conference is also being recorded.

I will now turn the conference over to Ms. Wendy Lim.

Ms. Lim, you may begin.

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

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 income to adjusted EBITDA.

With that, I will turn the call over to Jeremy.

Thanks, Wendy.

And welcome, everyone.

We had a great third quarter.

Revenue increased 67% year over year, and adjusted EBITDA grew approximately 150% year over year.

We saw strong growth across our key metrics as we continue to go after the vast global opportunity in front of us.

Our mission is to connect people with great local businesses.

And we want consumers to be able to access these trusted local reviews in any country and in their native language.

For example, imagine if you're traveling in Brazil and looking for the best [hybrania].

You want to know where locals go, not a bar filled with tourists.

Now you can launch the Yelp app, hit the translate button and see reviews go from Portuguese to English.

This machine translation feature provides the general meaning and context of reviews for consumers who would not otherwise be able to read the reviews.

We see a large opportunity internationally.

And we continue to roll out the Yelp playbook in new markets as we plant the seeds for future growth.

We expand geographically by hiring community managers who nurture communities and local writers.

Content brings in consumer traffic which leads to more writers and more reviews.

Once content and traffic grow we're able to start monetizing.

But this process takes time.

For example, we launched in Italy about three years ago and our salespeople just began selling into Italy last month.

With our recent launches in Chile and Hong Kong, Yelp is now available in 29 countries and in 16 languages.

In Q3 of last year we acquired SeatMe and subsequently launched Yelp Reservations, a free, light version of SeatMe, with the goal of enabling consumers to make online reservations at more restaurant, food and nightlife establishments.

Business owners and diners have responded positively to the ease of use and simplicity of our reservations product, and we couldn't be more pleased with the results.

About one year ago SeatMe had approximately 200 businesses accepting reservations.

As of the end of the third quarter, over 5,000 businesses were using SeatMe or Yelp Reservations.

With over 139 million unique visitors coming to Yelp to discover great local businesses, we continue to build out features to quantify customer leads for business owners.

Consumers have messaged over 100,000 unique businesses using our message-to-business feature, and are now able to transact with approximately 28,000 businesses, from restaurants to spas to wineries through Yelp Platform.

These products engage consumers, enhance their experience and provide additional ways to show the value Yelp delivers to local businesses.

Finally, I'd like to highlight the Yelp Foundation.

I'm proud of the Foundation and its mission to support consumers and local businesses in the communities served by Yelp, as well as the charitable interests of our employees.

This year the Foundation will donate about $1 million, giving grants to support community literacy and small business growth, and matching donations made by Yelp employees.

We look forward to supporting great non-profit organizations that are strengthening local communities around the country for years to come.

We have made great progress towards capturing the large global opportunity ahead of us.

We will continue to focus on what has made us successful, nurturing our communities of writers and contributors, bringing Yelp to new parts of the world and developing innovative products that demonstrate the valuable leads businesses receive from Yelp.

And 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.

We had a very strong quarter, exceeding both revenue and adjusted EBITDA guidance.

The key operating metrics for the third quarter are as follows.

Cumulative reviews grew 41% year over year to approximately 67 million.

More than five million reviews were contributed in the quarter, which was our largest quarterly increase to date.

Approximately 45% of new reviews were posted via mobile.

Claims local businesses were 1.9 million, up 40% year over year.

Our average monthly unique visitor grew 19% year over year to roughly 139 million.

Average monthly mobile unique visitors grew 46% year over year to approximately 73 million.

International traffic grew 40% year over year to approximately 30 million unique visitors on a monthly average basis.

In Q3, the international traffic was slightly down sequentially due to the changes we've seen in traffic from Google.

Active local business accounts grew 51% year over year to approximately 86,200.

This number includes paying customers such as businesses that buy impression-based ads and CPC ads, and also SeatMe customers and businesses that sold Deals in the quarter.

