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Yelp Inc  (NYSE:YELP)
Q3 2018 Earnings Conference Call
Nov. 08, 2018, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and thank you for your patience. Welcome to the Q3 2018 Yelp Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference may be recorded.

I would now like to turn the call over to your host, Head of Investor Relations. Ronald Clark. Sir, you may begin.

Ronald Clark -- Head of Investor Relations

Good afternoon, everyone, and thanks for joining us on Yelp's third quarter earnings conference call. Joining me today are CEO, Jeremy Stoppelman; our CFO, Lanny Baker; and our COO, Jed Nachman. Before we begin, I'll read our Safe Harbor statement.

We'll will make certain statements today that are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.

In addition, we are subject to a number of risks that may significantly impact our business and financial results. Please refer to our SEC filings, as well as our shareholder letter for a more detailed description of the risk factors that may affect our results. During our call today, we will discuss adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures, in our Shareholder Letter released this afternoon and our filings with the SEC, each of which is posted on our website. You will find additional disclosures regarding these non-GAAP financial measures as well as historical reconciliations of GAAP net income to adjusted EBITDA and GAAP net income margin to adjusted EBITDA margin.

Finally, an announcement on our earnings process. As we have previously disclosed, we may make future announcements of material, financial and other information through our Investor Relations website at www.yelp-ir.com. Beginning in 2019, we intend to announce our financial results on our IR website, while we plan to continue to issue press releases announcing the results have been posted, our IR website will serve as our Regulation FD compliance location.

And with that, I'll turn the call over to Jeremy.

Jeremy Stoppelman -- CEO

Welcome and thank you for joining Yelp's third quarter conference call. I hope you've had a chance to read the Shareholder Letter published earlier today. During the third quarter, we experienced a handful of operational issues in our local advertising business that impacted productivity. As a result, revenue for the quarter was below our outlook range. We believe the majority of these issues were internal and operational, and we have begun to take steps to address our underlying causes.

However, the near-term impact was lower than expected net account additions in the third quarter, reduces our outlook for revenue and adjusted EBITDA in the fourth quarter. While we are disappointed with these results, we are optimistic about the strategic initiatives we have planned for 2019. Yelp's brand in consumer audience are strong. In the third quarter, monthly average mobile unique devices grew by 2 million quarter-to-quarter and 4 million year-to-year. The shift in non-term contracts has opened the local sales funnel and offering businesses more control over the Yelp advertising is benefiting customer engagement.

Churn under non-term contracts has been consistent with our expectations, thus far, and we are focused on the sizable opportunity to convert and retain more of the local advertisers who are engaging with our ad platform. Growth in our self-serve, national and third-party sales channels has begun to diversify Yelp's go-to-market strategy. We plan to lean into these areas shifting beyond local sales headcount is the primary input to revenue growth. We expect the steps we're taking today to drive double-digit revenue growth in 2 percentage point to 3 percentage point of improvements in adjusted EBITDA margins in 2019, with further gains in profitability as we grow beyond next year.

We plan to share more detail about our 2019 plans and financial expectations when we provide our 2019 outlook.

Now, I'll turn it over to Lanny for some additional detail on our results.

Douglas Till Anmuth -- JP Morgan Chase & Co, Research Division -- Analyst

Thanks, Jeremy. Before we open the line for your questions, I want to add color to Jeremy's comments. Total revenue for the third quarter came in below our outlook due to fewer new customer additions and lower local ad revenue than we anticipated. Paying advertising accounts for the third quarter were $194,000 flat with the second quarter, we do not believe that there was any one single factor behind the new sales shortfall relative to our expectations.

Instead, a number of smaller compounding issues arose, including slower-than-expected sales headcount growth, a change in advertising promotions, a technical issue in flowing leads to our reps and a lower success rate in contacting business decision makers by outbound sales calls. These execution challenges that we experienced in the third quarter were generally similar to things we've experienced from time-to-time in the past and then both their size and their nature.

However, the impact of issues like the ones I just mentioned, when encountered in the pasts, typically would have been stretched out over the course of the ensuing year based on our annual contract model. With more of our quarterly revenue coming from within the same period after making the transition to non-term advertising, variations in sales productivity and account growth could have greater near-term impacts.

On the customer conversion and retention side, the shift to non-term advertising has introduced new customer behaviors including a greater number of trial purchases and on and off spending patterns. Churn rates as we've traditionally measured them have therefore been higher in the early months under the non-term structure.

