Wendy Lim Jeremy Stoppelman - Co-Founder, Chief Executive Officer and Director Robert J. Krolik - Chief Financial Officer and Principal Accounting Officer Geoff Donaker - Chief Operating Officer and Director.

Youssef H. Squali - Cantor Fitzgerald & Co., Research Division Jed Kelly - Oppenheimer & Co. Inc., Research Division Thomas Cauthorn White - Macquarie Research Kaizad Gotla - JP Morgan Chase & Co, Research Division Lloyd Walmsley - Deutsche Bank AG, Research Division Stephen Ju - Crédit Suisse AG, Research Division A.

Justin Post - BofA Merrill Lynch, Research Division Mark S. Mahaney - RBC Capital Markets, LLC, Research Division Ronald V. Josey - JMP Securities LLC, Research Division Michael B. Purcell - Stifel, Nicolaus & Company, Incorporated, Research Division Heath P.

Terry - Goldman Sachs Group Inc., Research Division Brian Patrick Fitzgerald - Jefferies LLC, Research Division Peter Stabler - Wells Fargo Securities, LLC, Research Division Charles Eugene Munster - Piper Jaffray Companies, Research Division Rob Sanderson - MKM Partners LLC, Research Division.

Welcome to the Yelp Q1 2014 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Wendy Lim. You may begin..

Good afternoon, everyone, and thank you for joining us on Yelp's first quarter earnings conference call. Joining me on the call today are CEO, Jeremy Stoppelman; and CFO, Rob Krolik; and COO, Geoff Donaker will join us for Q&A. Before we begin, I'll read our Safe Harbor statement.

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

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

Please refer to our SEC filings, as well as our financial results press release for a more detailed description of the risk factors that may affect our results. During our call today, we will discuss adjusted EBITDA, a non-GAAP financial measure.

In our press release issued this afternoon and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding this non-GAAP financial measure and a reconciliation of historical net loss to adjusted EBITDA. And with that, I will turn the call over to Jeremy..

Thanks, Wendy, and welcome, everyone. 2014 is off to a great start. In the first quarter, revenue grew 66% and again we saw strong growth across our key metrics. Yelp's mission is to connect consumers with great local businesses.

Our goal is to be wherever consumers are looking for a local business, no matter where they are in the world or how they access our content. More than ever before, our brand is becoming synonymous with local search, as evidenced by the 132 million unique visitors who came to Yelp on a monthly average basis in Q1.

Many companies recognize our leadership. This quarter, we announced partnerships with Yahoo! and YP.com. In addition, we powered Bing local search and Apple Maps and have integrations with several car navigation systems.

We would not be where we are today without our community of writers, whose high-quality rich content makes Yelp relevant for consumers. In March, we held our Annual Community Manager Week at our headquarters in San Francisco, and I was struck by the overwhelming enthusiasm in the room.

CMs are Yelp's brand ambassadors and our growing vibrant Yelp communities globally. I'm proud of all of their hard work and excited for what lies ahead for Yelpers around the world. We also continue to roll out new features to enhance the experience for our community of contributors and readers. We've been working to improve the mobile web experience.

And in the first quarter, we launched the ability to add photos via mobile web. The strong engagement we're seeing across mobile is a result of the investment we have made over the past year. Approximately 35% of new reviews came from mobile and about 60% of all searches came from mobile in the quarter.

We also revamped our business listing page by increasing the number and size of photos and improving review highlights to emphasize the information that consumers find most useful. Our international communities are also experiencing increased traction and brand awareness.

In January, I spoke at the DLD Conference in Munich, Germany and visited our Hamburg office. I was excited to see firsthand the communities that have taken root there. In Germany alone, the number of contributors has increased over 350% since we completed the Qype integration in October 2013.

In Q1, our total international traffic grew 95% year-over-year to 23% of total traffic and reviews grew 210% compared to last year to comprise 11% of total reviews. We also recently launched in Mexico and Japan, our 25th and 26th countries.

I visited Japan for our launch this month, and I'm thrilled with the warm reception Yelp has received from both consumers and media in our first few weeks. We continue to provide new ways to close the loop with local businesses. Earlier this month, we integrated our latest Yelp platform partner, Booker.

So now consumers can book spa and salon appointments directly on Yelp. We look forward to integrating additional platform partners throughout 2014. We're also seeing good traction with the products we've rolled out last year. Call to Action is a popular feature with both advertisers and consumers.

