Yelp Inc (YELP) 2014 Q4 法說會逐字稿

Welcome to the Q4 2014 Yelp, Inc.

Earnings Conference Call.

My name is Adrian, and I'll be your operator for today's call.

At this time, all participants are in a listen-only mode.

Later we will conduct a question-and-answer session.

Please note this conference is being recorded.

I'll now turn the call over to Wendy Lim.

Wendy Lim, you may begin.

Good afternoon everyone, and thank you for joining us on Yelp's Fourth Quarter and Full-Year 2014 Earnings Conference Call.

Joining me on the call today are CEO Jeremy Stoppelman, COO Geoff Donaker, and CFO Rob Krolik.

Before we begin, I'll read our Safe Harbor statement.

We will make certain statements today that are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially.

Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.

Please refer to our SEC filings, as well as our financial results press release, for a more detailed description of the risk factors that may affect our results.

During our call today we will discuss adjusted EBITDA and non-GAAP net income, which are non-GAAP financial measures.

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 these non-GAAP financial measures, and a reconciliation of historical net income to adjusted EBITDA and non-GAAP net income.

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

Thanks Wendy, and welcome everyone.

We had a fantastic 2014, marked by many accomplishments.

Revenue in 2014 grew 62% year over year, and our teams executed well across the board.

Consumers everywhere are looking for great local businesses, and are increasingly turning to Yelp when making local purchase decisions.

With the partnerships we've forged with car manufacturers, search engines, and traditional directory businesses, we've made great strides towards our goal of making Yelp ubiquitous.

We made significant progress on the three themes we introduced last year: Supporting and fostering our community, expanding geographically, and closing the loop with local businesses.

Community is at the center of everything we do at Yelp.

Our community is passionate about sharing their experiences with local businesses, and the high-quality content they contribute is why tens of millions of consumers come to Yelp.

As the world has become increasingly mobile, app contributions have out-paced desktop contributions.

In the fourth quarter, 58% of reviews and photos were posted via mobile apps.

With this evolution in mind, we developed new features with a particular focus on mobile to further engage our community.

Two of our notable product launches in 2014 were the ability to post videos, which provides even more context about experiences at local businesses, and the review translation feature, which enabled consumers to read reviews in 16 languages.

In our effort to expand geographically, we brought Yelp to five new countries in 2014, and at the end of the year had active communities in 29 countries around the world.

These communities have contributed rich, in-depth content, as we added approximately 2 million international reviews in 2014.

As an example, we've been excited about our progress in Japan, our first Asian-language country.

After only about nine months, Japan has become one of our top 10 countries in terms of mobile usage.

We also developed a number of features to show business owners the valuable leads Yelp delivers to them.

Restaurants are a particularly interesting area for us, given how frequently consumers eat out or order in.

When we acquired SeatMe in July 2013, they had approximately 200 customers.

By the end of last year, more than 8,000 restaurants accepted reservations through our paid SeatMe and free Yelp Reservations products combined.

With more than 19 million diners seated in 2014, this significant growth demonstrates the power of bringing together our consumer traffic with a compelling product like SeatMe.

As we look forward to 2015, we have identified three key priorities as we pursue our mission of helping consumers find great local businesses around the world.

First, we will look to drive mobile engagement by making Yelp even more useful for everyday consumers' needs like eating out.

Second, we'll continue to increase awareness of Yelp among consumers.

Finally, we'll focus on delivering and measuring ROI for our advertisers.

Looking back, I'm proud of all we've accomplished in our first 10 years.

I'm even more excited about what we can achieve in the next 10.

I envision a day when consumers everywhere and in any language will be using Yelp to discover and transact with great local businesses every single day.

With billions of people interacting with local businesses around the globe, we have an enormous opportunity in front of us.

Now I'll turn the call over to Geoff, our COO, who will provide some color about the evolution of consumer acquisition and local advertising.

Thanks, Jeremy.

I'd like to address two important shifts in our business that have been under way for several years -- the move from desktop to mobile, and from impressions to performance-based advertising.

These two trends have recently hit important inflection points, and we believe we're well-positioned to capitalize on them in the year ahead.

We've historically benefited from nearly all of our traffic coming for free, and we've leveraged this traffic to build communities of locals who contribute high-quality content.

Over the last couple of years, we've participated in the industry-wide shift away from SEO-driven desktop traffic to a mobile-first world.

