5 Things Yelp Inc.'s Management Wants You to Know

By Markets Fool.com

The last week has not been kind to Yelp shareholders.

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In the wake of its fourth quarter earnings report, Yelp shares have lost about one-quarter of their value. Although the online business review giant posted better-than-expected earnings and revenue, growth metrics suggested a slowdown in Yelp's business.

But management remains confident. In its quarterly earnings call, Yelp's C-suite offered up a number of key points about the firm. Below are five of the most important quotes from that call.

Yelp is growing internationally
Yelp is increasingly a global company, and management is committed to growing its reach. During the earnings call, Yelp's CEO, Jeremy Stoppelman, noted Yelp's international progress.

"[We] brought Yelp to 5 new countries in 2014 ... [we had] active communities in 29 countries around the world [at the end of the year] ... we added approximately 2 million international reviews in 2014."

Yelp's domestic business still has potential, but its international ambitions remain in their infancy -- in the fourth quarter, international revenue made up only 3% of Yelp's total revenue.

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Traffic slowdown is seasonal
Yelp remains a somewhat speculative venture, and its shares have been prone to wild swings since its public debut. It's hard to blame the recent pull-back on any particular factor, but the biggest contributor may have been the decline in visitor growth. Yelp's CFO Robert Krolik addressed the slowdown during the call, blaming it on seasonality.

"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."

In the fourth quarter, Yelp's monthly unique visitors rose 13% on an annual basis, down from 37% growth in the same quarter last year. According to Krolik, investors should expect a return to growth next quarter.

Most people still don't know about Yelp
To technology investors, or tech enthusiasts in general, Yelp may appear to be an established brand. But according to the company's Chief Operating Officer, Geoff Donaker, the average person still isn't familiar with Yelp.

"Today we only stand at 26% unaided brand awareness, which just seems shockingly small in the online consumer adult population."

Brand awareness is a measure of consumer familiarity with a given brand. Marketers use a variety of surveys to test both aided and unaided brand awareness, with unaided brand awareness offering up the strongest measure of brand strength. A marketer, for example, might ask a consumer which websites they use to find local restaurants. If they say "Yelp," that's an example of unaided brand awareness. In contrast, gauging aided brand awareness would involve mentioning Yelp explicitly -- the same marketer might ask a consumer if they use Yelp on a regular basis, for example.

Low brand awareness might be grounds for negativity, but it also suggests that Yelp still has much growth potential.

The business is increasing mobile
Consistent with other Internet-based companies, Yelp is seeing a shift of its business to mobile. Stoppelman addressed the transition during the call.

"We're kind of at peak desktop more or less. And so users are going to mobile ... mobile is at 37% year-over-year and so we're feeling pretty good about that ... It's all about what's happening on mobile."

Rather than find Yelp reviews through a desktop search, Yelp users are increasingly turning to the mobile app. That should benefit Yelp in the long-run, as the use of its app may drive further engagement.

Yelp's margins
Yelp's EBITDA adjusted margin last quarter was nearly 22%, but according to Krolik, the company has only scratched the surface.

"We ... believe that we can achieve long-term adjusted EBITDA margins of 35% to 40% ... we don't really have a specific year [that we plan to hit those targets] ... what we do have is a lot of confidence that we can get there."

Yelp's margin has improved significantly over time, but is still far removed from the company's long-term goals. Two years ago, for example, its fourth quarter adjusted EBITDA margin was less than 5%. If it's margin continues to improve, and its revenue continues to surge, Yelp should reward sharehodlers.

The article 5 Things Yelp Inc.'s Management Wants You to Know originally appeared on Fool.com.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Yelp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.