Yelp Pays $50 Million To Acquire Its Big European Rival Qype

| About: Yelp (YELP)

By Ingrid Lunden

qype logo

This just in: online recommendations and listings site Yelp (NYSE:YELP) is stepping up its international push and buying its biggest rival in Europe, Qype. It will pay €18.6 million for all of Qype's shares and is adding another 970,000 shares of Yelp's Class A common stock, for a total purchase price of approximately $50 million. Qype is headquartered in Germany, with operations across Europe. Combined, the two will have a service covering some 93 million monthly unique visitors and 32 million reviews, Yelp's CEO Jeremy Stoppelman noted in a blog post. That should help Yelp compete better against the likes of Google (NASDAQ:GOOG), which combines its search, listings, user feedback and maps into a powerful product to rival that of Yelp's.

At the same time, Yelp offered some updated guidance on its third quarter performance. It looks like it will still be doing better than it had originally said it would be, with revenue exceeding its forecasts made in August. It says that revenues will be $36.4 million, and while it will be still making a net loss - Yelp says it expects it to be $2 million - it's coming down by quite a bit from the $3.8 million net loss for the same quarter a year ago. The company will be publishing its Q3 results on November 1.

"I am excited to welcome Qype's employees and users to Yelp. We have built a solid foundation in Europe and this acquisition should significantly increase our international presence. With its strong local content in key markets like Germany and the United Kingdom, we believe that Qype will help Yelp become the de facto choice for local search in those markets," said Jeremy Stoppelman, Yelp co-founder and chief executive officer, in a statement. "Qype's established European sales force will also bring more local business owners into the Yelp ecosystem, which in turn will bolster our mission to connect people with great local businesses all over the world."

"Established European sales force" might be a bit of an understatement: Qype has long been a competitive thorn in Yelp's side. In May of this year, Qype officially became bigger than Yelp in terms of listings size in Europe, claiming 860,000 places reviewed in its database. That number is now even bigger: two million reviews and 15 million unique visitors per month across 13 countries.

Qype also has been looking at ways of diversifying its model, by introducing (yes) daily deals in the form of QypeDeals. And advertising on the site, Qype CEO Ian Brotherson told me in May, had grown 500% since last year.

Mobile is also increasingly playing a role. In May, Brotherson said mobile contributed one-quarter of revenues, with its apps installed on six times as many devices as Yelp has in Europe (in May, Qype's install number was four million). Some 30 percent of reviews are written from mobile devices.

Yelp, while definitely investing in its European growth, has not been able to keep up the pace, in some cases coming much too late to markets where Qype had already carved out a presence. And at the same time Qype hasn't taken its service too far beyond its region, so its growth prospects as a standalone company would have been limited.

And, in the end, that may be the main reason that Yelp had to take Qype out. With companies like Groupon and Yelp, relying as they do on mass take up of their services in order to work as they were built to work, if they don't get their foot in the door very early on, inorganic growth (that is, through acquisitions) is often their only option.

Before this acquisition, Qype had raised some $22.5 million from investors including Advent Venture Partners, Wellington Partners and Partech International.

Original post