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Yelp Beats Earnings and Predicts Double-Digit Revenue Growth Through 2025

Danni Santana
Yelp Beats Earnings and Predicts Double-Digit Revenue Growth Through 2025

Much to the delight of investors, Yelp crushed Wall Street expectations when it reported fourth quarter earnings after market close on Wednesday.

The user-generated review site grew revenue by 11 percent over the period, up to $244 million, due to a double-digit improvement in advertising revenue. Yelp’s overall revenue for the year also jumped 11 percent to $943 million, according to the company.

CEO Jeremy Stoppelman warned investors, however, that 2019 will be a year of transition for the company as, “we continue to reposition our business and strategy that we began in 2018,” he said on a conference call with analysts.

As part of the new go-to-market strategy, Yelp is moving from an impression-based advertising service to one based on visits. Yelp also altered the manner by which it issues contracts to restaurants and retailers last year, from long-term deals to shorter, non-term agreements.

While Yelp remains committed to the move, it did have a large impact on the company’s third-quarter performance, as both clients and its sales team adjusted. Such activity also caused activist investor SQN Investors LP to call for changes at the top in December, and later a sale of the company last month. Yelp announced three new members to its board today, and now also anticipates average revenue growth in the mid-teens until 2025, thanks to the restructuring of its business.

Growing Local and National Advertising

Yelp believes it is well positioned to grow its advertising business, particularly in the restaurant space, which represents its largest category by search traffic. This is largely due to Yelp’s lack of penetration in the market to this point.

Local advertising is a $150 billion market annually, according to Yelp. But the online advertiser’s local marketing revenue in 2018 only accounts for $1 billion, or roughly three percent, of that.

“It’s clear that we have considerable runway and upside opportunity ahead of us,” said Stoppelman, adding that he also plans to grow Yelp’s sales team in 2019, with an eye towards attracting more business from the top 250 national restaurant and retail brands.

In recent months, Yelp has upped its investment in proprietary bookings for restaurants, in order to grow its list of clients with a more national footprint. As a reault, nearly triple the amount of customers were seated in 2018 year-over-year through its Yelp Reservations and Yelp Waitlist platforms, including 42 million in December, according to the company.

Yelp additionally sports a long-term deal with Grubhub, which has already doubled the number of orderable restaurants available on its app, which has an average 33 million users per month.

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