Emphasizing Mobile Shift, Yelp Touts Double-Digit Gain In App Users

The business guide claims an presence on 20M unique devices, as local ad dollars rose 36 percent.

As Yelp began its exit from national brand advertising sales, the guide platform saw local advertising revenue rise 36 percent to $115.9 million during Q3, as the number of small business accounts grew at similar percentage to roughly 104,200. (Read the earnings release.)

In Q2, CEO Jeremy Stoppelman sought to appease impatient investors with a number of dramatic flourishes intended to demonstrate that the 10-year-old company could keep up with users who were gravitating toward mobile apps and away from its core desktop business. Among the major moves offered last quarter was the decision to abandon its flagging national display ad sales focus in favor of concentrating strictly on performance-based local ads.

CPC Rises As Brand Ads Are Phased Out

As such, brand ad dollars fell 4 percent to a meager $9 million during the quarter. Conversely, Yelp also recently made Cost-Per-Click packages available to all of its participating brands, contributing to a rise in CPC performance-based ad revenue that now makes up 52 percent of all local marketing dollars it takes in.

Yelp's Jeremy Stoppelman
Yelp’s Jeremy Stoppelman

“For the last couple months, what we’ve seen is that almost all of our new advertisers are adopting CPC,” Stoppelman told analysts. “It’s not 100 percent, we still do offer CPM [national display units] to those who prefer to buy that way, but it’s overwhelmingly become CPC in the last couple of months.”

Aside from driving revenue from local ads, Yelp is also hoping to stake its claim in the still growing “on-demand” category with food delivery and reservations services, as represented in its rollout of Yelp Now last spring and its February acquisition of GrubHub/Seamless rival Eat24.

Thanks to the purchase and quick integration of Eat24 into its app platform, “transactions revenue” jumped to $12 million from $1.3 million in Q3 2014.

“We’re delighted with app growth,” Stoppelman said during the analysts call. “It continues to be a major source of engagement and audience. It’s now representing about 70 percent of pageviews. So, that’s very dramatic and meaningful.

In all, Yelp’s revenues show its singular commitment to its local marketplaces and mobile consumers. About $116 million of the quarter’s total $143.6 million in total revenue came from local business, as in-app purchases grew 170 percent, a sign that the company is just getting started.”

He continued: “On the behavior engagement side, what does an app user mean to Yelp, I think the 70 percent pageview numbers speaks to what is happening there which is, the app is essentially skimming our very best, most highest value users and it’s giving us a direct relationship with them, so that person that otherwise might have gone to Google to start their search and then found a way to a local business. And really someone that enjoys of the Yelp experience and values the quality content, they are now moving away from Google and directly to the Yelp app. As that trend continues, I think that’s just going to strengthen the company over time.”

Not Just ‘Reviews’

Its investment in mobile has is almost meant to signal that Yelp is trying to become more than just a reviews site. The message to stockholders and clients is that Yelp is a provider of local discovery that can drive in-store shopping. Mobile is the perfect field to target consumers who are out in the world now and want to make decisions about where to spend their money in the moment.

“We executed well this quarter,” said Stoppelman, in the Q3 earnings release. “Consumers are increasingly discovering our app, which represents approximately 70% of engagement across our entire ecosystem. We believe that our highly engaging app, combined with our native local advertising products that generate high ROI for our customers, strongly positions us to capture the large market opportunity.”

Yelp has seen significant growth as well. Total revenue grew 40 percent since last year and the share of total revenue from small businesses grew by 33 percent. Cumulative Yelp reviews grew by 35 percent and local advertising accounts grew by 37 percent, year over year.

“We continue to see a strong interest from local businesses who have historically advertised offline,” Stoppelman said. “As those numbers continue to grow, we are building a large base of legacy advertisers and a stream of recurring revenue.”

Despite the largely positive numbers in Q3, Yelp still had its struggles. Marketing spend dug into Yelp’s profits, prompting an explanation that an unforeseen increased need for new hires combined with Yelp’s ambitious upcoming marketing push (the company is planning its first TV advertisements) led to the increased expenditure.

About The Author
Daniel Parisi Daniel Parisi @daniel_parisi_

Daniel Parisi is a New York City-based writer and recent graduate of the University of Maryland. Daniel specializes in coverage of mobile payments, loyalty programs, and the Internet of Things.