Yelp buys rival Qype for $50 million

Yelp also provides preview of third quarter: revenue at $36.4 million

(Updated to reflect comments from Mark Mahaney)

Yelp has purchased Qype, Europe's largest local reviews site, for $50 million, it was announced Wednesday.

Under the terms of the acquisition agreement, Yelp acquired all of Qype's shares, for approximately €18.6 million, and 970,000 shares of Yelp's Class A common stock. The acquisition will be recorded in Yelp's fourth quarter and 2012 year-end financial statements.

"I am excited to welcome Qype's employees and users to Yelp. We have built a solid foundation in Europe and this acquisition should significantly increase our international presence. With its strong local content in key markets like Germany and the United Kingdom, we believe that Qype will help Yelp become the de facto choice for local search in those markets," Jeremy Stoppelman, Yelp co-founder and chief executive officer, said in a statement.

"Qype's established European sales force will also bring more local business owners into the Yelp ecosystem, which in turn will bolster our mission to connect people with great local businesses all over the world."

In a blog post, Stoppelman said that Yelp’s mission “is to become the defacto choice for local search globally.” While Yelp has communities in 19 countries so far, the acquisition of Qype will assist Yelp in accerlating its international growth.

"We believe that folding Qype’s local sales force into Yelp should help the company penetrate deeper with local businesses in the German and U.K. markets," wrote Mark Mahaney, analyst at Citi Research.

Yelp currently has 30 million reviews on the site and 78 million unique monthly visitors.

Launched in 2006, Qype allows users to browse and add reviews for restaurants, hotels, bars and pretty much any other kind of establishment that you might recommend (or not) to a close friend. Business owners can claim their listing in order to guarantee that all the details are accurate and up-to-date. Additionally, businesses can pay a fee to have their listing appear higher than others.

Qype is headquartered in Germany, with operations also in the United Kingdom. 

"We're excited to join forces with Yelp, the premier brand in local search," Ian Brotherston, Qype's chief executive officer, said in a statement.

"Like Yelp, Qype is committed to providing rich, authentic content within local search. This acquisition enables our users to contribute to a much bigger platform, delivering greater value to local businesses."

Qype’s contributors have written more than two million reviews of local businesses, and more than 15 million monthly unique visitors to the service.

Yelp’s upcoming financial results

In addition to the news about purchasing Qype, Yelp also took the opportunity to preview its third quarter financial results, which will be released on November 1.

Third quarter revenue is expected to be $36.4 million, with a net loss of $2 million. Adjusted EBITDA is expected to be approximately $2.2 million.

The expected third quarter numbers exceeded Yelp’s previous expectations, as well as those of Citi Research, which had previously anticipated $35.1 million in revenue, Adjusted EBITDA of $1 million, and a net loss of $2.8 million.