What happened

Shares of Yelp (NYSE:YELP) were slammed on Friday. Shares tanked as much as 32.6%. But the stock was down 28.6% as of 12:30 p.m. EST.

The stock's decline followed the company's third-quarter results, which included third-quarter sales and fourth-quarter guidance that were both below consensus analyst estimates.

A chalkboard sketch of a chart showing a stock price moving lower.

Image source: Getty Images.

So what

The business-reviewing platform reported revenue of $241 million. This was up from $223 million in the year-ago quarter, but it was below both management's guidance and analysts' consensus forecast. On average, analysts were expecting revenue of $245 million. 

"While the shift to non-term advertising has opened our sales funnel, it has also made our results more sensitive to short-term operational issues," said Yelp CEO Jeremy Stoppelman in the company's third-quarter earnings release. 

Now what

Stoppelman said Yelp has already begun addressing issues impacting its underwhelming sales growth, but he noted that it's going to take more than a quarter for these changes to be reflected in the company's results. To this end, Yelp lowered its outlook for full-year revenue by $20 million (based on the midpoint of its guidance range) and provided a fourth-quarter revenue guidance below expectations. Management forecast fourth-quarter revenue between $239 million and $243 million. Analysts, on average, were expecting revenue for the period to be $260 million. 

Looking beyond Q4, management believes its shift to "more flexible and dynamic advertising terms" will "greatly increase[s] our long-term sales opportunity and opens up additional levers to expand Yelp's sales reach and profit margins," said Stoppelman.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool recommends Yelp. The Motley Fool has a disclosure policy.