I want to take a moment to give a little color around the different dynamics surrounding this metric and how it relates to revenue.

First, while Deal customers are included in active local business accounts the revenue is reflected in other revenue line item.

Excluding Deal customers, the remaining active local business accounts grew 66% year over year.

The revenue generated from these remaining active local business accounts comprise local revenue.

Second, national and regional customers are among the advertisers included in active local business accounts, and revenue associated with these accounts is reflected in the local revenue line.

It's worth noting that a national advertiser with 100 locations typically counts as a single active local business account.

These businesses tend to be more sophisticated and better understand the compelling ROI Yelp provides.

Moving on, for the third quarter local revenue was $85.1 million, up 66% year over year.

Brand revenue was $9.3 million, up 35% year over year.

We expect Q4 brand revenue to be similar to Q3.

Other revenue increased 158% year over year to $8 million.

The increase was primarily driven by the revenue from our partnership with YP.

For Q3, revenue from the YP partnership exceeded our expectations.

Given this, we decided to take the opportunity to realign the partnership for everyone's benefit.

As such, for modeling purposes, we expect other revenue to be approximately $7 million in Q4.

While it's still early, we've been pleased with the partnership and look forward to continuing the relationship.

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

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

Gross margin was 94%.

We continue to see leverage in the model.

Total sales and marketing was approximately 53% of revenue, compared to approximately 56% last year.

Sales headcount in the third quarter grew 52% year over year.

We intend to continue our investment in sales and marketing given the great results and large local opportunity ahead of us.

Product development was approximately 17% of revenue compared to 18% in the third quarter of last year.

G&A was 15% of revenue compared to 17% in the third quarter of last year.

We generated approximately $19 million in cash flow from operations, and finished the third quarter with $418 million of cash and cash equivalents and marketable securities on the balance sheet.

Now turning to guidance, for the fourth quarter we expect revenues in the range of $107 million to $108 million, representing a 52% year-over-year increase.

We expect adjusted EBITDA for the fourth quarter to range between $24 million and $25 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.

We expect full-year 2014 revenue to be in the range of $375 million to $376 million or approximately 61% growth over 2013.

For the full year, we expect adjusted EBITDA to range between $69.5 million and $70.5 million, a 138% increase over 2013.

We expect stock-based compensation to be approximately $42 million to $43 million, and depreciation and amortization to be approximately 4% to 5% of revenue.

For modeling purposes, in the fourth 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 73 million shares.

For the full year, we expect our weighted average diluted share count to be approximately 77 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.

(Operator Instructions)

Our first question here comes from Mark Mahaney from RBC.

Please go ahead, sir.

Thanks.

Two questions, please.

I guess the second one will be the follow-up.

Can you talk a little bit about the international opportunity and how we should think about that building up as a percentage, maybe, of overall revenues now that you've anniversaried the acquisition?

Are there other markets like Italy?

If there are any other examples of where you're going to start selling ads where you haven't for several years?

And then, secondly, could you just give a little more color on this YP partnership and why revenue would be down sequentially from Q3 to Q4.

Any more details on that would be appreciated.

Thank you.

Mark, thanks for your question.

In regards to the international opportunity, I think, as you said, we started to lap the Qype opportunity, the revenue from prior year.

We were up to approximately $3 million in international revenue.

So, on a run rate basis we're about $12 million on an annual basis.

Which is interesting; if you take a step back and look at Yelp in 2008, Yelp itself in total did about $12 million of revenue.

So, we feel like the international business is off to a good start.

We're going where we want to be.

And also, from a monetization standpoint, we just started monetizing in Q3, Italy.

We launched Italy about three years ago and there's now enough content, therefore enough traffic to start to monetize that opportunity.

So we'll look forward to monetizing others.

We don't give out specifics on when we're going to do the next country, but we do have some plans.

In terms of the YP comment -- yes, both parties are very happy with the deal.

In the beginning, or Q3, the opportunity was very large that we saw.