However, non-term conversion and retention trends in the third quarter remained consistent with our expectations and in line with the second quarter results. While the number of paying advertising accounts for the quarter was flat quarter-to-quarter, the number of repeating advertisers grew by 5,000 to 6,000 from the second quarter to the third quarter. We expect to resume growth in net paying advertising accounts in the future. However, the lack of growth in that accounts at the end of the third quarter, means that we now expect fourth quarter advertising revenue to be roughly even with third quarter ad revenue, and this has reflected in the revised business outlook.

As presented in the Shareholder Letter, we revised our full year outlook range for revenue to $938 million to $942 million. At the midpoint of that range, that is $20 million below our prior outlook. Reflecting the revenue shortfall in the third quarter, as well as a 5% to 8% reduction in our revenue expectations for the fourth quarter of 2018.

Our outlook range for the fourth quarter revenue is $239 million to $243 million, which at the midpoint of the range would represent 10% revenue growth over the fourth quarter of 2017. The fourth quarter and full year revenue outlook reflect the developments and trends in local advertising that we've just discussed, and our expectations for the rest of our business remain consistent with our prior views.

That brings me to adjusted EBITDA. Our new outlook for the year is $178 million to $180 million in adjusted EBITDA, which at the midpoint is $10 million lower than our prior outlook for adjusted EBITDA, and would represent a 19% adjusted EBITDA margin for the full year 2018. Our fourth quarter adjusted EBITDA outlook range is $48 million to %50 million.

Finally, and thinking about next year, I'd like to make a couple of points. We plan to continue to diversify our go-to-market, as Jeremy described, and there are two primary objectives there. To expand our reach to more of the local market opportunity and a lower selling costs and drive profit margins for the Company. We do not plan to grow the local sales headcount at the 20% plus rates we maintained in the past in the coming year. And we're planning to prioritize product, marketing, self-serve, national, and channel partners to drive more of our revenue growth going forward. We anticipate that revenue growth will be in the double-digit percentages in 2019 versus 2018, with adjusted EBITDA margins moving up by 2 percentage points to 3 percentage points year-over-year.

And with that, let's open the call up for your questions.

Questions and Answers:

Operator

Thanks. (Operator Instructions) Our first question comes from the line of Douglas Anmuth of JP Morgan. Your line is open.

Douglas Till Anmuth -- JP Morgan Chase & Co, Research Division -- Analyst

Thanks for taking the question. So you guys laid out a bunch of different issues. Just related to kind of internal execution around 3Q and into 4Q performance. But, obviously, we've seen this multiple times over the last few years. So just curious, if you can talk about whether you think there is anything more external exogenous going on in terms of competitive issues or more specifically around consumer engagement as well? Or anything else you can point out structurally? Thanks.

Jed Nachman -- Chief Operating Officer

Sure. Hi, Doug, this is Jed. Short answer is no. We don't believe there are any external factors that fundamentally change Yelp's position in the marketplace. During the first half of the year, productivity -- momentum was really strong and we anticipated that to continue throughout Q3 when, in fact, it slowed down. We saw degradation in the volume of accounts that we were able to add due to some really short term operational issues that had near-term impact. Those just to repeat from for the letter number one, lower than anticipated headcount. We saw more movement out of the local sales rose from veteran reps, who had a harder time than anticipated moving to the non-term contract model, and slight headwinds in the hiring environment. We're through that transition period, and remain on track for the 2018 headcount plan. Number two, changes in our promotional strategy. We moved from the majority of promotions, being a flat upfront credit to a bonus as a dollar-for-dollar structure. These deals have a higher lifetime value, but affected starts volume. We're now through that transition and expect to be on more of an apples-to-apples basis moving forward. The third technical issue that we referenced was specifically the way in which new business additions to Yelp were being captured and delivered to the reps and sales force. These new business additions have a high propensity to buy and cause a drag on production during the quarter, until we identify the cause and took the appropriate actions to fix. We were able to fix this issue in short order after it was identified. And then finally, the fourth one, lower success rate in reaching local business decision makers through outbound sales calls, we're in the process of working through alternative ways to reach local business owners, who are not as receptive to phone calls, as they have been in the past. These include more extensive and targeted use of email, SMS, in-app notification. So we believe we're on the right track there. So the majority of these issues are within our control and have either already been addressed or are in the process of being worked through right now. But as we said, there will be a follow-on effect for Q4 and those have been reflected in the outlook.

Douglas Till Anmuth -- JP Morgan Chase & Co, Research Division -- Analyst

Okay. And just to follow-up quickly, Lanny, anymore color on kind of how you define double-digit revenue growth in 2019?

