Yelp Revenues Up 67%, Mobile Close to Surpassing Desktop

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Yelp surprised analysts with stronger than expected earnings in Q2, bringing in $32 million in revenue to post a $ 1.98 million loss. That’s a 67% jump in revenue year-over-year. And while net losses rose nearly 70%, much of that can be attributed to a bump in sales and marketing costs as the company continues to expand both its consumer- and merchant-facing business internationally.

On an earnings call with investors on Thursday, CEO Jeremy Stoppelman hammered in the importance of mobile in the company’s product and monetization strategies, citing 70% year-over-year growth in mobile app usage during the second quarter. Strategically, growth in mobile usage is helping loosen the company’s dependence on Google search for customer acquisition.

With mobile traffic now accounting for 40% of total searches, and actually surpassing web on weekends, much of the future revenue for Yelp hinges on its ability to monetize mobile audiences. Stoppelman was unclear about when the company would begin monetizing its mobile properties, but said that mobile app monetization is “obviously a high priority” and would come “sometime soon.”

“We’re open to anything that works well for our business customers,” he said about potential mobile revenue models. “I do think that right now what we’ve already got is something similar to what we have on the desktop — [ads] sold on a CPM or CPC basis — so that’s probably the first step.”

It’s still unclear how the company will integrate mobile ads into its existing local subscription and branded display products, but the transition — at least in terms of revenues — should be smoother for Yelp given the intent-based nature of its product. Whereas Twitter and Facebook need to build in mobile-only targeting parameters to leverage assets like location, Yelp’s ad product already incorporates location and proximity into its service.

The company’s mobile search traffic is set to explode in early fall when Apple is expected to release a new mobile operating system that will feature deep integrations with Yelp’s reviews and check-in functionality.  The partnership is a heavy blow for Google, whose mobile local search efforts now rest largely within its Android ecosystem. The losses for Google will likely only increase over the next few years as mobile is set to overtake desktop in local search traffic by 2015.

Stoppelman and CFO Rob Korlick remained mum on the partnership during the earning call, only to say that they were “excited about the opportunity.”

Steven Jacobs is deputy editor at Street Fight.