And what ended up happening was, it exceeded all of our expectations.

And, so, what we did is we took the opportunity to realign the agreement.

Both parties got a little something out of it.

And we ended up that other revenue is probably expected to be in the range of approximately $7 million in Q4, instead of $8 million, what we saw in Q3.

Thanks, Rob.

Thank you.

Our next question here comes from Mr. Brian Fitzgerald from Jefferies.

Please go ahead.

Thanks.

Maybe a bit of a follow-on to Mark's questions.

Can you give any other color on the markets in Asia that you entered, such as Hong Kong?

Maybe, specifically, is the user behavior and the business behavior similar there as you see in the US or even in Europe?

And then another follow-on to Mark's -- when you look at the Italy content ramp, was that as expected?

Is that the norm?

I imagine you see varying rates in varying geographies as you ramp content.

Thanks.

Brian, this is Geoff.

Thanks for the questions around international.

First off, on Asia, it's very early days in all of our Asian markets.

As you recall, we launched Japan earlier this year, and that's been off to a great start.

Hong Kong, we're only a week or two in now, so really nothing much to report other than the launch went well.

In Japan, the user behavior we've seen so far has been terrific.

It has been more mobile and we've actually seen a lot of photos in particular in the Japanese market.

Only a couple months in right now, but we are seeing positive signs that are a little bit different from what we've seen in other markets, but not radically so.

Just to underline what Rob said, though, I think you should assume with all of our Asian markets it will be years before we even begin to monetize any of those since we're in such early days of marketing investment right now.

Back over to Italy, the content ramp there that we saw in Italy -- or really our other European markets -- by and large what we've seen -- and you've probably seen that bubble chart we've shared historically in terms of contact growth in these markets -- has followed a relatively predictable pattern compared to what we've seen in the States.

Certainly that was helped by our acquisition of Qype and integration of that content last year.

But, by and large, yes, fairly predictable and consistent pattern.

Great.

Thanks, Geoff, thanks, Rob.

Thank you.

Our next question comes from Kaizad Gotla from JPMorgan.

Please go ahead.

Thanks for taking the question.

I was wondering if you could just discuss the lower 4Q revenue guidance relative to the implied 4Q guidance you provided three months ago.

Was there something about the YP?

Or was there revenue related to the YP partnership in 4Q that got pulled into 3Q?

And then, separately, the Yelp Platform, I think you said has 28,000 businesses now.

And I was wondering if you could maybe discuss some of the benefits you're witnessing from these closed-loop transactions with these businesses in terms of uplift and penetration of your advertising offerings.

Thanks.

Thanks for your questions.

In regard to the guidance question, we didn't actually guide Q4.

What we did is, we guided for the full year and we've come up actually a little bit from that original guidance.

I think we said in Q2, we said full year was going to be $372 million to $375 million, and I think this way this guidance shows we're at $375 million to $376 million.

So about a 61% growth rate and we're pretty happy with that.

As we mentioned, I think that the YP relationship actually started out with a bang, and we've realigned that agreement a little bit to benefit both parties.

And so you can expect other revenue to be approximately $7 million in Q4 versus $8 million in Q3.

And then I think we also said that we expect brand to be similar in Q4 to what we saw in Q3.

And for your other question about Yelp Platform -- yes, the coverage has been expanding quite dramatically, as we mentioned earlier.

It's now around 28,000 local businesses that are integrated through these third parties, like E-24 and Booker.

So, we have coverage in food, spa, salons, and just recently, as of actually yesterday, we rolled out hotels and wineries.

And, so, it's really starting to look at Yelp as this marketplace where consumers can come and not just find the information that they're looking for but also transact.

And we think that's a great way to make the user experience better and fundamentally that's what we're focused on.

But at the same time it also gives feedback to local businesses because they're able to see that transactions are actually happening.

So, when they log into their business owner dashboard they can see transactions that have actually occurred, and revenue -- cold, hard cash that's actually going to their bank account.