Although we only launched CTA last summer, it's already generating approximately 100,000 leads for advertisers every week. Also the Customer Activity Feed, which we launched in Q4 of last year, provides business centers with details of each lead.

For example, yesterday at 5:30 p.m., a man in his 30s from New York called your business from the Yelp Mobile app. We think consumer desire to find great local businesses is universal, and this creates a large global opportunity for us. I'm excited about what's in store for the rest of the year.

We'll continue to focus on what has made us successful, supporting and engaging our community of contributors, developing innovative products to enhance the consumer experience and helping local business centers see the value that Yelp delivers to them. And now I'll turn the call over to Rob for the financial details..

Thanks, Jeremy. As Jeremy mentioned, we had a strong start to the year. Please note that we have posted a few slides on our Investor Relations web page that accompanies the financial portion of the webcast. Let me start with the financial results. We were very pleased with our performance.

In the first quarter, revenue grew 66% year-over-year to $76.4 million. Adjusted EBITDA was $8.5 million in the first quarter compared to $3.2 million in the first quarter of 2013.

Moving on to key operating metrics for the first quarter, cumulative reviews grew 46% year-over-year to approximately 57 million, as we added about 4 million reviews in the quarter. Active local business accounts, which now includes SeatMe customers, grew 65% year-over-year to approximately 74,000.

Our average monthly unique visitors grew 30% year-over-year to roughly 132 million. Average monthly mobile unique visitors grew 52% year-over-year to approximately 61 million. Claim local businesses were 1.6 million, up 47% year-over-year. Let me run down the P&L, starting with the revenue mix to provide some additional color.

We are seeing great growth across all revenue sources. For the first quarter, local revenue was $65.2 million, up 67% year-over-year; brand revenue was $7.5 million, up 57% year-over-year; and Other revenue increased 56% year-over-year to $3.8 million. International revenue contributed about 3% of total revenue in the first quarter.

Our customer repeat rate, defined as the percentage of existing customers from which we recognized revenue in the immediately preceding 12-month period, was 75%. Gross margin was 93%.

Total sales and marketing was approximately 59% of revenue compared to approximately 61% last year, demonstrating leverage in the model, while we continue to invest in hiring, as well as launching new country sites in Japan and Mexico. Sales headcount grew 55% year-over-year.

We intend to continue to invest in sales and marketing given the large market opportunity we see in front of us. Product development was approximately 18% of revenue compared to 16% in the first quarter of last year.

Again, this reflects our strategy to invest in product innovation, such as improving business profile pages, integrating additional platform partners and supporting new languages and communities. G&A was 17% of revenue compared to 19% in the first quarter of last year.

Separately, we recorded a tax benefit in the quarter related to the release of a valuation allowance against our foreign net operating losses. Turning to the balance sheet. Our cash and cash equivalents position at the end of the quarter was approximately $400 million. We generated approximately $9 million in cash from operations in the quarter.

Before turning to our outlook, I'd like to take a moment to remind everyone about our investment strategy in 2014. We see a multibillion-dollar global opportunity in the local space. Our strategy is to continue to invest in growing the Yelp product and footprint to maximize long-term revenue and local advertising market share.

Given our results in Q1, we think this strategy is working. For the second quarter, we expect revenues in the range of $85 million to $86 million, representing a 55% year-over-year growth rate. We expect adjusted EBITDA for the second quarter to range between $11.5 million and $12.5 million.

We also expect stock-based compensation to range between $10 million and $11 million, depreciation and amortization to be approximately 5% of revenue and negligible tax expense on a cash basis. I'm pleased to announce that we are increasing revenue and adjusted EBITDA guidance for the year.

We expect full year 2014 revenue to be in the range of $363 million to $367 million or approximately 57% growth over 2013. Full year -- for the full year, we expect adjusted EBITDA to range between $56 million and $60 million, a 97% increase over 2013.

We expect stock-based compensation to be approximately $43 million to $45 million, depreciation and amortization to be approximately 5% of revenue and negligible tax expense on a cash basis. For modeling purposes, we expect our average weighted basic share count in the second quarter to be approximately 72 million shares.

And for the full year, average weighted basic share count is expected to be approximately 73 million shares. I'll now turn the call over to the operator to open up the call for questions..

[Operator Instructions] First question is from Youssef Squali from Cantor Fitzgerald..

