Shares of Yelp rose 10% in after hours trading Wednesday evening after the company reported strong top-line growth in Q1 2013. The reviews site grew its revenue by 67% year-over-year to $46.1 million in Q1, cutting its net loss in half to $4.8 million from $9.8 million a year earlier. The bump came on the back of a 81% jump revenue from local businesses as well as successful monetization efforts in nascent international markets.
Channeling Google’s strategy with Enhanced Campaigns, the company has managed to weather the shift to mobile without an impact on its top line. By bundling its app, mobile web, and desktop impressions, which come as a part of the company’s monthly and annual subscription, Yelp can monetize the roughly one third of users who visit on a mobile device without seeing a drop in revenue.
In the first quarter, 35% of all local ads were placed on a mobile device, up from 25% a quarter earlier, according to the company’s earnings release.
During an earnings call Wednesday, the company’s chief financial officer Rob Krolik said that the user shift to mobile might actually benefit the company, given the higher conversion rates on mobile: “We’re platform indifferent and the fact that the matter is that as we get more mobile users, we’re actually in a better spot given click through rates and what not.”
Outside of its integration with OpenTable, Yelp has not made much of an effort to push deeper into the transaction loop with a commerce product. Although the company does have plans to offer performance pricing, Krolik said that Yelp is investing in new metrics to help better measure return on investment for merchants that will roll out over the coming year.
The reviews site has spent the bulk of its capital in expanding geographically since its IPO last year, acquiring its largest European competitor in Qype and investing heavily in marketing to grow its audiences in new markets. International revenues ticked up from 6% to 7% from the quarter earlier, and Jeremy Stoppelman, the company’s chief executive, said Yelp has plans to increase its sales presence in London and Hamburg, as well as open offices in other European markets.
As the company focuses on scaling its business, however, it faces a number of new threats that could potentially undermine its long-term position among users. Facebook has accelerated its push into local discovery with the launch of Graph Search and Nearby, and the social network has started to invest in building out its local business segment. Meanwhile, Foursquare is openly gunning for Yelp, although the struggling startup still does not have the scale to pose an immediate threat.
The content-centric approach, on which Yelp has built its business, will likely continue to dominate user discovery for some time, but the company lacks the the data structure to compete with Facebook and Foursquare from a merchant perspective. Without the ability to measure user activity (since identity is not a big part of the platform), and a notoriously inconsistent place database, the company lacks some of the assets that will be critical to hyperlocal advertising on mobile moving forward.
Steven Jacobs is deputy editor at Street Fight.
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