So, we're very excited about how far we've come but it's still early days.

Thanks a lot.

(Operator Instructions)

Our next question here comes from Lloyd Walmsley from Deutsche Bank.

Please go ahead.

Thanks.

Wondering if you can give us an update, following up on your last point on Yelp Platform -- now that you have a lot of coverage on that, how is that impacting ad sales to local businesses who are seeing a lot of transaction volume?

Are you able to convince them to buy more ads?

And then my follow-up: if you can update us on where you are in terms of inventory sell-out levels in general?

And then looking at the partnership with YP on selling enhanced listings, does it make sense to partner with a network like Google or Facebook Audience network to help monetize other unsold inventory at good CPCs?

Is there a potential interest in doing something like that?

Why or why not?

Hello, Lloyd.

Let me try to hit those questions.

First off, you asked about Platform and is that helping us on the sales side.

Anecdotally I'd say, yes.

There's certainly been a couple of stories we've heard where businesses who were seeing a lot of transaction volume are excited to get even more, and therefore sign up for advertising.

I don't have any numbers for you on that.

My guess is it's still quite small in the scheme of what we're doing.

But certainly that gets to the idea here of trying to provide more value for businesses and therefore sell them other products in the future.

As to the question on inventory, we still have plenty of inventory on the site and we're still at a very low overall sell-through, the ratio.

As we do add more performance-based advertising, of course that gives us opportunity to take advantage of that inventory through the beauty of auction dynamics within the ad system.

And then you asked also about whether we can work with third-party networks or advertisers to place them on the site.

And in a small degree that's what we're doing with YP today, because they have the ability to offer an enhanced profile on Yelp to their hundreds of thousands of advertisers, and that's a great first step.

As you may be aware, we also do use AdSense on a couple of places on Yelp as a backfill for AdBox, where we don't currently show a Yelp ad.

And so that does provide a small amount of monetization that shows up in the other revenue line.

Are there other opportunities to work with third parties on this kind of thing in the future?

We think so, although I suspect none of them will be major drivers of the business in the foreseeable future.

Thank you.

Our next question here comes from Jason Helfstein from Oppenheimer and Company.

Please go ahead, sir.

Thanks.

I'll just ask one.

What initiatives did you guys have in place, as you're planning into next year, to try to drive the number of active business accounts?

I think the ratio of active business accounts to claimed has been relatively steady for the past few quarters.

And while the number of businesses is growing, so you're benefiting, we're really not seeing the penetration go up much.

If you could just talk about initiatives to drive that higher.

Thanks.

Hello, Jason.

Thanks.

This is Rob.

To your question, I think what we're really focused on is local revenue.

And, so, when our sales team goes out there and sales are selling to a revenue quota, that's how they're organized.

It's not specific to a number of businesses.

It's just a dollar amount.

And one thing I would highlight is -- and I think we said this on the prepared remarks -- is that when you look at active local business accounts, if you exclude Deals, it did grow at 66%, which is about the same as local ad revenue.

So, we feel really good about where we're headed.

I think these growth rates are pretty substantial and that's how the sales team is compensated and commissioned.

So I think we're headed in the right direction.

And thank you.

Our next question here comes from Heath Terry from Goldman Sachs.

Please go ahead, sir.

Great.

Rob, I just want to ask on the cohort analysis that you updated in the slide deck -- when we're looking at the cohorts from [your pair] to your pair, how would you have us think about that average local revenue opportunity in the 2007, 2008, 2009, 2010 cohorts in terms of the ability to get to the level?

Or what the appropriate level for them to get to, understanding that they're smaller markets, relative to the $6 million that the 2005, 2006 markets are at?

What would you say the equivalent is, at a similar point of maturity for those other cohorts?

Thanks, Heath, for the question.

It's actually a little bit difficult to say, given the growth rates for the youngest cohort market that we give out is about 100%.