Lanny Baker -- Chief Financial Officer

It's great question, Doug. No, not this time. We're looking at -- the fourth quarter is -- as I said, it looks like it's about 10% year-over-year growth at the midpoint of our outlook range. There is -- a year-ago, we had just a little bit of time with the 24 that we don't have this year. So there is a modest impact from that. But we'll update that, it's a little bit early right now for us to give a precise view on 2019.

Douglas Till Anmuth -- JP Morgan Chase & Co, Research Division -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Lloyd Walmsley of Deutsche Bank. Your line is open.

Lloyd Wharton Walmsley -- Deutsche Bank AG, Research Division -- Analyst

Thanks. I guess first one, just can you discuss the move away from salespeople and lowering the headcount growth. And just what you're seeing is some of that just -- to Jed, I guess your last point people aren't as interested in answering phone calls anymore, and what gives you confidence that you can scale into regrowing the gross adds on the advertising side under a completely new focused model? And then I guess, if you can elaborate...

Jed Nachman -- Chief Operating Officer

Yes, Lloyd. Sure, we can give you some of thoughts on that, and I think -- I don't think this -- we are in the place, that you just described, the completely new market approach at all. What we're really talking about is diversifying our go-to-market, and we are in a position where our product, our marketing, our self-serve channel, the national success that we're having some of the stuff we're doing with small channel partners are really indicating to us that there are ways for Yelp to get to the large local business opportunity that are not exclusively driven by our local sales force. We have a 3,000 persons -- 3,000 plus person sales force at this point. And what we're looking at is additional ways to get to the market, where we can get there faster, we can get there more efficiently, and we can drive margins and penetration for the Company. So these all surround -- we'll continue to have growth in the sales force. I think at the end of this year we'll be where, we'd anticipated all year long, which is kind of the high teens to 20% exiting this year growth rate in our sales force. But as we look into the future, we want to and we intend to surround that with a broader, deeper go-to-market that leverages all these other channels as well.

Lloyd Wharton Walmsley -- Deutsche Bank AG, Research Division -- Analyst

Okay. And then if I can ask another. You guys have mentioned a bit more of a focus on third-party channels. So wondering you have been I think working with third-party channels at different levels for a little while. Can you just give us a sense of what you see there in terms of the ability to scale those channels? And then, what kind of revenue shares do you have to give up working with folks on the third-party side?

Jed Nachman -- Chief Operating Officer

Yes, I mean there is -- we're very early and that business is in its infancy, it's a small portion of our of our go-to-market today, it's pretty clear to us that many others who are going after the local opportunity are working through in many cases local, digital marketing agencies who often control and manage the ad budgets of local merchants who are kind of too busy to do some of the things that are required to effectively manage digital marketing campaigns. Yelp has spent some time and some product effort to make ourselves available and interesting to those third-party resellers. And as I said, it's in its infancy at this point, but it's really exciting and we're very encouraged by what we're seeing there. The things that those channel partners want from us are APIs and ability to control spending, very much the change to non-term contract makes us far more appealing in that channel than we were when it was -- we are kind of the only item on the shelf that has a 12-month contract behind it. We've made some investments on our side, selling and made some investments in product. We'll continue to make investments in those areas as well as marketing to build our presence in that third-party channel, and it looks to us like a very efficient way to get to the market. Most of these customers do a great job of measuring return on investments on advertising and Yelp typically comes out very, very well when it's analyzed carefully in terms of the return on marketing investment on Yelp.

Jeremy Stoppelman -- CEO

Yes, I would just add one more thing to that, what we found with these third-party resellers is that, Yelp perhaps represents a pretty attractive, alternative to Google and Facebook out in the marketplace and something that we haven't really offered in a packaged way before and made it easy to work with. And so this program, it's coming out in the growth rates that you see today, but we're able to go out and introduce effectively for the first time to a lot of these channels the Yelp product and it's resonating really well, it's another weapon that they can have in their bag as they go out to talk to these local business owners.

Lloyd Wharton Walmsley -- Deutsche Bank AG, Research Division -- Analyst

All right. Thank you.

Operator

Thank you. Our next question comes from the line of Mark May of Citi. Your question please.

Mark May -- Citi -- Analyst

Thank you. Just maybe, I'm still little bit confused on what happened in the quarter that will continue to impact Q4. It sounds like, if I had to boil it down that productivity slowed in the quarter and you had shortfalls in gross adds or was it more on a heightened churn perspective? I'm just trying to boil it down and I know you mentioned a number of smaller things, but if you had to rolling up and look at them from gross adds to churn, I'm kind of taking that its was primarily a gross adds issue. But if you could just sort of help us boil it down? And then given that a number of these factors were -- are already being addressed or had been addressed, would you anticipate that by Q1, your net ads will start to look more like historical levels? Thanks.

