A fifth of Yelp's value was just wiped out on disastrous results because of Google

Key Points
  • Yelp shares fall more than 20 percent
  • The company reported mixed earnings after the bell on Tuesday.
  • Wall Street is disappointed with Yelp's outlook for the rest of 2017.
Matt Nighswander | NBC News

Shares of Yelp lost one-fifth of their value Wednesday, a day after the company reported weaker-than-expected sales growth and gave an outlook with little sign of improvement.

The stock closed down 18 percent Wednesday morning.

After Tuesday's closing bell, the online review company posted an adjusted loss of 6 cents per share on revenue of $197.3 million in the first quarter. The loss was narrower than the 8 cents per share loss expected by a Thomson Reuters consensus estimate — but revenue fell short of the $198.3 million expected.

The lower-than-expected revenue will likely drag on, too, the company said, forecasting second-quarter revenues of $202 million to $206 million, and full-year revenues of $850 million to $865 million. That's well below the second quarter estimate of $215 million, and the full-year revenue of $889 million forecast by Thomson Reuters consensus.

Yelp said it has reduced its sales and adjusted earnings outlooks because of weak ad trends. The majority of Yelp's revenue — $177 million of $197.3 million — comes from advertising.

Meanwhile, tech companies Google — owned by Alphabet — and Facebook are holding onto a larger share of the ad market, and competition is stiffening with consumers turning to social media, instead of a traditional model like Yelp, to post and read reviews.

"In terms of our go-to-market strategy and, ultimately, we're not happy with either what happened in the fourth quarter on the sales productivity side nor what happened on the churn bump during January and February of the first quarter," Yelp Chief Operating Officer Jed Nachman said on the earnings conference call.

As of Wednesday's close, shares of Yelp were down 25 percent this year but had been up 7 percent over the past 12 months.

YELP 1-year performance 

—CNBC's Anita Balakrishnan contributed to this report.

Read: Yelp reports first-quarter earnings