Yelp has reported some truly impressive earnings. But that doesn't mean bulls aren't getting well ahead of themselves.
Yelp reported a 1-cent-per-share loss on earnings for the second quarter, which doesn't sound great but did beat expectations of a 4-cent loss. The company's revenue came in at $55 million, up from the $46.1 million that Yelp logged in the prior quarter.
The company managed to pull in a significant amount of new traffic due to its acquisition of internationally focused Qype. This helped Yelp to launch its service in six new markets. And Yelp showed positive growth across the board in categories like mobile and global, as well as in the number of user reviews. All of this has enabled Yelp to take a leading position in the industry, in which it competes with Zagat, OpenTable and Angie's List.
A recent study by the Boston Consulting Group gets to the bottom line of why Yelp could end up being highly valuable. The study found that small businesses that have a free presence on Yelp saw an annual increase in revenue by $8,000 on average. Local businesses that paid for advertisement on Yelp (costing an average of $4,200/year) saw an annual increase in revenue by $23,000 on average. Some segments performed even better than that; for instance, home services saw an increase in annual revenue of $54,000.