Even the oldest cohort's about 50% or 60%.

When we look at it, we say that Yellow Pages did about $7 billion in the US in 2012.

Markets like San Francisco or New York or LA probably are in the hundreds of millions of dollars of advertising.

And we're generating, on a run rate basis anyway, about $24 million, $25 million in those markets today.

If you go to the next tier, which is the second cohort, includes cities like Philadelphia, I still think that there's quite a large number, probably hundreds of millions of dollars, but not quite sure.

I'd say that there's plenty of opportunities still left in those markets and one of the reasons why they're still growing so fast.

Thank you.

Our next question here comes from Youssef Squali from Cantor Fitzgerald.

Please go ahead, sir.

Thank you.

Two questions, please.

Your uniques were up 19% year on year.

They were relatively flat sequentially, even as you open up new geos.

So, can you just speak to what's going on there?

I think you gave some metrics around that.

Maybe it's the desktop uniques that may be bringing it down, or something?

But maybe just shed some more color on that, and initiatives to reaccelerate that over the next several quarters hopefully?

The other thing is around brand.

Rob, I think you guided to Q4 being flat with Q3.

Maybe can you speak to the seasonality of that line item?

Last year certainly we saw a huge jump.

Maybe if you could speak to why it should be flattish this year, it would be very helpful.

Thanks.

I'll take the first question.

This is Geoff.

And, yes, back to the uniques, you actually did answer your own question.

That's right.

Now that we're in this post-desktop era we are seeing significant traffic shift over to mobile.

We feel great about that mobile shift since we are growing still at 46% year on year in terms of mobile unique visitors.

As we've said before, the mobile visitors actually tend to be more active contributors and participants in Yelp than the desktop users.

So, all of the underlying metrics, like reviews and photos and clicks through to business accounts, are actually all up at a ratio that's much higher than that 19%.

So, we do feel great about the shift and we'll continue to emphasize it as we reach out into new markets as well as existing markets.

Youssef, in terms of your brand question -- while brand is a nice business for us and we're happy to have it, and I think the team has done a great job, our focus continues to be on local, and that's really where we're putting the resources.

Interestingly, last year it grew pretty substantial in Q4.

Really, most of that is because of an easy comp from 2012.

We have about the same brand team in terms of numbers that we've had from a year ago.

So it grew a lot in 2013 but remained at about the same size in 2014.

So, we aren't really seeing the impact of additional productive sales reps.

And I'd say there is a shift going on in programmatic, as well.

We're also in that game.

So, like I said, really the focus is local revenue but it's a nice business for us.

Thank you.

Our next question here comes from Ron Josey from JMP Securities.

Please go ahead, sir.

Hello, guys, this is Michael Wolf for Ron.

Thanks for taking my question.

I have a couple.

I was wondering if you could first comment on the progress with Google app indexing and if that has helped to drive more traffic to the Yelp mobile app?

And if you could comment on mobile app usage trends in general?

And then, secondly, if you could give us an update on CPC buying in terms of adoption among Yelp's active business accounts?

And what are the pricing trends you're seeing there in CPC?

This is Jeremy.

I'll try and take the first question, see if I can answer it appropriately.

I think what you're talking about is deep linking from Google search results on Android into the app.

We have seen, as we implemented that, some lift in engagement, users coming over from Google search results into our Android app.

So, that's great.

Overall, we're seeing great growth on mobile.

Geoff just previously cited 46% growth.

And that extends to apps, as well.

We're seeing really robust, healthy growth there that we're quite happy about.

And with that, of course, comes content and really strong engagement from users.

Overall, we're liking the trend there.

And then you asked about the CPC product line.

As we've talked about before, we do sell to local businesses in a variety of different pricing options.

But predominant to our flat rate CPM-based advertising package, and then the other is performance-based package wherein they set a budget and basically get ads on a CPC basis.

We are seeing great uptake in both packages still and feel good about those.