Two quick questions, please. I guess, starting with Jeremy, if I look at the international business, so you're in 26 countries right now, you've been in some of these countries for a few years -- for several years now. International contribution to revenues is still relatively small. I think you stated 3%.

If you were to kind of dream the dream, how big do you think international can be or in the not-too-distant future, I mean, in the next 2 or 3 years? Can international for you be similar? Or is there any structural difference or challenge that would prevent your international business from over time becoming, say, half of your business, obviously, not over the next 2 or 3 years, but over time.

I'm just trying to understand kind of the -- your thinking about the ramp-up of monetization as you open up more countries and as more and more traffic starts coming from international. And then Rob, your EBITDA for both Q1 and Q2 was a bit shy of expectations. Yet, if I look at the year, it was higher, as you just stated in your guidance.

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

This is Jeremy here. So thanks for the question about international. We continue to be very happy with our consumer growth, audience growth there, as well as contributor growth, which, as you know, comes before the revenue piece.

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

And as far as our expectation of what can we achieve over the next several years, we think it's something like 30% to 40% of revenue could be coming from international over the next 5 to 10 years. That's how we think about it. That's kind of our goal that we've set up for ourselves..

Youssef, it's Rob. So to follow up on the question about EBITDA, so we did -- we had about $8.5 million in EBITDA in the quarter, Q1. And then we had not, obviously, given any expectations about Q2 as of yet.

We feel like continuing to invest in the business, both in sales hiring, as well as product to continue to generate all of our great product initiatives, as well as hire these great sales people who are doing great work. And we feel -- as you can tell in Q1, with a 66% growth rate, is paying off.

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

The next question is from Jason Helfstein from Oppenheimer..

This is Jed on for Jason. Just with -- just touching on international, again.

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

Yes. I don't know that we would necessarily relate the business at this point to better weather. I previously worked at eBay. I know that's a factor. I think we're so nascent in the market at this point that we're only generating probably $2.5 million in the quarter from international.

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

The next question is from Tom White from Macquarie..

On the guidance, it looks like you expect the top line trends to kind of improve quite a bit, I guess, over the remaining 3 quarters, sort of back half of the year.

Could you maybe comment a little bit more on exactly why the raised outlook? Do the deals with Yahoo! and YP, do they factor into that at all? And then just quickly on Platform, in terms of helping drive kind of consumer understanding or awareness of Platform, not merchants but consumers, would you guys ever consider doing any sort of traditional brand marketing?.

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

So it's really coming from the business momentum that we have currently. As you know, we haven't rolled out the YP.com partnership as of yet, and our expectations are fairly modest for that. That said, it's not reflected in our guidance. But I would encourage everyone to be cautious only because we'll be experimenting over the next year with YP..

And then, Tom, to your other question, this is Jeremy, around Platform and can we create consumer awareness through some brand marketing. I think we're really happy with the growth we're already seeing with our existing partners on Platform.

I think there's a lot of leverage to be gained by adding additional partners, which we'll continue to do over the course of the year. And we just launched Booker in the last quarter, which we're very excited about. We'll never say never on experimentation with brand marketing.

We do have a program that we've been dabbling with, but it's not particularly focused on Platform. And it's really just experiments. We're constantly evaluating different ways to get the word out about Yelp. But fundamentally, the best way that we've found to get the word out about Yelp is just through our organic growth.

And so of the traffic that we keep getting, north of 130 million monthly uniques, is really all organic. We don't do any SCM at this point. So it actually is pretty difficult and expensive to move the needle when you have an audience of that size..

The next question is from Kaizad Gotla from JPMorgan..

Just wanted to dig in a little bit on the YP partnership. Wondering if you could just talk a little bit about the overlap between YP's advertiser base and yours and how many of them have a Yelp profile today. And also, I noticed the customer repeat rate was up quite a bit, from 70% to 75% this quarter.

Wondering if there's anything you wanted to call out there.

Or are you seeing more usage of some of the ROI measurement products that you've rolled out over the last few quarters that's boosting that number?.

This is Geoff. Thanks for your questions. First on YP, we see this YP relationship as really a win-win, gives YP's advertisers access to our 138 million consumers; and us, the opportunity to tap into YP's 500,000 plus advertisers. As to specific overlap between their advertiser base and ours today, we actually haven't done that specific deduping.

So I don't yet know. My sense from some initial tests is that it's pretty small. So we do think it will be mostly upside. Though as Rob said, we really don't know what to expect there. And in the first year, we'll be doing a lot of iteration and experimentation.