We believe that local is the perfect space for mobile, and that Yelp is uniquely positioned to succeed.

Mobile unique visitors grew 37% year over year, and those mobile users are highly engaged, as evidenced by 65% of our searches coming from mobile in the fourth quarter.

Consumers who use our app love Yelp.

A recent study with Nielsen showed that 78% of app users had a favorable perception of the Yelp brand, and 77% of them used Yelp within the past month.

While we're encouraged by these statistics, this same survey noted that Yelp only had 26% un-aided brand awareness among online American adults, demonstrating considerable opportunity to increase consumer trial of Yelp.

We invested approximately $10 million in online and off-line consumer marketing experiments last year, and are encouraged by the promising results.

Given these results, along with the brand affinity associated with our increased awareness and usage, we are planning to increase our marketing investment in online and off-line marketing by about $20 million in 2015.

The second evolution we're experiencing is the shift from impressions-based to performance-based advertising.

While we have traditionally focused on selling impressions-based advertising packages to local business, we made our packaged CPC product widely available in September 2014, and have been pleased with the fast up-take.

CPC advertisers represented 32% of local revenue in the fourth quarter, up from 23% in the third quarter of 2014.

The next logical step in our closing-the-loop efforts is to connect advertising spend all the way through to customer leads and spending.

We are now tracking these ad-driven leads and associated revenue estimates for all advertisers, and will be making this data available in our business owner tools in the coming quarters.

Recent results indicate that our local CPC customers experience an average return on investment of over 500% on their Yelp advertising spend.

We believe that as advertisers are able to better measure their ROI, more local businesses will advertise with us.

We've seen increasing traction among consumers who choose to take advantage of self-serve advertising.

We've also seen an increasing number of customers who begin the self-serve process, and then choose to call and consult with a Yelp salesperson before making a final decision.

Taken together, we believe that most business owners will continue to prefer consulting with our sales people, though many of these conversations may increasingly be what we think of as assisted self-serve.

Given the continued success of our sales team and the large opportunity ahead, we plan to increase sales head count by approximately 40% in 2015.

We're excited about the coming years, as more and more businesses understand the power of Yelp, and as consumers increasingly rely on Yelp as the place to find and transact with local businesses.

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

Thanks Geoff, and hello everyone.

Please note that we have posted a few slides, as well as a new data sheet, on our investor relations web page that accompanied the financial portion of the webcast.

In the fourth quarter we achieved outstanding financial results, as both revenue and adjusted EBITDA came in ahead of our guidance.

In the fourth quarter revenue grew 56% year over year to $110 million, and adjusted EBITDA was approximately $25 million.

For the fourth quarter, local revenue was $93.1 million, up 60% over last year.

Brand revenue was $8.7 million, down 7% year over year.

While we were disappointed in brand revenue, we continue to believe it is a nice source of complementary revenue as we remain focused on local advertising.

Other revenue increased 143% year over year to $8.1 million, primarily reflecting our new partnership with YP in 2014.

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

While we are encouraged by the growth of our communities and review content overseas, we expect it to take years for international revenue to develop into a large percentage of revenue, given the strong growth we've seen in the US.

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% for the fourth quarter of 2014.

We continue to see leverage in the model.

Total sales and marketing was approximately 49% of revenue in the fourth quarter, compared to approximately 55% last year.

Sales head count in the fourth quarter grew about 40% year over year.

As Geoff mentioned, we plan to invest an incremental $20 million in marketing, and continue to grow our sales head count in 2015, which will benefit us in future years.

Product development was approximately 17% of revenue, which was flat compared to the fourth quarter of last year.

G&A was 15% of revenue, compared to 19% in the fourth quarter of last year.

GAAP net income was $32.7 million, and GAAP EPS was $0.42 in the fourth quarter.

Based on the amount of profit we achieved in 2014 and our expectations of continued profitability on an ongoing basis, we released all of our deferred to income tax valuation allowance in the fourth quarter of 2014.

We had a one-time tax benefit of $26.2 million, or $0.34 per share related to this valuation release.

Non-GAAP net income, which consists of net income excluding stock-based compensation, amortization, and valuation allowance release, was $18.9 million in the fourth quarter.

Non-GAAP EPS, which is non-GAAP net income divided by fully diluted shares, was $0.24.

We generated approximately $19 million in cash flow from operations in the quarter, and finished the fourth quarter with approximately $400 million of cash and cash equivalents and marketable securities on the balance sheet.