In the long term we do expect the CPC or performance part of the business may exceed the fixed price part of the business.

But that is no time in the immediate future.

And right now we're just agnostic and happy to sell to local businesses in whichever way they prefer to buy.

Thank you.

Our next question here comes from Stephen Ju from Credit Suisse.

Jeremy, I know the thought process for you guys has been that there's a predefined playbook and a timeline that new cohorts follow relative to the older ones.

Given that Yelp is now more visible versus back then when you guys first launched, is there any chance the newer cohorts should follow a steeper development curve?

And, secondly, at what percentage of any given cohort's online consumer population do you feel like you need to have exposure to before you can turn loose the sales force to go engage the advertisers?

Thanks.

Stephen, this is Rob.

Let me try and take that first part.

We give out this bubble chart that gives out the content as it maturates through the years.

And it shows when our community managers started and how the content ramps.

What we've seen is a pretty steady progress up the line of the amount of content that's contributed over the years.

And, so, I don't know that content necessarily accelerates as opposed to any other market.

It stays in line with and grows at a fairly rapid clip.

So if you were to take, say, Philadelphia, or maybe even a Tulsa, Oklahoma, at a point in time versus where San Francisco was at that same point in time, I'd say it's fairly close.

So that's what that graphic is trying to represent.

I think we're experiencing pretty tremendous growth rates.

Review growth is over 40% in the quarter.

We had 5 million reviews were contributed.

45% of those on mobile.

A year and some months ago we actually didn't have that you could post a review on your mobile device.

You had to go back to your computer.

So, we feel good about the content generation and, therefore, the traffic.

And then, Stephen, you also asked a question about if there's any particular population metric that we're trying to hit before we begin selling into a market.

The simple answer to that is no.

When we set up a team to begin selling at the country level, really we're looking not so much at a given metric.

Rather, we're trying to make sure we do have sufficient inventory on the consumer traffic side to make it worth our while to staff up a team of salespeople.

Within a country that we're already selling, however, we effectively have a system now where the territories are more or less automatically generated for the sales team once we get up to a level of traffic, and therefore business prospects we can reach out to in any given city.

So, there's not any particular threshold in time.

Rather, it's as soon as we have inventory available we can begin calling into the businesses and offering them advertising.

Thank you.

Our next question here comes from Kevin Copeland, Cowen and Company.

Thanks a lot.

Just had a question on advertising expense.

It seems like you guys are doing a little bit more testing there.

I was just wondering if you could tell us how effective your consumer advertising tests have been?

And how big a factor were those in the sales and marketing line this quarter?

Thanks.

Thanks for the question.

We have continued to experiment with advertising, some online and with app direct downloads, and then also a variety of offline tests, as well, particularly outdoor in a couple of cities.

The results we've seen from this experimentation has been good, and as a result we have dialed it up a bit in Q3.

I don't think we have a specific number for you in terms of Q3 spend.

But as that experimentation continues to go well, you can expect that we'll continue to dial it up, although we are testing and learning as we go and making sure that we're getting good yield out of it in terms of new brand awareness and new consumers coming into Yelp.

Thank you.

Our next question here comes from Mark May from Citigroup.

Please go ahead.

Thanks for taking my questions.

First one on, I think you made reference to your international traffic being impacted by some changes at Google.

Wondering if you could elaborate a bit more on what exactly you saw happen there?

What the impact was?

And what your expectation is going forward?

Is there opportunity for you to make that back?

And was that one of the reasons why your unique visitors were essentially flat sequentially?

And then the follow-up question -- there is obviously a lot of focus on the active local business account number.

And, Rob, you mentioned the 66% growth ex-Deals offers.

Can you help us think about how that compared to what you saw in Q2?

And what you're expecting for Q4?

Mark, this is Jeremy.

I'll take the first question on international traffic.

This actually goes back to the previous quarter.

We had actually mentioned that Google has been making changes that had affected our international traffic.