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

The next question is from Lloyd Walmsley from Deutsche Bank..

Wondering if you can just give us a little bit more color on the Call to Action ad unit. I think in the past you've said that your customers adopting and saw kind of a 15% lift in engagement. Any update there? And can you maybe give us color on what percent of your customers are using that? And then a follow-up, if I may..

Okay. Thanks to -- this is Geoff again. Thanks for your question about Call to Action. Yes, as Jeremy mentioned, that is actually starting to drive a material number of leads. It's more than a 100,000 leads to our customers in the last period. I don't have an updated number for you on that.

We had previously done a study that suggested 15% uptick -- or uplift in leads per page view for those advertisers who had the CTA turned on. We haven't updated that study yet. And so, I guess, when we do, we'll share that back out. But nothing new to report there at this point.

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

Did you have a follow-up part of that?.

Yes. And then just wondering if how integrated Call to Action and Yelp platform statistics are now into the customer dashboard.

Any update there?.

Yes. Call to Action is incorporated into the customer dashboard. And so those customers who have Call to Action turned on can see how many leads they're getting from that Call to Action button. The Yelp platform component is not yet integrated into the business owner dashboard. And so that is still to come.

And so some uplift there for those customers to be able to see how many transactions they're actually getting through Yelp platform..

The next question is from Stephen Ju from Crédit Suisse..

So Jeremy, I've been noticing that Yelp has been gathering additional information about venues whenever I check in to the location, because they take reservations, that sort of thing. So having more data so you can present a richer search experience to the users is pretty straightforward.

But are there other use cases for the data that Yelp has not yet fully exploited? And this is also probably more of an anecdotal question, but I've noticed that legacy Qype users do not really seem to be contributing content for London, for instance.

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

Sure. This is Jeremy. Thanks for the question. So the feature that you're referring to is after you check in, we ask you a number of questions that are optional that you can answer. We call those attributes, and they help you understand things about the business.

Is the place dressy or casual, is it good for kids, is it good for groups, et cetera, et cetera. And it's been a great way to collect additional information. It's actually something that we've always been doing when you write a review on the desktop. And so really, that is -- it's nothing new in and of itself.

It's just been now brought to mobile, and we're seeing very nice uptake there. We have quite a bit data from that. So we're happy with the performance of that. Your question was, are there other uses of both this and other data? I think the answer is absolutely yes.

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

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

And so I think that is part of the moat around Yelp is our ability to leverage all of this data that we've been gathering for, frankly, years and only have scratched the surface on. Really quickly to your Qype question and maybe Geoff could chime in here as well.

We actually are seeing quite a bit of lift across the board in Qype communities or formerly Qype communities after the integration. And so we're very pleased with both how traffic has performed, as well as contributions.

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

Yes, there's really nothing else to add there..

The next question is from Justin Post from Merrill Lynch..

A couple questions. First one, when you look at engagement, is the primary metric reviews per user? And are there other things that you look at and how are they trending? And then the second question, a little bit of controversy in the quarter on merchants maybe wanting to see reviews.

Do you have controversies like that in international countries? Or how do you look at those markets maybe being different than the U.S.?.

This is Geoff. I'll try with your first question around engagement metrics. There are a host of different engagement metrics that we've looked at internally over time. But I can't tell you that there's any one predominant metric that we find to be important.

Sure, reviews per user is interesting, but also what percent of months in a user's first year on Yelp they contribute or participate is interesting, the number of photos that they add, how often do they open a Yelp product or do a search. So there are a variety of ways that we might look at engagement.

Interestingly enough, at scale, what I would tell you is that engagement -- this engagement curves have looked pretty darn comparable over the years, even as we've grown so much and into new geographies. So there's no kind of big outlying anything specific, I guess, to share there.

As to the second question, Jeremy?.

Yes. To your second question on controversies surrounding reviews and have we seen anything internationally, I think with 57 million reviews on the site, there's bound to be some consternation over reviews, given that they are opinions, and business owners may not always agree with those opinions.

I think one thing to keep in mind is about 20% of our reviews on the site are negative, so the majority is neutral to positive. And so that negative review is far less frequent than you might imagine. Internationally, we do see complaints from time to time. And with the big rise in traffic, in Germany in particular.