Before I turn to our outlook, I want to go through our operating metrics for the quarter.

We have made a couple enhancements to these metrics, and we believe they will help people understand our business more comprehensively.

Average monthly unique visitors grew 13% year over year to roughly 135 million.

Average monthly mobile unique visitors grew 37% year over year to approximately 72 million.

Average monthly desktop unique visitors were flat year over year to approximately 78 million.

International traffic grew 20% year over year to approximately 31 million unique visitors on a monthly average basis.

Year-over-year unique visitor growth slowed in the fourth quarter, which is consistent with seasonal trends, but we expect traffic to increase sequentially in the first quarter based on traffic in 2015 and historical trends.

Going forward we will provide a separate break-out of desktop and mobile unique visitors.

Active local business accounts grew 39% year over year to approximately 93,700.

Keep in mind that in the fourth quarter of 2013, we had an inorganic increase of about 2,200 advertising accounts related to the (inaudible) integration.

Excluding these historical inorganic accounts, active local business accounts grew 44% year over year.

Beginning with the fourth quarter, we will provide a new metric, local advertising account.

Local advertising accounts are defined as active local business accounts, excluding deal customers.

The revenue generated from this local advertising account metric comprises local revenue, and we believe will more accurately reflects our core advertising business.

Excluding the inorganic account additions associated with (inaudible - technical difficulty), local advertising accounts grew 54% year over year to approximately 84,000.

Going forward we will provide local advertising accounts, and do not plan to provide active local business accounts.

Cumulative reviews grew 35% year-over-year to approximately 71 million.

About 5 million reviews were contributed in the quarter.

Claim local businesses were 2 million, up 36% year over year.

Now I'll turn to our outlook for the first quarter and full year 2015.

For the first quarter we expect revenues in the range of $114 million to $116 million, representing a 51% year-over-year increase.

We expect adjusted EBITDA for the year -- for the first quarter to range between $19 million and $21 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 our tax rate to be approximately 40%.

We expect full-year 2015 revenue to be in the range of $538 million to $543 million, or approximately 43% growth over 2014.

For the full year, we expect adjusted EBITDA to range between $100 million and $103 million, a 42% increase over 2014.

We expect stock-based compensation to range between $58 million and $60 million, and depreciation and amortization to be approximately 4% to 5% of revenue.

We expect our tax rate to be approximately 40%, however we do not expect to pay significant cash taxes in 2015 due to the use of our NOLs.

We expect CapEx to be approximately $25 million.

For modeling purposes in the first quarter, we expect our weighted average fully diluted share count to be approximately 78 million shares.

For the full year, we expect our weighted average fully diluted share count to be approximately 79 million shares.

We had a fantastic 2014, and expect great things in the future.

Given the enormous opportunity ahead of us and the leverage we continue to see in the model, we now believe that we can achieve long-term adjusted EBITDA margins of 35% to 40%.

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

Thank you.

We'll now begin the question-and-answer session.

(Operator Instructions)

Mark Mahaney, RBC Capital Markets.

Thank you.

A question for Geoff and one for Jeremy.

Geoff, could you provide a little more color around that $20 million, how you reached that amount for 2015?

Why not more, why not less?

Jeremy, I know in the past, the last couple of quarters you talked about maybe a negative impact from some Google algorithm changes to your overseas traffic but not to your US traffic.

Could you give us an update on what you're seeing there?

Thank you.

Hi Mark, thanks for joining us.

Yes, about $20 million.

Just to clarify, we did say that was a $20-million increase, so $10 million last year plus $20 million this year would be approximately $30 million in marketing spend this year.

As to why that number -- actually going back to some of the other things we've talked about before, we try to take a Goldilocks approach of going as fast as we can while achieving and doing things with quality.

I think in this case, it's given that we spent $10 million last year and we learned a lot from those tests, basically as much as we think we can reasonably spend this year would be about $30 million, which gets us to the ability to run many more tests and do some things that scale.

But obviously we're not yet ready for huge amounts of marketing well beyond that at this point.

This is Jeremy talking about international, what we're seeing there.

Yes, we had talked about Google making a bunch of adjustments, and that impacting us.

We're seeing ups and downs country by country.

But overall, things are holding steady.

We're spending our time still focused on community building and growing our content there.

Thank you, Jeremy.

Thank you, Geoff.