Overall the picture year over year is healthy.

We had 40% year-over-year growth, content grew by 97% year over year.

That's pretty good.

Google obviously continues to make changes on their site, both competitively and algorithmically.

But fortunately we have incredible consumer content.

So, one way or another people ultimately do find their way there, no matter what roadblocks tend to be put up.

But that can affect growth.

So, could we have grown even faster than 40% year over year if Google wasn't leveraging its position -- its monopoly position?

Absolutely.

But we don't really know what that number could have been.

Mark, this is Rob.

Let me take the question regarding active local business accounts.

That metric, excluding Deals, was about 66% growth in the quarter, Q3.

As a comparison to your point, Q2 was about 70% or so.

And I think local ad revenue was about 69%.

So, somewhat in line with that.

We don't specifically -- this is what I call a new metric, excluding Deals.

We don't have the salespeople really targeting number of accounts.

They actually are targeting revenues.

So, Q4 we don't have a specific number to give you.

I think we had mentioned that we expect overall to generate about $107 million to $108 million of revenue.

And so within that -- and I think I've given you some other details about other and brand -- you can do the math to figure out what we're expecting.

We still continue to expect robust growth.

The one call-out I would have with regard to Q4 is that previously, in Q4 of 2013, we had Qype introduced into the metric for active local business accounts.

So, I would just caution people to remember that.

And I think it was around 2,200 additional accounts that were added into Q4 2013.

So, just realize when you're doing a comp that, that's included.

Thanks.

Thank you.

Our next question comes from Tom White from Macquarie.

Please go ahead.

Great.

Thanks for taking my question.

Maybe just another follow-up on the Google-related disruptions.

As it pertains to your international traffic, could you just maybe indicate, was it more sheer competitive aggression on their part?

Or was it more algorithmic changes that disrupted traffic there?

And is it right to think that, as your content quality in those markets improves, you get more in the local language, et cetera, that the algorithmic pressure might subside?

And then I've just got a quick follow-up.

Yes, it's Jeremy again.

Of course, it's quite hard to tell which is which, and so I'm not going to speculate, obviously.

For content providers like ourselves, Google is somewhat of a black box.

To address also the earlier question, what can we do, I think the answer is to continue to focus on building communities internationally and driving great content.

Because ultimately that's what the user wants.

And if Yelp is the premier destination for that content, over the long term we still feel quite strongly that users will find their way to Yelp.

Growth can be slower, but ultimately if you have something very scarce and unique like Yelp content, ultimately you're going to win the day.

There's also the mobile component.

And, so, with mobile apps obviously that's a direct folks that consumer and that's a disintermediation of Google.

So, I think that's also another long-term bet that we're making.

Thank you very much.

Our next question comes from Kerry Rice from Needham.

Thanks.

The first question is, Rob, you had mentioned the sales force isn't really focused on the number of accounts they win, more on the local revenue.

You've also discussed in the past that you really are still focused on hunting versus maybe raising prices.

Would you say that's changed at all where there is some focus on maybe driving some up-sell, either through bigger packages or more features and functionality?

And then the second question I have is back to, you've got 28,000 businesses on the Platform, and early on you talked about driving transaction revenue.

Are you driving transaction revenue yet?

If not, how do we think about that ramp building over time?

Thanks.

You asked a question on the hunting focus for the sales team.

Yes, we continue to be very much still in an acquisition phase.

However you want to look at this, the active local business account number, whether it's 86,000 or some smaller number for the advertiser count, it's still a drop in the ocean relative to the millions of local businesses that are out there.

And so we are absolutely still in an acquisition phase.

And we want to sell local businesses whatever it is they want to buy, whether that's a low-priced package that just includes profile features, or whether that's a larger advertising package, either on a fixed price or performance basis.

At this stage, we are really not focused on raising prices in any way, but rather selling advertisers and letting them compete with one another for prices over time.

Rob, do you want to tackle the transaction question?