Jeremy Stoppelman -- CEO

Yes. Thanks, Mark. You are right in understanding the dynamics in the third quarter that are affecting the fourth quarter outlook, and that is that, we did not achieve the gross additions of customers during the quarter that we anticipated and that the customer turnover in the quarter was in line with what we expected, it was -- the prior -- first half of the year was a record period of time in terms of new customer additions. And so the number of accounts canceling or turning over in the third quarter, rose just as we expected. But really the shortfall in the net number relates to the gross additions being lighter than we thought for the quarter. As we look into next year, we haven't given any outlook at this point for sort of the first quarter or for the year. But as we said, we do -- we anticipate being able to get back into a position of growing the net account profile of Yelp in the future.

Mark May -- Citi -- Analyst

Thanks.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Brent Thill of Jefferies. Your line is open.

Brent Thill -- Jefferies -- Analyst

Good morning. I'm just curious if you can expand on the self-service channel, that's one of the keys for next year coming back on the sales reps and letting customers onboard and themselves. Can you give us a sense of what percent of customers are doing that today? What do you need to put in to effectively bridge that gap so that they can do this more effectively?

Jeremy Stoppelman -- CEO

I'll let Jed talk about that a little bit. If you look back at 2018 or 2017 rather, the number of gross additions coming through the self-serve channel was larger than the number that were coming through the rep channel and that was primarily the difference than that we are offering the non-term in the self-serve and so selling term among the reps. As we opened up this year with the reps selling non-term, those numbers have really balanced out, in fact, we've seen periods of time where the reps have been adding more gross adds than the self-serve channel. The key to the growth of the sale -- of all of our sales is really starts with businesses claiming their pages on Yelp. We had 200,000 -- roughly 200,000 businesses claim their page on Yelp for the first time in the third quarter, about 1 million in the last 12 months. And that's really the pool from which whether it's self-serve through that claiming process or into the lead generation system that goes to our sales force, that's where the pool where we fish for converting those claims into paying advertisers. So I think from a product and a marketing perspective, the things that we're doing to make the business owner page more dynamic, more engaging,, give appetizers more control over their page, are things that very much drive people into that claim flow, bringing them through and give us an opportunity to drive self-serve.

Jed Nachman -- Chief Operating Officer

Yes, I guess, I would just add, and this goes for kind of rep assisted self-serve or non-term contract as well as pure self-serve. Traditionally, Yelp had been tooled for the majority of our business to be done through kind of human beings and human contact. And so whether that was a sales person on the front end or an account manager on the back end. And we have a huge opportunity now, that all of our clients start from the exact same starting point, which is inside the business owners account. And so we're doing a ton of work behind the scenes to make sure that, that online experience and that product marketing experiences, people are exposed to that is a lot better experience. And just to give you a couple of tangible examples there, in the middle of September, we released a new onboarding flow, we hadn't needed to set up an onboarding flow in the past because you'd have human beings that would walk you through kind of your first experience with Yelp, well, now that's online and they guide somebody on -- it got local businesses on, how to kind of create the most effective experience on Yelp. Another example is, if you look at our mobile app, we had not invested a lot in our mobile business owners app and it turns out that business owners in fact like using that to interact with Yelp. And so, we're doing a little bit of catch-up compared to desktop there and we believe that type of thing can unlock a bunch of new business for us. So that's one, that too would add a list of many things that we're doing to make sure that, that product marketing experience, conversion flow is really world-class.

Brent Thill -- Jefferies -- Analyst

Can I just clarify that the comment you made around some of veteran reps moving out. I think you said that that's under control, so that from your perspective you addressed, I just want to make sure I understood that statement?

Jed Nachman -- Chief Operating Officer

Yes. We had a bunch of folks who had been effectively under the same model for years and when we made the transition, some of them did not adapt to the non-term contract model as well. And so we did experience some of those folks leaving the local sales force and we've now been able to kind of get back on track and replace with new folks, granted there's a ramp-up time to get everybody up to kind of full speed there, but folks that we start out in a non-term contract world is still really productive.

Brent Thill -- Jefferies -- Analyst

Great. Thanks for the clarification.

Operator

Thank you. Our next question comes from Mark Mahaney of RBC. Your line is open. We'll got to the next question from Deepak Mathivanan of Barclays. Your line is open.