Jason Helfstein, Oppenheimer.

Thanks.

Hi, guys, it's Jason.

Two questions.

The first is mobile slowed from $73 million to $72 million.

I think that's the first time there was a sequential slow-down.

One, do you still feel like those numbers are reflective, i.e., of the trends, or are we still seeing effectively the impact of double usage, multiple devices if you're not logged in.

As you think about it, when you think about the marketing -- what are you trying to drive?

Are you trying to drive mobile download -- mobile app downloads?

Are you trying to drive engagement among existing users?

Are there any data you can share with us on the number of mobile app downloads, perhaps quarter to quarter or year to year in the fourth quarter?

Thanks.

I'll take the first part of that, looking at mobile.

First off, there is a seasonal trend that I guess I'd just point to.

We typically see between Q3, Q4 sort of a seasonal slow-down.

If you look at our growth rate for mobile, we're 37% year over year.

We feel pretty good about that overall.

Hi Jason, it's Geoff on the marketing question.

You asked what are we trying to drive.

There are a couple different channels that we've been experimenting with, and we'll continue to, so it does depend a little bit.

Some of our experiments have been driven towards trying to get folks to get the Yelp app and experiment with the Yelp app.

As I mentioned I think in the earlier part of the call, we do see that when people get that Yelp app they use Yelp often, and they tend to really love the experience they have.

Some of our efforts have been in that direction.

Then actually, some of the efforts have actually been in a pure un-aided awareness direction, as well.

I think I also mentioned that today we only stand at 26% un-aided brand awareness, which just seems shockingly small in the online consumer adult population.

In a lot of ways, we're also just trying to get people to be familiar with Yelp and try us, whether that be on mobile or the desktop.

Overall in terms of how metrics -- the marketing efforts both last year and this year will be all about long-term value.

We don't expect to see any kind of immediate gains in terms of overall reach.

However, long term we certainly expect to see those things change over a period of years.

Stephen Ju, Credit Suisse.

Thanks for taking the question.

Geoff, you mentioned performance-oriented advertisers earlier.

Presumably those guys are probably spending more versus the normal subscription tranches you are offering.

Was wondering if you could give us any color on how much more they might be spending, because they're probably not limited by cash flow constraints and probably looking more at ROI?

Thanks.

Thanks, Stephen.

Today, when we talked about that 32% of our local revenue being driven by CPC advertisers, most of them are actually buying our package CPC product.

Effectively, in a lot of ways their spending is at a very similar level to what our historical and pressure-based advertisers were spending at.

Certainly within that number you do have a range, and some advertisers our un-capped, as you described it -- meaning they start with a small amount and then they increase their budget over time.

However the averages, the overall median case, is still in that $300- to $500-a-month typical consistent spending range.

We expect there to be more of the variable price advertiser who may increase spending over time, but that's in the out years, as opposed to really where the focus is today.

Thank you.

Gene Munster, Piper Jaffray.

Good afternoon.

I might have missed this earlier, but can you talk about some of the overall trends in unique user growth and how to think about those going forward.

Separately, as you talked about improving retention gave some of those metrics, how do we see things like SeatMe starting to have an impact on that, and Dashboard?

Maybe just broader from over the next year, how to think about customer retention?

Thanks.

Sure.

Hi, Gene.

I'll take a stab at this.

Looking at the overall traffic trends, I think we have reached a place where we're at peak desktop, more or less.

Users are going to mobile.

We've been talking about that for a long time.

I think when you see how broken out the year-over-year growth, mobile is at 37% year over year, and so we're feeling pretty good about that.

The age of just going to Google on your desktop and finding your way to Yelp, while it's not over, we've hit that peak.

Now it's all about what's happening on mobile.

Speaking of mobile, we've got the app and those users are highly engaged, but we'd like to see even more engagement there.

That's where some of the investments that you alluded to, SeatMe and Platform, I think end up being very important.

We do have an eye towards some of the high-frequency categories.

That's why we made the investment in SeatMe.

That's why we continue to invest.

One of the best areas for us on Platform is actually food delivery, and we have several partners there that are seeing success.

Great, thank you.

Lloyd Walmsley, Deutsche Bank.

Thanks guys.

Following up on an earlier question on this packaged CPC.

When you guys look at the supply and demand characteristics, do you still have a lot of availability of inventory to sell as these new CPC advertisers come in?

