Online reviewer Yelp (YELP -0.38%) started off the week on a gloomy note. The company reported mixed earnings and overall investors were not impressed.

While revenue increased 40% to $153.7 million, part of my short thesis includes ignoring the top-line growth (more on this later). Operating cash flow was $3.8 million, and adjusted EBITDA came in at $17.5 million. Yelp said its cumulative reviews jumped to 95 million, and local advertising accounts increased 32% to 111,000.

By the time you get to the bottom line, investors are looking at a net loss of $22.2 million, or $0.29 per share. On an adjusted basis, Yelp posted net income of $28.9 million, or $0.37 per share. Investors were also caught off guard by the fact that CFO Rob Krolik is stepping down, and Yelp has begun the transition process to find a permanent replacement. It's never a good sign when a high-level C-suite executive resigns abruptly.

Revenue growth comes at a cost
The reason why Yelp's revenue growth is less impressive than it seems is because Yelp has to pay handsomely for it. Last year (when I initiated my short position), Yelp had acknowledged that it was having trouble growing its salesforce due to intense competition for talented salespeople.

The company has seemingly addressed this: Yelp grew its sales headcount in the fourth quarter by 45% year over year. Meanwhile retention of salespeople returned to historical levels. The company says that it will continue to invest in growing its salesforce in order to take advantage of growth opportunities going forward.

But Yelp is paying out quite a bit in order to support those hiring and retention figures. Sales and marketing expenses soared 63% to $87.5 million last quarter, which includes $5.8 million of stock-based compensation. That expense growth is notably higher than revenue growth. Sales and marketing expenses are now nearly 60% of revenue. This is Yelp's largest operating expense -- by far.

Yelp has always relied very heavily on its human salesforce to drive revenue growth. Local advertising is the bulk of the business (82% of total revenue last quarter), which requires a lot of human capital to physically send salespeople to local businesses to pitch them on advertising products.

Meanwhile, Yelp still has high implied churn rates among customers, if those ads fail to deliver results to local merchants. The company's customer repeat rate is now 77%, implying churn of 23%.

Party like its 2014
For 2016, Yelp's guidance calls for revenue in the range of $685 million to $700 million, which would represent 26% growth at the midpoint. That's deceleration relative to the 46% revenue growth in 2015, any way you slice it. Yet the company still plans on ramping up spending, which will inevitably put more pressure on margins. Stock-based compensation this year is forecast to be in the range of $83 million to $87 million, or about 12% of revenue at the midpoints. At least one Street analyst thinks Yelp should stop "spending like it's 2014."

How long will Yelp keep spending so heavily with the hopes of driving revenue growth, even as its user growth continues to decelerate?