Deepak Mathivanan -- Barclays -- Analyst

Hi guys, thanks for taking the questions. Two quick ones from me. First, is the constraint so far in driving self-serve adoption something you think is related to product or capability-related? Or is it just due to pluck (ph) those finding difficulty in understanding the value of Yelp advertising? Do you feel comfortable that a more pronounced push toward self-serve, you can kind of addressed constrained with explaining the value of Yelp advertising to advertisers? And then second one, Lanny, you mentioned that the churn has been as expected. But how does that compare with a cohort of advertisers that you saw come into non-term contracts from early this year, has there been any change at all from 1Q to 3Q?

Jeremy Stoppelman -- CEO

I'll take the conversion retention and churn question first, Deepak. We've seen really pretty consistent trends on that, we look at those numbers obviously in a bunch of different ways and there are kind of different behavior patterns. There is the initial starts and there is a period there what we consider kind of let to be trial purchase activity, there is a point in time where you move through that trial purchase, and now, I'd say, you've got more like a customer retention dynamic. And as we look at all those metrics, they've been very consistent throughout the year. So we scale up the volumes really dramatically and we've been really pleased to see that our expectations for those numbers have been of largely in line with the reality that we've seen. There is a big opportunity in there. There is a -- there's a lot of leverage to improving trial purchased conversion and customer retention. Now 24 months ago, we went to work on improving the churn and the retention of advertisers in the long-term model, and over the ensuing 18-month period, I think we improved the retention rate or reduce the churn rates by probably about 1/3 over that period of time. So we've done this before, it is a little bit of a different game with the velocity of the business right now and a little bit different purchase activity by consumers -- by businesses. But to answer your question, it's been pretty consistent year-to-date. On the question about self-serve and articulating two businesses the value proposition of Yelp advertising. I think it's a lot of what just spoke about, and that is bringing people into the business owner application, showing them the control that they have over the -- over their advertising and being able to market better, the value that Yelp can deliver to local businesses.

Lanny Baker -- Chief Financial Officer

Yes, I guess, I would just add in this new world, the first 45 days becomes critical in terms of the experience that a new advertiser has with Yelp and by the way new claim to business has with Yelp. And there is certainly room for improvement in that conversion funnel, both from non-claimed to claim and then claimed in the paying advertisers and there's a bunch of low hanging fruit that we're already in process on working on their and product marketing becomes a much larger driver of that opportunity.

Deepak Mathivanan -- Barclays -- Analyst

Okay. If I can just quickly follow-up, do you have an expectation for where self-serve could kind of shake out by next year in terms of total advertisers? Or is it still need I'll leave lead to kind of make a forecast?

Lanny Baker -- Chief Financial Officer

Well, it's early to make a statement about that. But we're -- we believe it could be a bigger driver of our growth and a bigger contributor to the overall customer acquisition of the company.

Deepak Mathivanan -- Barclays -- Analyst

Okay. Thanks, Lanny.

Operator

Thank you. Our next question comes from the line of Mark Mahaney of RBC. Your line is open.

Mark Mahaney -- RBC Capital Markets -- Analyst

Great, thanks. I know you talk about I think 2 to 300 bps of EBITDA margin expansion in 2019, could you just go through the levers, what needs to have -- what needs to happen in order to get there?

Jeremy Stoppelman -- CEO

There is -- just on this quarter, we had a little bit better than 40% incremental profitability year-over-year in terms of revenue, incremental revenue going through to incremental adjusted EBITDA. And we've said in the past and I think we've shown in the past, that the core Yelp model has inherently very high operating leverage. As we focus on channels that we've talked about, whether it's the bigger dollars that come to the national channel or it's the lower selling costs becomes a self-serve channel or it's small changes in account retention. All of those things are contributors to sort of revenue side, operating leverage. On the expense side, there's operating leverage against our fixed costs, there's leverage against the investments that we're making in areas such as our restaurant strategy. I think there are opportunities as well against product and marketing. So Mark, there are a number of places. 2 to 300 basis points of margin leverage feels like a pretty reasonable target for us to achieve in the coming year.

Operator

Thank you. Our next question comes from the line of Brian Nowak of Morgan Stanley. Your line is open.

Brian Nowak -- Morgan Stanley -- Analyst

Thanks for taking my questions. I guess if we look back over the last 12 to 18 months, there's been some ebbs and flows and the sales force productivity and execution. I guess maybe Lanny or Jed, for your shareholders listing, could you just sort of talk to one or two the biggest learnings you had over the last year to 18 months on ways you can improve the sales force efficiency sort of avoid some of these unfortunate hiccups? And then the second one, I think you talked about slowing hiring next year on the sales force is -- what gives you confidence that's the right strategy, following a quarter where I think you said, you had higher than expected sales churn impacting the gross adds? Thanks.