Are you seeing CPC pricing move up as more people come into these auctions?

Where do you think it can go in terms of CPC pricing over time?

Hi, Lloyd.

I think the answer is really yes to both of those.

We do still have an awful lot of effectively unused or unsold inventory within the ecosystem.

That leads to a lot of upside.

Also, we're seeing that in some more competitive categories or geo categories, if you will, we do see that the prices quickly rise within packaged CPC, because that is an option-based dynamic, where folks effectively are bringing in an amount of money that they're going to spend on CPC advertising, and then leaving it to the bidding to determine what the prices will ultimately be for that inventory.

You could imagine tight categories like movers in San Francisco.

Those prices are able to move up pretty quickly.

I think there is head room in both price as well as inventory turn-around.

Yes.

As a follow-up, we've looked at a few categories like lawyer San Francisco and core search players are recommending bids in some categories at 2X the levels of you guys.

Are there things you can do to accelerate more auction participants to close that gap?

Yes, thanks for pointing that out.

We noticed the same thing as we've done a little bit of benchmarking.

Obviously it gives us comfort with both the ROI that we're giving to advertisers today, as well as the head room in those categories for pricing.

The simple answer is just acquisition.

That's why we continue to be focused on bringing in as many CPC advertisers as we can, because over time more competition should mean prices will rise, as well as hopefully more happy customers.

Great.

Thanks, guys.

Heath Terry, Goldman Sachs.

Great, thanks.

I was wondering if you could give us a sense as you -- as you focus on beginning to monetize international a little bit more, what you see as being the primary driver in those markets?

Is it greater density of users in each of those, is it more sales people?

How should we think about your goal for international growth longer term?

To the point you made at the end of the prepared remarks around long-term margins, can you give us a sense of how you're going to balance that from a timing perspective?

Clearly, you can -- there's the classic trade-off between growth and margin expansion.

How important is it for you to get to that kind of a margin number in the intermediate long term, versus accelerating, or even just driving more top-line growth?

This is Geoff.

I'll take the first half of that question about international monetization.

Of course, international monetization, I think we're at 3% of revenue now, so it's still super-early days.

There's a lot of great signs out of that international team, and yet in a lot of ways we're still just getting started.

You asked what are the key metrics that we look at in each country or each city.

There certainly are more than one.

It is a function of some of the things you already mentioned.

Obviously consumer demand, traffic in general, inventory opportunity, and then things of course like paying accounts, which tend to be driven historically by sales people.

It will be really all of those things.

I think the message there for us internally has continued to be, hey let's stay patient and focused.

Over a long period of time we expect it to certainly be a very big part of the business.

But it is going to be a one-year-at-a-time thing.

Hi, Heath.

This is Rob on your question about long-term margins.

We don't really have a specific year that we had planned to have the 35% to 40% margin.

What we do have is a lot of confidence that we can get there.

We've gone in the last couple years from effectively negative EBITDA margins to in 2014 about almost 19%, and for the fourth quarter, in fact, about 22%.

We feel like it's not necessarily a stretch.

Even if you look at our oldest cohort markets it's pretty robust on a contribution margin basis.

We feel like it's there for us in terms of taking it.

Then how long does it take us to get there?

We'll just have to be wait and see.

To your point about driving growth on the top line, we see tremendous amount of opportunity there.

The [TAM] is still really large.

You see tens of millions of businesses that we want to bring over to Yelp and have them advertise on us.

I think we'll just have to wait and see, but right now we don't have any specific time frame.

Great.

Thanks guys.

Mark May, Citi.

Okay, thanks for taking my questions.

On the outlook for sales head count growth this year -- sorry if I missed this, but maybe if you could provide a little more color about the type of sales people that you're looking to bring in?

Is this going to be more heavily weighted to some of your new international markets, or sales people maybe that are focused with the specialties in certain -- selling certain products?

Then a question on some of the things that you're doing to help your customers measure ROI, like bringing on platform partners, et cetera.

Curious if you could put any numbers around the benefit that you've seen as you introduce these ROI tools, in terms of sales conversion?

Hi, Mark.

I will try both of those.

First you asked a question about the sales head count growth.

I had mentioned we are going to grow sales head count by approximately 40% this year.

Who are those people?

The majority of that sales head count will be what it historically has been, which is in our local sales group.

Many of those folks tend to come to us either straight out of college or within a few years thereafter.

But we take all comers, and there's all different kinds of folks.