Yes.

As you mentioned, we've got about 28,000 businesses on the Platform.

Whenever a transaction occurs, revenue ends up in the other line item.

It's fairly small dollars at this point given the fact that what ends up happening is our partners are charging a fee and then we're grabbing a percent of that fee.

So, as you can imagine, if, say, you have a $50 food order and they're taking, I don't know, 10%, and so that's $5 of that food order, we get a percentage of that.

It's really more about the consumer engagement on the platform.

You're searching for a great place to eat.

You find one.

You don't feel like going out.

You have the order delivered to you.

So, it's really a consumer experience.

And then it's also, from an ad standpoint we can go back to that business owner and say -- Hey, look, you just generated 3 orders, 10 orders off of the Yelp Platform and Yelp traffic.

Why don't you advertise with us and maybe increase that velocity to get in front of people looking for food.

At this point it's really more about the consumer angle as well as communicating to the business owner that we're actually driving significant transactions into their business.

Thank you.

Our next question comes from Paul Bieber from Bank of America.

Please go ahead, sir.

Thanks for taking my questions.

Two quick questions.

I was wondering -- a quick follow-up on the YP partnership -- what elements exactly are working well?

And then, secondly, what attracted you to the travel vertical, given that I think it's only about 3% or 4% of your reviews are in that category in 2013?

Let me take the YP question.

I think right now everything's really working very well.

Both partners would agree that it started off with a bang and I think we're mutually benefiting -- us from the additional content that's included in the YP listings and our traffic to our partners, so our partners' benefiting from all the traffic that they're generating in the branded profile.

I don't know that there's anything specific that's not working at this point in time.

I think there was some issues with regards to how we were thinking about the deal long term, and we have mutually agreed to resolve that.

And we feel very good about the long-term prospects of this relationship.

I'll take the second part of your question there around the why of travel.

As you can see from some of the partners we announced, we also went into the wine category.

That's certainly not a huge traffic category for us either on a percentage basis, but it's still really interesting.

I think that's the power of Platform, is that it allows us to open up and bring in any third parties that can enable transactions.

And we can do that in a scalable way.

And though we're not literally building out an end-to-end experience ourselves, we're leveraging third parties that actually are able to build right into Yelp.

And so, therefore, if their flow changes they can make changes on their end, and it's far easier to maintain than if we were trying to just pick individual winners and not provide something that's much more open.

I think that's the really exciting long-term component of what we've built with Yelp Platform, is that literally, as new companies start up in various different verticals, they can come to Yelp and say -- hey, I want to build into that -- and we can give them the tools necessary to build right into Yelp.

And it's not a heavy lift on our side.

Thank you.

Thank you.

Our last question here comes from Mr. Robert Peck from SunTrust.

Please go ahead, sir.

Rob, just trying to get a better feel on organic growth here.

We know you talked about the 66% growth in ALBA, down from about 69%, 70%.

So, still very robust.

But the mix of national and regional advertisers is skewing that.

Can you give us a better feel, when you account for the various locations of those advertisers, when you adjust for that, what that organic growth is?

Thanks for your question.

It's Geoff.

As a point of clarification, that 66% is actually account number.

It is not a locations number.

So if, for instance, Walmart were to sign up 5,000 new advertisers or advertising locations in a given period, that would actually count as only one new account for that 66% of local business account growth number.

As to the broader question of how is the national business doing, it's actually going really well.

National and what we think of as mid-market, which are smaller local chains, are two segments that are growing very nicely for us.

However, they're still very small as a percentage of the overall mix and the local advertiser remains the predominant share of both local accounts as well as local revenue.

So, national business going well, but still early days.

Thank you.

At this time we have no further questions.

I would like to turn the call back over to Ms. Lim for closing remarks.

Thanks everyone for joining us on today's call.

We look forward to updating you on Q4.

And go Giants.

Thanks.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for your participation and you may now disconnect.