We saw some uptick in noise in that market. But we actually do hear from time to time from just about every market that we're active in. And it's the same type of stuff that we see in the U.S., usually concerns over reviews. Some of which are reviews that fundamentally violate our review guidelines, and therefore, are removed by our team.

And then others is just difference of opinion. And I think that's just kind of the nature of the beast. That said, I think we have gotten better and better over time at communicating, how do we police the site and keep it at a level-playing field. We have our recommendation algorithm that recommends certain reviews and doesn't recommend others.

And it shows about 75% of content. And we found that while that does occasionally cause frustration for business owners, it's actually been an incredibly effective at keeping the site useful for consumers..

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

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

Could you provide any color -- more color on what some of those products or maybe what broad area you're thinking about? And then let me get to the idea on products and pricing for really local-targeted ads, which is essentially what Yelp is.

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

So could you talk about whether you think you have the products currently in place versus the next 5 years that would really help people realize the value of local leads? And whether or when you think you'll have the ability to turn that lever and maybe charge a little bit more for really hyper-local-targeted ads?.

Sure. So I'll take the first half of your question there around innovative products and what areas are we focused on. I'd say there's -- aside from continued international expansion, which maybe isn't necessarily new products but just new countries, there's 2 areas in particular that we've been looking at.

And one of these you probably heard in a number of previous calls, which is closing the loop with local businesses. And so that's a pretty broad area. But some of the stuff that we've done there, particularly recently, has been Yelp Platform, for example, where you can actually have transactions happening on the site.

We also purchased SeatMe and have integrated that -- from a consumer perspective, integrated that fully into Yelp. So you can book reservations right on the site. And then there's just more and more information that we could provide about leads that Yelp generates and pass on to local businesses in the business dashboard.

We talked about some demographic information that we just recently added to that dashboard. So if say a man in his 30s in Sausalito, California called your business, we can log that and show that to you in real-time.

And so I think we'll continue to roll out features in that direction of helping business owners understand the value that they're getting from Yelp and the value of their advertising. On the consumer side, one area that we're focused on is contributions and really engaging the community.

A feature that we -- I just talked about on an earlier question is new feature, where we're collecting information on mobile from users after they check in. That's just one example. But there are so many other ways that users can contribute to the site. We launched mobile reviews. That now comprises over 30% of our reviews contributed.

And so I think we're going to continue iterating in that direction as well, providing new ways for users to add content to Yelp..

Mark, this is Geoff. You also asked a question about kind of packaging, pricing of our ad products and kind of where we are today. Broadly speaking, we do sell ad products in sort of 3 rough categories today. One is sort of a pure self-serve ad product.

The second is kind of direct subscription pricing, which is sort of a flat rate product that includes both ads and enhanced profile features. And then third is this thing that we've talked about over the last couple of quarters that we call package CPC. That is really sort of a blend of the first 2.

You get effectively auction or bidded ads on a CPC basis, plus some of the enhanced profile features. Broadly speaking, what we're really shooting for here is more selection and better merchandising of these various package options, or so that every local business can buy whatever ad package makes most sense for them.

At the core of it, we're agnostic, we're happy to sell people advertising on a CPC basis or a CPM basis, on a flat rate basis, kind of whatever works for them.

And so I guess, to the sort of second inherent part of your question there, which was should mobile CPCs be higher? I think the reality there is it really depends, it depends on the situation and what's going on. I think we can all conjure up that use case.

If okay, if I'm looking for a cup of coffee and I'm 10 feet away from a store, then a higher price might make sense and should package that accordingly. On the other hand, if you're looking for a plumber, the value of that plumbing lead is probably the same, irrespective of where you're sitting or what platform you're using.

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

We have a question from Ron Josey from JMP Securities..

So a question on mobile here, given UVs, that uniques grew around 52%. I'm wondering if you can give a breakout between this mobile web and app. And I know the company and you all said that it's relatively agnostic where traffic is coming from.

But is there -- are you also focused at all on driving app usage? And if so, how? And then a quick follow-up, if possible..

Ron, this is Rob. So app was about 10.9 million in the quarter, so app users. And that's not downloads, to just be absolutely specific. That's actually people using our app. And then we had about 51 million, 52 million mobile web users..

And then on the -- how we're driving app usage side, I think that's our mobile product team. And so we're constantly rolling out new features that engage user base. In fact, we just rolled out to our Elite Squad a new feature, which is as of, I think, yesterday, mobile messaging.