But it is a sales training program, as most of that head count is folks who are reaching out to local businesses of different stripes.

Of course within that number there is some international, and there is some specialty sales in our mid-market, franchise, and national accounts.

But the majority of it is traditional local sales head count here in the US.

As to your other question, as we have done things to close the loop and help prove value and now increasingly ROI for our advertisers, do we have any kind of clean metric that says here's how conversion ratios have improved?

Unfortunately we don't.

There are certainly a lot of anecdotal signs and smaller metrics that we can look at that look positive, but there is no single metric I can point to and say this metric changed a lot when we released this feature or that feature.

Sorry, go ahead?

Maybe a follow-up then on that is maybe take one example like HipMonk, which I think it was, if I'm not mistaken, one of your first entries into travel and hotels.

Have you seen any noticeable pick-up in new business accounts in that vertical?

Not that I know of.

I don't have a metric for you on that.

That having been said, interesting Platform, which certainly not at odds with our local advertising, doesn't necessarily directly augment our ability to sell local advertising, either.

Many times we'll have a local advertiser who, for whom we turn on a Platform partner, whether that be food delivery or travel or something else.

They're happy to have it there, but it doesn't really change the way they think about their Yelp advertising program overall.

Okay, thanks.

Brian Fitzgerald, Jefferies.

Thanks, guys.

Maybe along the same lines of questioning, can you give us any metrics around e-commerce monetization that's coming through the Yelp platform?

What share of overall revenue could that be over time.

Separately, with the Yelp platform I think you said you had 60,000 businesses-plus integrated in.

Could you discuss some of the benefits you're witnessing from these closed-loop transactions with these businesses, in terms of up-lift or penetration of your ad offerings?

Hi, Brian.

This is Geoff.

Do you want to take the first part?

Yes, I'll take the first part if you want to take the second.

Sure, go ahead.

in terms of the metric around monetization of the platform, it's fairly small.

It actually lives in other revenue.

What we're doing is we're taking a share of what the partner is taking in, so it's a piece of a piece.

We haven't really shared what that amount is.

Really the purpose of Platform at this point is just to show advertisers that we do close the loop, that we do drive leads.

I think that's going to be the measure of that business for the foreseeable future.

In terms of what can it grow to?

It can grow to -- it depends, I would say.

It can become a larger and larger piece of the business overall long term; but actually at this point we're really focused on local advertising.

What Platform is all about is consumer.

It's providing a consumer a complete transaction -- I find a place, I want to transact, I transact, and I'm done, and I have a happy experience on Yelp.

I think you covered the second half.

Yes.

Got it.

Thanks, guys.

Kevin Koppelman, Cowen and Company.

This is Andrew Merick on for Kevin.

You talked a little bit earlier about your 2014 product launches.

Could you expand on product innovation going forward, especially around the Yelp platform?

Sure, this is Jeremy.

Yes, I can't really foreshadow much about our product pipeline for 2015, but we will continue investing in Platform, and we do expect to bring on a number of other vertical partners.

Stay tuned on that, but unfortunately I can't share a whole lot of what we'll be releasing soon.

Okay.

Then on international traction, I know you had announced earlier that you were doing smaller tests in, for instance, London with outdoor advertising.

Have you seen any early returns from those?

Are you expecting to see anything within the next quarter or so?

Yes, hi.

I think that's right.

We did mention some of our outdoor tests, many of which were international last year.

We did, we saw positive signs, as referenced earlier in those tests, which gives us confidence to continue testing into this year.

There's no -- none of those tests, including the one in London, are game-changing in terms of our overall traffic the print.

Got an awful lot of people using our site in London, so certainly some pop in terms of traffic in a short period of time around when we ran this stuff, but nothing overall that would show up in the numbers in a large way.

All right.

Thank you.

Ronald Josey, JMP Securities.

Hi guys, this is Michael Wu for Ronald.

Thank you for taking my question.

Real quick, can you guys provide some insight on international revenue growth for Yelp's oldest markets abroad?

Then given the recent acquisitions, or announced acquisitions on Restaurant Critique in Germany and City Box in France, could you compare and contrast the two markets, and how the acquisitions could help you there?

In terms of international revenue, international revenue is about 3% in terms of our oldest markets there.

We've been selling into UK, Spain, France, and Germany for the last couple of years -- actually when we first, effectively when we first started selling into Europe.