Jed Nachman -- Chief Operating Officer

Yes, this is Jed, I'll take the second part of that question first. In terms of moving into next year Irrespective of what had happened in this quarter, we were taking a hard look well before this, what's the go-to-market strategy that's going to make the most sense free up and how do we get the most high quality, high-calorie revenue into the system and in turn drive margin. So you look at kind of our market share in the national segment, as an example, compared to total kind of media spend in that market and as a percentage we're way down from kind of where we think we should be at about 25% of our revenue today. And we started actually see that traction pickup. You look at that business, it's grown 30% year-over-year, we're are seeing the seeds in the channel partner area really look nice. And so as we think about investment opportunities, we'd love to get off of, hey, you need to drive headcount in order to drive revenue and really invest in those high-quality areas. That being said, we're still going to have a very large sales force going into next year and our ability to really focused the folks that we do have in the building on the most -- on the best opportunities for them to go after is critical. And so we do believe we can improve the efficiency of the folks that we do have in seats and that kind of how we're looking at it as. Working we invest the dollars that are going to yield the most high-quality revenue, and that's the lens.

Lanny Baker -- Chief Financial Officer

Yes, and I think on your question about the learnings about the sales force, it's an interesting one. I guess one thing is I'd point out is that as we've moved our go-to-market -- our selling model from long-term contracts to non-term contracts, more of our revenue comes in the more near term kind of in the quarter for the quarter versus the model that was more like a long-term sales that stacked up and with layout over the ensuing year. And so one of the reasons we've expressed this year some caution about the transition to non-term contracts is a recognition that the business is operating at a little bit different clock speed today than it was before. And so one thing is we've learned is that the business is now more sensitive to the short-term productivity issues that probably were there in the past as well, but their impact in sort of the immediately turn over to the next quarter was just not as great as it is now.

Operator

Thank you. Our next question comes from the line of Justin Patterson of Raymond James. Your line is open.

Justin Patterson -- Raymond James -- Analyst

Great. Thank you very much. Just curious, how you're thinking about uses of cash at this point there's a pretty healthy move in the stock price after hour. So curious if that just changes your appetite on buyback at all? And then just kind of thinking broadly at a high level as it rolled out these new products, what changes have you seen in terms of advertisers, I'm talking about their ROI from Yelp. In another way, do you think there is any signs that advertisers are actually having a sub-optimal ROI right now and that's why?

Jed Nachman -- Chief Operating Officer

Yes, this is Jed, I kind of address that second question, really our most sophisticated advertisers, which is the national segment right now, they're seeing the most success in the most visibility into the ROI, they're getting from Yelp. We certainly have some product, it's not available today to the local advertising segment and some attribution products where we use both first-party data and third-party data, it actually show folks that have been exposed to an ad and then end up in store or in restaurant. And that's been a lot of the key to our success in the national segment and they're able to kind of parse through all of that data and understand the ROI that's coming out of it. We do believe there is an opportunity to kind of shift that mindset over into the -- to the local category as well. So overall, we believe just from the data that we see internally and internal, and we call it Yelp store visits as in that's the product that were actually driving people into the storefronts. And -- so the fundamental kind of promise of Yelp advertising is working and working very well. I do think there is an opportunity to get better at how we display all of the results for our local advertisers. And so, to me it's more of a -- how do we take what we already have and put it in a format that's really digestible for that local business?

Lanny Baker -- Chief Financial Officer

I think as we see the results in this quarter one of the things, I think to keep in mind is the number of repeating customers grew by 5,000 or 6,000 quarter-over-quarter and is growing at a mid-teens rate year-over-year. So while we're flat quarter-to-quarter on the total number of advertisers, I don't think that's indicative of exactly the things you're describing. From a cash perspective, during the third quarter, we repurchased about $3 million worth of our shares. We have tried to be pretty disciplined about the prices which we repurchased the stock. We have a initial $200 million authorization, I believe there is about $115 million left on that authorization as of the end of the quarter. And we'll get -- we have probably an opportunity based on their action today to continue to buyback stock, and when that authorization is completed, we'll consider what we do next.

Justin Patterson -- Raymond James -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Ygal Arounian of Wedbush Securities. Your question please.

Ygal Arounian -- Wedbush Securities -- Analyst

Thanks, guys. So first was there any advertiser feedback in the decision to rely less on the sales force where you -- where you are getting feedback from your actual advertisers that led you to make that decision? And second, is there anyway to help quantify the impact of -- if you're going to hire less sales next year and focus more on the self-serving partners. How long until about the net effect sort of balance that meeting you're efforts from ramping up self-serve is driving as many as adds as the net loss from those sales people? Thanks.

