Yelp (NYSE:YELP) is doing a great job mixing social components with local business data to form the online yellow pages. The localized search platform is increasingly becoming more social, with thriving user engagement and strong web traffic levels. Yelp's monthly visitor count is growing at a rapid pace and will aid the company substantially in competing with other social platforms like Facebook (NASDAQ:FB) and TripAdvisor (NASDAQ:TRIP)

Stellar metrics across the board
Yelp's web traffic reached record-high levels of 117 million monthly visitors at the end of the last quarter, a 41% year-over-year increase. Yelp's social platform contributes heavily in the form of reviews, as total reviews increased 42% to 47.3 million. 

Yelp's users are increasingly engaged and interact with each other, making the platform similar to Facebook. Yelp's mobile footing is phenomenal, with more than 62% of searches coming from mobile devices. On a monthly basis, Yelp is accessed on more than 11.2 million mobile devices. The company added a new feature that enables users to write reviews from mobile devices, which should further bolster the platform's total content.

The company is also signing up a lot of local businesses as paying advertisers. Last quarter, Yelp's active local business accounts surged 61% to 57,200. There are more than 1.3 million businesses listed on Yelp's platform, so there's good potential to turn a decent number of them into paying customer customers, considering the current penetration rate is roughly 4.4%.  

Solid growth story
Yelp is doing well, in spite of operating in a reasonably crowded social and local space. The world's largest online travel information platform, TripAdvisor has been growing across the board. TripAdvisor's user traffic and user-generated content are increasing at healthy and sustainable levels. At the end of 2013, TripAdvisor had more than 260 million monthly visitors and more than 125 million reviews from more than 200 countries

On a similar note, Facebook has enabled users to post reviews and rate local businesses on its platform. Considering that Facebook has 1.2 billion users, this might be a competitive threat for Yelp. But, Yelp has evolved into a social network of its own, and the network effects will yield great results for the company. 

In the last quarter, Yelp's revenue grew a stellar 68% year-over-year to $61.2 million. However, Yelp is still sitting on an operating loss as the company focuses on building its business. The company's adjusted EBITDA stood at $8.1 million and the company's operating cash flow stood at $12.1 million, and had a net loss of $0.04 per share in the last quarter.

Yelp is on the brink of turning out its first profit in the next quarter or two, and investors are particularly excited about the company's position on mobile devices and international expansion. In the last quarter, 46% of local ads were shown on mobile devices. As more consumers shift  web usage to mobile, Yelp's fortunes should improve and also Yelp generates only 5% of its total revenues from the International market.

Newer business lines and markets
Yelp is pretty much a growth story on local advertising, as the company generates roughly 84% of its sales from local advertising. However, the company has a lot of growth room from brand advertising and other services as well. Last quarter, local advertising revenue grew 80% year-over-year to $51.2 million and brand advertising grew 17% to $6.9 million. Revenue from other services stood at $3.1 million, a 55% increase.

Earlier in 2013, Yelp launched Yelp Platform, which enables consumers to directly submit orders and engage in other transactions with merchants. Yelp also acquired a mobile-based restaurant and night life reservation system called SeatMe, which will enable the company to build a better experience for its consumers by allowing customers to make reservations.

Yelp is expanding rapidly worldwide, as the company launched in five new cities, bringing the total number of Yelp markets to 111. Yelp launched in Brazil and integrated some of the markets from its Qype acquisition, including France and UK sites, and plans to integrate Qype's biggest market, Germany, in the near future.

In the holiday quarter, it launched in Portugal as well. Yelp's investment phase should go on for a while, as the company is focused on growing its business lines and gaining mass in newer markets. Yelp can grow its top line in the high double-digits for the foreseeable future due to expansions in newer territories.

Going forward
For the holiday quarter, Yelp's management guided to revenue of $66 million-$67 million, which implies a growth rate of 62% and the company's adjusted EBITDA is expected to be $9 million-$10 million. Yelp even did a follow-on offering to tap into the bullish equity market to bolster its cash balance to the tune of $289 million by issuing 4.3 million shares at $67 apiece.

Yelp's focus remains on ramping up its mobile usage, expanding across newer markets, and monetizing local businesses. Yelp's CEO stated that in the last quarter, roughly 25% of new reviews came from mobile devices. Yelp's international expansion is also bearing fruit. Last quarter, 18% of user traffic and 8% of reviews came from outside the U.S.

Yelp has evolved into a great database for reviewing businesses by taking the public opinion. The company is more than just an Internet version of the yellow pages. Yelp's penetration rate among potential advertisers is very low and should bear a lot of fruit in the future. In the long run, Yelp is a great bet in the local and social space.

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Ishfaque Faruk owns shares of Facebook. The Motley Fool recommends Facebook, TripAdvisor, and Yelp. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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