We started out about 2.5 years ago.

We most recently launched in Italy probably in September or so of 2014.

What we've seen is if you look at just organic growth in international revenue, it's been about 80% in 2014.

We feel like the momentum is there, and we're continuing to see it in 2015.

We're excited about it.

We think that as a percent of revenue it's going to be a fairly small percent in the near term, given the strong growth rate in the US.

You asked about our recent acquisitions of City Box and Restaurant Critique, as well.

The context for those acquisitions was very similar to our acquisition of Qype at an earlier time.

That was really all about the content and resulting traffic that tends to come in from bringing on these complementary communities of writers and reviews.

In the case of those two properties, they actually have a lot in common.

This is why we did them at the same time.

Also, you asked about our market position in France and Germany.

The story there is actually relatively similar, too.

Certainly, we're much earlier in both of those countries than we are in the US.

But in both cases we've got a nice following.

These two niche properties, City Box and Restaurant Critique, also had nice followings in and of themselves.

We'll be pursuing a very similar strategy to what we did with Qype when we bring on that content on to Yelp, and over time really make the focus on the Yelp properties in both France and Germany.

You could look for that in the coming months.

Thank you.

Paul Bieber, Bank of America.

Hi guys, thanks for taking my questions.

I was hoping first on the international front, could you talk about the strategic priorities in the international business, and can you remind us which countries you're actually monetizing internationally?

That is actually a sales people calling on local businesses.

Secondly, when I look back over the last two years, you've guided pretty conservatively at the beginning of the year, and your -- especially on the EBITDA line, and your eventual actual EBITDA numbers are much higher.

Is there anything different in the guidance this year?

I know you guys are investing in advertising, but anything different that's changed your way of approaching guidance?

Okay.

On the first question, you asked about our priorities as far as international.

Look, big picture why are we in 29 markets, because we believe the Yelp pitch of helping people find great local business resonates around the world, and consumers everywhere want to find great local businesses.

Americans who are already familiar with Yelp want to be able to use Yelp when they're traveling around the world.

That's really the strategic comparative for us as we try to bring Yelp internationally.

Within that, though, do we hope to make money in many of these countries?

Certainly.

That's why we have begun to monetize several of them.

As I'm writing it down here today, we've monetized, or we are monetizing France, Germany, the UK, Ireland, Italy, and Spain.

I don't think I missed any, and in addition to of course the US and Canada.

The second half of the question?

The second-half good question is about guidance.

What we do is we release guidance for the year.

Revenue we expect $538 million to $543 million in revenue for 2015.

On an EBITDA basis we're expecting $100 million to $103 million.

How we look at that is that we do a model and we put all the inputs and we get an output based on all the things that we want to do in 2015.

Then obviously we continue to update that through each quarter.

That's what we'll continue to do.

Whether it's conservative or whether it's aggressive, obviously we won't know until the end of the year.

Okay, thank you.

Chris Merwin, Barclays.

Great, thank you.

You made some changes to the YP partnership after the 3Q, and it looks like other revenue you said was flat sequentially.

Are you comfortable with the terms of that agreement now?

Has that partnership had any positive impact on paying account growth, where you're basically able to up-sell a customer you source from YP up to your ad products?

Thanks.

Yes, we feel really good about the YP partnership.

We did change some of the terms, and made it longer and better synched ourselves with them.

We feel really good, and I think so far it's working out, and we expect it to do so in 2015.

In terms of if it's increasing our paying accounts, it's really -- we already had the ability to sell into those accounts prior to the YP agreement.

I wouldn't say that it's allowing us to sell an account that we weren't able to sell it to.

What I would do is I would say that in some cases we're able to mention that those particular customers are getting a branded profile.

That doesn't include advertising, so if they want to include advertising on Yelp, it may help that particular customer out.

We think of it as all positive.

Thank you.

Aaron Kessler, Raymond James.

Hi, guys.

Thanks for the question.

First on the -- according to our survey, some of the merchants are still a bit uncertain on ROI and more on the foot traffic side, whereas like home services.

Do you see a good ROI -- I guess with regards to your comments, an improving ROI?

What's your plan on more foot-traffic type of establishments to help show them an improved ROI?

Thanks.

Hi, Aaron.

This is a bit of an age-old question for us.