Jeremy Stoppelman -- CEO

In terms of feedback from advertisers, no, nothing, there was no feedback that specifically drove any decision around headcount kind of going into next year.

Lanny Baker -- Chief Financial Officer

Yes, and I think that as we look at the sub-balanced between the sales channel and the self-serve channel. Our goal is going to be to clutch from one into the other, as we gain momentum on the self-serve side it allow us to think about the investments in the rate of growth that we have on the sales force side. So we'll end this year with the sales force that will be, as I said kind of high teens 20% bigger year-over-year that'll put us in position for 2019. And as we -- I think, we've started to turn the corner of growth on the self-serve side of the house and we'll continue to push on that lever as we go into 2019.

Operator

Thank you. Our next question comes from the line of Tom Champion of Cowen. Your line is open.

Tom Champion -- Cowen -- Analyst

Hi, good afternoon, guys. A couple of quick ones, if I may. Curious if the recent Google algo or user interface update in August has had any impact on the business? And then on Request-A-Quote, the 5.5 million leads in 3Q, is that flat sequentially with 2Q, it wasn't clear to me in the letter. If that was apples-to-apples? And then I guess just more broadly on the service, how do you think user awareness is trending and maybe how that can be boosted? Thank you.

Jeremy Stoppelman -- CEO

Hi, Tom. This is, Jeremy. So taking your first question here the Google algorithm adjustments that happened over the course of quarter, we did see an impact particularly on desktop traffic and neither other updates were favorable there, but negative impacts to our traffic levels, but the reality today is that so much of our engagement is on the mobile app, we didn't see real tectonic shifts or massive impacts. So we feel good about our overall audience metrics and engagement with users. Request-A-Quote, volume is up 46% year-over-year, so we feel great about our growth there and attributable revenue, which we've talked about all throughout the year, it was actually $45 million, which is up 27% quarter-over-quarter. So we're taking those leads and we are monetizing them better than ever. So we feel great about that. Seasonally, obviously, as you go in toward the holidays, you do see volume impacted, but -- so we were fairly flat quarter-over-quarter, but that's actually still pushing against the seasonal trend, which would be a decline. And then your last question was on user awareness, again, with our focus on the mobile app is up 13% year-over-year that as quarter-over-quarter we had 2 million devices and year-over-year 4 million devices. So we feel like that's pretty healthy audience growth. We do -- we are making additional investments. We've talked a lot about the restaurant segment particularly Yelp reservations and Nowait. And we saw over a 1 million monthly Yelp seated diners. And so that -- those are people that are going through the app or the desktop website and adding themselves to a wait list or booking -- reservation booking their party at a restaurant. So we think that growth rate is really healthy there. It's up, I think a 150% from September 2017 to September 2018. So really strong momentum and that will start. I think really spooling up into 2019 contributing to our user engagement, but overall it's looking quite healthy there.

Tom Champion -- Cowen -- Analyst

Thanks very much.

Operator

Thank you. Our next question comes from Sameet Sinha of B Riley. Your line is open.

Sameet Sinha -- B. Riley -- Analyst

Yes, thank you very much. Couple of questions. In terms of the paying advertisers, can you disclose what percentage of total PAA's are term versus no term? And if what the ARPU differential is between the two? And second question would be, I'm just thinking, looking back at when you raised guidance in the last quarter that was about 40 days into the quarter. So should we assume that some things kind of just fell-off in the second half of third quarter and that's why you started seeing these issues?

Jeremy Stoppelman -- CEO

Yes. So let me take the first question about the term versus non-term contracts. We stop selling term contracts in our local business really by the end of May of 2018. So everything that's been added new since that in the local business has been on non-term basis. At May, probably half of the business that was under term contract was already one year into those relationships. And therefore, on a month-to-month basis. So we're in a place today where the proportion of our business that is under long-term contracts is shrinking pretty quickly. On the other hand, the number of customers that have been with us for more than a year continues to grow, that's a cohort that tends to have very strong relationship with Yelp and kind of relied upon Yelp for the growth of their local business and we tend to see retention rates -- revenue retention rates really strong from that group. As to your question about the sort of course of the quarter. There is always a number of factors that are playing. As we've talked about the past, we've been cautious about the transformation or transition to non-term contract, and how that would play out, while being really confident about this being the right thing to be doing for the long-term opportunity and for the benefit that we'll see from having made this change. As we got to the second half of the quarter and then at the end of the quarter, it became apparent that we would need to revise our outlook for the fourth quarter based on what we saw in the number of paying accounts and where we ended the quarter. And as we said earlier, there are two components to that one is the gross addition of new customers, the other is the conversion and retention of customers that we have and the delta relative to our expectations was on the gross addition side rather than on the retention and conversion side.