So that's certainly -- that would have an engagement impact is one example. But also continuing on the theme of contributions, collecting more information from our passionate user base.

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

And so we're going to continue to push the app. We think it's a great experience. But frankly, if you go and use mobile web, it's basically all the same functionality. And in the last quarter, we are adding -- we did add an important contribution feature. You can now add photos from the mobile web.

And so the difference between the 2 experiences is becoming more and more narrow. And so there isn't really a strong preference either way. If you're a diehard Yelp user, we'll take you on the mobile web, we'll take you in the app or we'll even take you on desktop..

That's great, very helpful. And the quick follow-up is just with international revenue. I think it was around 3% of total, Rob.

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

Thanks, Ron. Yes, so I think to answer your question, it's really in the process of integrating the Qype customers and moving them over to Yelp. There were some customers that didn't come over, which is fine. They were selling a bit of a different product where they providing access versus advertising.

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

We have a question from Michael Purcell from Stifel..

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

I'm wondering if you could just help us understand or what do you attribute this to that you're able to maintain such a high level of growth in your older cohorts. And I'm wondering underneath that if that renewal rate of 75% -- I think that's the highest that you've given us.

Is that from within the cohorts? And is that helping the overall growth that you need?.

Michael, thanks for your question. This is Geoff. Thanks for noticing, too, those cohort growths continue to be pretty good. I think our oldest cohort grew revenue at 62% year-on-year in the latest period -- or 62% last time, 61% in this most recent quarter. I think the short answer to the question is just the TAM is really big in these markets.

And we can evaluate TAM in a whole bunch of different ways. When we look at census and whatnot, I think the numbers that we're coming back with are about 25 million local businesses in the U.S. and something like that again in the European and other Yelp markets.

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

We're not really doing anything specifically different, other than we just continue to branch out and acquire more consumers, which then enables us to reach out to more local business owners and offer ad products and whatnot. If there was a second part of your question, I'm afraid I missed it..

Well, I think you hit it out. It was just really if the renewal rates, if you're noticing that they are different versus the average platform.

As you've been in the markets longer, do the renewal rates -- are they better?.

Yes. There's nothing significant to kind of call out there that we've seen in recent period. Thanks, though..

Heath Terry from Goldman Sachs is online with a question..

I guess, Jeremy, could you give us an idea, is your ability to invest or your increasing ability to invest as margins improve and the business grows shortening the road map that you have for taking new markets from launch to scale to profitability, whether it's in newer international markets like Japan or even newer markets in the U.S.? And then second, Rob, what kind of uptake are you seeing on self-serve? Is there any sort of typical profile of business that's using that platform? Do they tend to be existing Yelp customers that migrate? Or are they new to the platform, smaller, larger, particular verticals where that's been particularly successful?.

Jeremy here. So I'll talk about international and our ability to invest there, whether or not the time line has changed. From my perspective, certainly, the product gets better and better. But I wouldn't say that our expectations have changed in any kind of dramatic fashion as far as how fast a given market can develop.

I think it still takes a period of years. That said, we do see market-to-market variation. And there's a lot of factors that go into that. It could be that the particular culture is very excited about American Internet products coming versus other markets that are maybe more skeptical or skittish.

Like we've seen slower development and faster development, and we've often kind of tried to draw up theories explaining what is the difference. And so we come up with ideas like that. But we don't really have a definitive answer for why does one market grow a little bit slower than the others.

But the good news is, on the whole, all of the markets do grow and grow at a rate that we're pretty happy with. And so we feel good about international expansion and continuing to invest heavily there and roll out new markets..

This is Geoff, your second question was about the self-serve products that we offer and who are those customers. You actually asked, are those customers who might have been full serve customers and then move over to self-serve, I'd say that's actually the exception to the rule.

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

And as that starts to work for them, they're very likely to actually speak to a sales or account representative here at Yelp and then actually upgrade to kind of more of our full-service offering and take advantage of having an account manager and whatnot. It could go the other direction, but that would be much rarer..

Brian Fitzgerald from Jefferies is online with a question..

Two quick clarifications. With regard to the YP deal, is that -- I assume that's nonexclusive, so you can do something similar with Dex. And then as you're looking at Qype, as you moved over to the Yelp model, you inherently added in a performance component, so that should raise pricing.

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

Okay, thanks. This is Geoff again. So on the first question, you asked about YP. We haven't shared specific terms on that deal. We do have other relationships with other reselling agents out there. But I wouldn't want to go into any specifics about the YP deal or how that's going to work in detail. I think you also asked a question around Qype pricing.

