UPDATE 2-Yelp's business account growth falls short of expectations

Wed Jul 30, 2014 6:40pm EDT

(Adds analyst comment, updates share movement)

By Lehar Maan

July 30 (Reuters) - Yelp Inc, the operator of consumer review website Yelp.com, reported its first quarterly profit as a public company, shrugging of analyst forecasts of a loss as small business customers spent more on advertising.

Yelp shares fell as much as 3 percent in extended trading, before recovering most of the lost ground.

"One thing a little softer than expected was active local business accounts. They increased about 5,900 sequentially, we were looking closer to about 7,700 merchant heads," Raymond James analyst Aaron Kessler said.

Local business accounts grew 55 percent to about 79.9 thousand in the quarter, Yelp said in its earnings statement.

Yelp has devised advertising deals to lure more businesses to its site and launched new features to draw more users.

Kessler said expansion of the company's search product could help if more advertisers adopt cost-per-click (CPC) products.

A business subscribing to Yelp's CPC product pays only when a user clicks on the advertising.

The company forecast revenue of $98 million to $99 million. Analysts had expected revenue of $95.4 million, according to Thomson Reuters I/B/E/S.

Yelp, which listed almost three years ago, competes with internet search engines from Google Inc, Yahoo Inc and Microsoft Corp's Bing.

It has expanded into restaurant bookings, event management and payments, including signing an advertising deal with YP.Com last quarter to gain access to a bigger pool of business owners. YP.Com is based on the old Yellow Pages phone directories.

Yelp bought SeatMe Inc last year to compete better with restaurant booking site OpenTable Inc.

Along with a stronger position in its primary market, North America, Yelp is looking to expand internationally.

It has launched services in Mexico and Japan and entered Germany by buying Qype in 2012.

The company reported net income of $2.7 million, or 4 cents per share, in the second quarter ended June 30, compared with a loss of $878,000, or 1 cent per share, a year earlier.

Revenue rose 61.4 percent to $88.8 million.

Analysts on average had expected a loss of 3 cents per share on revenue of $86.3 million.

Shares of the company fell as low as $73.37 in extended trading, having closed at $75.60 on the New York Stock Exchange.

Shares of the company have risen about 30 percent since the company last reported results in April. (Reporting By Lehar Maan in Bangalore; Editing by Don Sebastian)

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