Yelp Winds Down Display Ad Sales, Plans To Devote $30 Million To TV Ad Awareness Campaign

With declining direct sales and its problems with programmatic, Yelp is going all in on performance-based ads in an attempt to appeal to app users.

Yelp’s struggles with investors on its ability to bring marketing dollars in line with the shift in consumers’ interest from web to apps continued into Q2, as CEO Jeremy Stoppelman offered a series of dramatic fixes designed to reverse its course.

Yelp's Jeremy Stoppelman
Yelp’s Jeremy Stoppelman

In particular, the local guide company will be completely abandoning brand-based display ad sales by the end of the year, Stoppelman said during the analyst earnings call. Stoppelman also once again highlighted the problems of programmatic, exchange-based ad sales, citing the practices associated with real-time bidding for producing “new challenges,” including privacy implications, ever-declining CPMs, and lower ad quality.

All The Way With CPC Ads

Instead, Yelp’s salesforce’s marching orders will rest on tackling performance-based advertising, primarily cost-per-click. Aside from the obvious promise of ROI and accountability that marketers seek, the focus on performance will also play into Yelp’s main proposition as a source for connecting consumers to local businesses. Mostly, Stoppelman argued that CPC ads would have more appeal to Yelp users, who are increasingly accessing the company’s 83 million review via its mobile apps (incidentally, the number of reviews grew 35 percent from Q2 2014).

“To better leverage Yelp’s strengths with consumers and local businesses, we’ve decided to phase out brand advertising by the end of the year,” Stoppelman said. “We believe that eliminating brand advertising — which we also refer to as our display advertising product — will benefit our company over the long term. The industry trend toward increasingly disruptive display advertising is at odds with our focus on the consumer experience — particularly within the app.”

And even though Facebook has been banking on video ads within its advertising arsenal, Stoppelman implied that the Yelp experience is obviously very different.

“Ads that play video or audio intrudes on the consumer experience, as well as leads to slower load times and increased data usage,” he said. “We’ve invested in a world-class salesforce that is creating ad products that deliver high ROIs. Our salesforce has historically sold impression-based advertising. The transition to performance-based advertising has moved quickly.”

Yelp loveBranding Has Its Place

While Stoppelman may perceive branding on Yelp’s properties as having limited value, the attitude is completely different when it comes to television advertising. He unveiled a plan to spend $30 million — $20 million during the third- and fourth quarters of this year alone — on TV spots aimed to attract more users.

“The TV advertising campaign will highlight the many different uses for Yelp, including finding a mechanic, golf instructor, or restaurant,” Stoppelman said. “We expect our advertising programs will benefit awareness, and therefore consumer usage, over the long-term. Given that the vast majority of local advertising dollars are still spent offline, we believe we have a tremendous opportunity.”

An Unexpected Loss

The 11-year-old San Francisco company conceded that Q2 delivered its slowest revenue growth in 18 quarters, and swung to a net loss of $1.3 million, compared to a profit of $2.7 million during the same time period a year ago. Separately, the company said Chairman Max Levchin would step down “to pursue other interests.”

Other key results from Yelp’s Q2 included:

— Local advertising revenue totaled $107.9 million, representing a 43 percent gain year-over-year. The number local ad accounts grew 40 percent year-over-year to roughly 97,000. “Claim local businesses” were approximately 2.3 million, up 34 percent since last year, while  Yelp’s “customer repeat rate” was up 77 percent during the period.

— Transactions revenue, which includes this past February’s acquisition of delivery app Eat24, as well as ad products such as Yelp Deals and Gift Certificates, came in at $11.3 million, compared to $1.2 million in the second quarter of 2014.  The rise was mostly due to the purchase of Eat24.

— Brand advertising revenue was  $8.3 million, which fell 8 percent from last year’s Q2.

— Other revenue totaled $6.4 million, representing 128% growth over the second quarter of 2014. Other revenue is primarily comprised of revenue from partnership arrangements.

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Mobile Surpasses Desktop For The First Time

When it came to the closely-watched mobile traffic stats, unique visitors exceeded Desktop Unique Visitors for the first time in company history. Mobile represented about 83 million uniques compared to roughly 79 million individual desktop users.

“Growth in unique devices accessing the Yelp app accelerated to 51 percent over the second quarter of 2014,” the company said. “The majority of Yelp consumer engagement now occurs on the app with approximately 70 percent of new reviews and photos and approximately 70 percent of calls, clicks for directions and map views coming via the Yelp app.”

On the local advertising, front, Yelp pointed to the full rollout of its CPC advertising package in September 2014. The amount of local ad dollars generated by CPC advertisers rose to 46 percent in Q2, an increase from 40 percent from Q1 2015.

“Based on Yelp’s internal analysis, local advertisers on Yelp receive on average approximately 270 percent ROI on their advertising spend, demonstrating the compelling nature of its highly relevant, native advertising products,” the company said in a statement.

About The Author
David Kaplan David Kaplan @davidakaplan

A New York City-based journalist for over 20 years, David Kaplan is managing editor of A former editor and reporter at AdExchanger, paidContent, Adweek and MediaPost.