Yelp Shareholders Should See Rewards Of European Expansion

| About: Yelp (YELP)

Earlier today, review company Yelp (NYSE:YELP) announced it would be acquiring its European rival Qype. The acquisition gives Yelp control of Europe's largest local reviews site. Qype is headquartered in Germany, and it appears the review site's strong presence in Germany and the United Kingdom are what Yelp was after. Yelp will be spending 18.6 million Euros and 970,000 shares on the acquisition, putting a price tag at somewhere around $50 million.

The deal immediately gives Yelp a huge review base in Europe. Qype had operations in 13 countries prior to the acquisition. Here is a list of countries Yelp was in prior to the deal:

· Australia

· Austria

· Belgium

· Canada

· Denmark

· Finland

· France

· Germany

· Ireland

· Italy

· Norway

· Poland

· Singapore

· Spain

· Sweden

· Switzerland

· The Netherlands

· United Kingdom

In 2012 since becoming a public company, Yelp has entered new markets including: Singapore, Poland, Finland, Denmark, and Sweden. The deal with Qype now allows Yelp an entry into countries it wasn't in, and a greater focus on previous markets. Yelp's strategy is to enter one huge market in each new country with Stockholm, Sweden and Copenhagen, Denmark as examples. Qype has a huge database of users and reviews that are the reason Yelp made the deal. Yelp also cuts out their biggest rival company and can now directly take on search and review giants like Google (NASDAQ:GOOG), and Yahoo (NASDAQ:YHOO).

Qype also has a deals site called Qypedeals. The site is a Groupon (NASDAQ:GRPN) style deals site that has offers locked in once a certain number of users claim the deal. The integration of this technology with Yelp's strong American base could hurt Groupon going forward. Shareholders should be excited about the company expanding into a deals site.

Along with the news of the acquisition, Yelp announced third quarter revenue was $36.4 million. Analysts on Yahoo Finance were predicting the company would report $35.8 million in revenue. The company's net loss for the quarter was $2.0 million.

Yelp saw 78.3 million unique visitors in the second quarter. The company reached a cumulative 30.3 million reviews at the end of the second quarter. Yelp continues to expand its mobile presence with apps that integrate the ability to call businesses directly and receive coupons on their phone.

On November 1st, Yelp will report full details of third quarter earnings. During that announcement, the company will also update fourth quarter guidance. Analysts on Yahoo Finance see the company posting a loss of $0.31 per share in 2012 on $136.24 million in revenue. The following year, analysts hope the company will post a profit of $0.05 from $201.09 million in revenue. The 2013 numbers will likely see increases, depending on when the acquisition closes. The time to get behind Yelp is now, with shares ready to breakout. The company has huge growth ahead as its American and international presence grows. New entries into daily deals could also propel revenue numbers for the company.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.