Operator

Thank you. Our next question comes from the line of Anthony DiClemente of Evercore ISI. Your question please.

Anthony DiClemente -- Evercore ISI -- Analyst

Thank you for taking my questions. Sorry about the tough quarter here. I guess really a high level, we see other companies that are ad supported Internet companies, shifting in terms of new ad formats and evolving their product offerings. So I guess is there anything you feel you can do to invest in the ad product next year and beyond to maybe just thinking more creatively improve the ROI or improve the experience for your customers? And then second question which would be, Lanny, you mentioned claim local business pages is being a metric to really focus on as opposed to PAA's. But if you look at that conversion ratio of claim pages to PAA's it stayed pretty constant over time I think, correct me if I'm wrong? But are you basically saying that you would expect that conversion rate to kind of go up from here? Or what give you confidence that claim business page is really a better way to look at or better leading indicator of revenue let's say? Thank you.

Lanny Baker -- Chief Financial Officer

Let me take the claims question first and then maybe Jeremy could talk about the ad product. On the claims, remember that the claim count that we provide is the cumulative talents of claims. The number of PAA's is the current active revenue generators in the quarter. And so there's another difference between the two measures and that is the number of claims is claimed local business locations. The number of paying advertisers is the number of master accounts that are paying Yelp and you might have in their small businesses that owns two to 10 shops, you might also have a large national advertiser that could have hundreds of locations advertised on Yelp. So it's that ratio between the two isn't quite working the way that I think you're thinking about it. And we do believe that driving claims marketing to those businesses that are -- sort of their own volition, saying that they recognize Yelp is important to their local presence and their local brand. And then showing up to show them the ways that we can help them through our advertising products and increasingly some of our other products, we can help them find customers, bring customers back and operate their business. It's a really important part of our flow.

Jeremy Stoppelman -- CEO

And this is Jeremy, talking about products and particularly with respect to our ad offering. So we've got a lot of investments happening in that area, Request-A-Quote being a big part of that and so we continue to improve that product, better match consumers to advertisers. And so you'll see a lot of additional improvements happening there. And I think some of that's reflected in our really fast growth Request-A-Quote attributable revenue which grew very nicely quarter-over-quarter. We also launched new product Yelp Verified. So for home and local services type businesses that have licensing structure, which of course varies state by state. We have started rolling that out. I think right now we're in California, something like 30 different categories in California and the early signs are pretty interesting there, but still early days. So it's another example of some innovation that we're doing there. We continue to invest in search and how that looks and along with that, how we present advertisers. So if you look across the industry at others search results, there's a lot of monetization happening, especially in low frequency, high value categories like home and local services. So we continue to look at different experiences that could drive more leads to our advertisers. And then on the business owner dashboard side, the business owner account, we've got a lot of work happening there both in helping business owners claim faster, have a really smooth onboarding experience, help them understand the value better by presenting the data in more intuitive ways. And then should they decide, they are considering canceling advertising, doing a better job of convincing them of the ROI that they're getting. And of course, all of this has to be built out on mobile, we do have the version of the business owner account on mobile, our business app. But it's relatively elementary, I would say it's somewhat under invested partially as we heard earlier on the call because we've been so focused on the human side of the experience where you as a potentially Yelp advertiser were talking to a sales person and then to get your accounts set up, you were talking to an account manager. Now all of that is happening within the product. And so our orientation within product and engineering now reflects that. And so we're pouring a lot of our resources into improving those experiences.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may disconnect your lines at this time.

Duration: 50 minutes

Call participants:

Ronald Clark -- Head of Investor Relations

Jeremy Stoppelman -- CEO

Douglas Till Anmuth -- JP Morgan Chase & Co, Research Division -- Analyst

Jed Nachman -- Chief Operating Officer

Lanny Baker -- Chief Financial Officer

Lloyd Wharton Walmsley -- Deutsche Bank AG, Research Division -- Analyst

Mark May -- Citi -- Analyst

Brent Thill -- Jefferies -- Analyst

Deepak Mathivanan -- Barclays -- Analyst

Mark Mahaney -- RBC Capital Markets -- Analyst

Brian Nowak -- Morgan Stanley -- Analyst

Justin Patterson -- Raymond James -- Analyst

Ygal Arounian -- Wedbush Securities -- Analyst

Tom Champion -- Cowen -- Analyst

Sameet Sinha -- B. Riley -- Analyst

Anthony DiClemente -- Evercore ISI -- Analyst

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