The good news, if you will, is that there's so many leads that are already being captured through Yelp that advertisers aren't processing today, that if we just take credit for the ad-driven leads that we are capturing, including things like people getting directions on their way as they're walking into a business, and what-not, so again, leads that we're already capturing but attributed top an ad.

We see that on average our CPC advertisers are getting a 500% return on their investment in terms of the Yelp ad spend.

We feel like that's a great place to start in showing that to advertisers -- ought to help.

Longer term, are there even more things we could do to take advantage of the significantly more leads that are coming in through walk in and people who actually are processing those leads on Yelp?

There probably is, although as we go increasingly mobile I think we'll be able to take advantage of many of those in question.

Got it.

On the marketing spend, the $20-million increase this year, are you flowing that through to revenues at all, or is that a secondary effect that we should expect?

Yes.

If I understand your question correctly, are we counting on any of that to drive revenue this year, no we're not.

We're really not expecting that to have an impact on metrics in 2015.

These are marketing tests that are very much focused on the long-term brand and un-aided awareness opportunity to get people familiar with Yelp and such, that hopefully they're loyal users in the out years.

Got it, great.

Thank you.

Darren Aftahi, Northland Securities.

Great, thanks for taking my question.

Just one quick one.

You talked about the SeatMe ramping to 8,000 by the end of 2014.

Can you talk about any benefit you're seeing in terms of uplift from paid customers in terms of migration to paying advertising clients?

Yes.

Hi, thanks for the question.

I guess let's parse that.

First of all, you mentioned the 8,000 restaurants.

Just to be clear, those are SeatMe plus Yelp Res customers.

We certainly are seeing flow back and forth.

You know it's a nascent business for us.

However, we are seeing flow of people who start with either Yelp Reservations or SeatMe, and then choose to buy a Yelp advertising package in order to drive incremental business.

We also see Yelp advertising clients who say, hey, I'd really love to get on your reservation platform.

There is some cross-pollination that's already happening, but I would describe it as early days, and small as a percentage.

(Operator Instructions)

Tom Forte, Brean Capital.

Great, thanks for taking my question.

I wanted to know where we stood with the video to the extent that consumers are adding video to the platform, and what that's doing for engagement?

Then also to the extent that merchants are adding video to the platform, and if we're close to potentially advertising via video on Yelp?

Thank you.

Hi there, this is Jeremy.

Video is off to a strong start.

We just actually had a recent release that boosted videos significantly from where it already was.

We're feeling pretty good about that from a consumer perspective.

On the merchant side, they've already been able to host video for quite some time.

We actually have that produced as part of their advertising package.

It's actually now -- is it more than half?

More than half our advertisers are taking advantage of that.

It's actually a really great part of becoming an advertiser on Yelp, is getting that video up on your page and enhancing it ultimately for consumers.

We kind of have both angles.

They're pretty separate products.

The video that we launched last year was really a consumers uploading short video, and then we have a bit of a longer form, in terms of a few minutes, that merchants can take advantage of as they become Yelp advertisers.

Thank you.

Kerry Rice, Needham & Company.

Hi, this is James Nye for Kerry.

Considering that the percentage of ad impressions on mobile is 56% on mobile is 56% for the quarter, how should we think about the size of mobile revenue?

A follow-up to that is what levers you can push or pull to close that gap between mobile revenue and ad impressions?

Thanks.

Hi, this is Geoff.

Let me try the first one.

Yes, 56% of ad impressions were on mobile.

Again, that's as comparison to desktop.

You can't exactly, in most cases, draw the line between ad impression and revenue, and that's why we don't.

You can do your own math and come up with your own calculation on that.

That's because most of our advertisers are agnostic.

They're saying, hey, I want to buy a plumbing impression, and so we'll put the plumbing impression in front of the consumer wherever he or she may be.

As to what levers we can pull, I don't know that they're really any different for us on mobile advertising than they are on our historical desktop advertising business.

Those are just the classic things like bring more advertises in, and as we get tighter density and better advertising targeting in any geo-category combination, prices rise, and there's more demand for the product, too.

Of course, also more consumers means more impressions that we can show.

No special magic on mobile specifically, but all of those numbers tend to push things in the right way.

That concludes the Q&A session.

I will now turn the call over to Rob Krolik for closing remarks.

Thanks everyone for joining us on the Q4 call.

We look forward to speaking with you in Q1 2015.

Thanks.

Thank you ladies and gentlemen.

This concludes today's conference.

Thank you for participating, and you may now disconnect.