Yelp Inc. shares fell to their lowest level in two years on
Wednesday after the reviews site cut its revenue guidance for the
year, reigniting concerns about its ability to grow.
San Francisco-based Yelp on Tuesday lowered its revenue guidance
by about 5% to a range of $544 million to $550 million. The company
also said it would cut its branded-advertising product, which had
struggled in recent quarters as people shift away from traditional
display ads to performance-based advertising products.
Shares of Yelp fell as much as 29% in morning trading Wednesday,
erasing more than $700 million from its market value. More
recently, shares were down 28% to $24.07 a share. Yelp's stock
peaked at $101.75 a share in March 2014.
On top of the revenue-guidance cut, which Yelp attributed to
slower growth in salesforce hiring and the phasing out of brand
advertising, some analysts were discouraged by Yelp's traffic in
the second quarter.
Traffic growth has been a concern for investors lately, and the
company said in April that it would stop providing total monthly
unique visitors, focusing instead on desktop and mobile monthly
unique visitors.
The company said Tuesday that monthly mobile unique visitors
rose 22% in the second quarter from the prior year, to about 83
million, on a monthly average basis. Still, that represented a
slowdown from the 29% year-over-year increase in users it posted in
the first quarter and its 37% increase from the fourth quarter.
In a note, Northland Capital Markets analysts said decelerating
user growth could drive the company to spend more on marketing.
Yelp started in 2004 after former PayPal executives Jeremy
Stoppelman and Russ Simmons devised a local website to replace
word-of-mouth recommendations. With a $1 million investment from
Mr. Levchin, a PayPal co-founder, Yelp quickly spread to new
markets and drew a community of contributors.
Yelp relies on Google's search engine for more than half its
online visitors. That reliance has created tension between the two
companies over the years, especially as Google has pushed further
into its own listings for restaurants and other local points of
interest.
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