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

So now that we're offering Yelp pricing, it is true that I think if you were to look at revenue per customer of a Yelp client versus a Qype client, it would certainly be higher. But frankly, it's a totally different package that we're offering today and it's almost not real relevant to compare the 2..

We have Peter Stabler from Wells Fargo..

So going back to the topic of self-serve. When we on-boarded a local business a month or so ago, we felt like we were kind of pushed towards the self-serve and nowhere in the process -- which was pretty easy and really easy, by the way, nowhere in the process did we ever really get an understanding of the impression bundles that were available.

And we had kind of kept an eye out, whether we'd get a menu of different offering. It just -- it really felt like we were pushed to self-serve. So I guess, my question is can you talk a little bit about the education process. Geoff, I think you just spoke a little bit about the discovery, how small businesses are discovering different ways.

But can you help us understand like the proactive education process, the different options that a small business has when they're on-boarding and claiming their business for the first time. Hope that made sense..

It did, and thanks for teeing that up. I guess, there are 2 pieces of good news in there. One is that you found it easy to self-provision, so I'm glad you tried and I'm glad it went well.

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

And this is what I was alluding to when I talked about our need for better selection in merchandising in the on-boarding process, a little bit earlier to Mark's question. I think, frankly, we're just at the beginning of this. We rolled out self-serve advertising a couple of years ago now as kind of this entry point.

And until this point, although we've done a whole host of things, we haven't done a great job of making that selection in merchandising easy for the local business owner. So I think there's actually quite a bit of upside in just doing that better in the months and years to come.

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

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

A little bit earlier you mentioned being sort of agnostic to pricing models. And I was just curious if you've given any consideration to charging for specific engagements, like directions or actually charging for calls to businesses, that kind of line of thinking..

Gene, it's Geoff again. We have. We certainly considered those pricing possibilities. We do offer pay per call pricing in some situations, and that's a small but interesting part of the business. I think pricing on things like Call to Action engagement, other kinds of leads, clicks for directions and whatnot, those are all possibilities in the future.

As we've talked to local business owners and sort of done the math on this point, I don't think that's very low-hanging fruit. I think between sort of our subscription impression-based bundles and CPC, we're going to capture kind of the majority of the market interest as it exists today.

But there's other kinds of pricing options, I think, are out there in the future and certainly will be things we'll explore as we get more interest from the marketplace..

Rob Sanderson from MKM Partners is online with the question..

A couple also related to the cohort analysis. Very strong growth again in each of the cohorts. But I guess, depending on our assumptions for brand and other in the guidance, it looks like you see a pretty sharp deceleration in local ad sales. I'm just wondering what might be contributing to that.

And second question is I believe the Deals are still sort of opt-in product, not really sold direct by sales force.

Why not push harder on the deal's opportunity?.

Rob, so yes, so we did see great growth in the cohorts, still pretty phenomenal, fairly flat to last quarter, and that was a 60-plus percent and 70-plus percent for the second cohort and then still over 100% for the third one. In terms of, I guess, the assumption that you'd have to make, obviously, you'd have to make those.

We didn't give any specific guidance around the breakdown. But you can -- what we feel like is that the local revenue line item is growing quite fast, and we feel good about that. As far as brand, what we've seen at least in the past is Q2 and Q3 are fairly flat.

And then obviously, you have a Q4 bump because of the seasonality of that particular line item. For other revenue, if you maybe remember back, Q2 of last year, we signed a couple of deals, whereby I think it was Locu and SinglePlatform. That bumped that line item up quite a bit.

And so -- and that's been fairly steady, maybe a little uptick on a quarter-over-quarter basis. So I don't know that, that grows significantly over the next few quarters given what I just said. So hopefully that helps you look at the 3 individual line items..

Yes, and you also asked about Yelp Deals and you're right that, that's primarily a self-provision or self-serve product today. We have experimented with the sales force outreaching specifically on Deals in the past.

And while that's been okay, frankly, the economics for us and, therefore, our sales force have been better when we've just offered primarily lead with the ad products at this point. So we mentioned the Yelp Deals offering, and then customers can go in and self-provision for that component if they want to.

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

I will now turn the call back for final remarks..

Okay thanks, everyone, for joining us for the first quarter of 2014 call. We look forward to updating you on the next call. Thanks..

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect..