With Strong Earnings, Yelp Nears Profitability

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yelp-stickerYelp reported stronger-than-expected earnings on Wednesday as a jump in new paying business accounts accelerated revenue growth in the second quarter. The reviews site brought in $55 million in revenue during the quarter on a $878,000 loss, a more than 56% narrowing from the previous year and the closest the company has come to run-rate profitability since going public.

The results come on the heels of a busy past few weeks for the company as it began to stake its position in a local market that’s shifting toward commerce technologies. In early July, the company announced partnerships with Eat24 and Delivery.com that will allow users to order food through the site and the mobile app, and then weeks later, acquired reservations software SeatMe. The moves come as part of a new business development initiative called Yelp Platform that aims to integrate the host of transactional services used by local business into Yelp’s search experience.

“The vision [for Yelp Platform] is really around the consumer experience,” Jeremy Stoppelman, the company’s chief executive, said during an earnings call Wednesday. “We have all these people who are coming to Yelp to try to make a decision or purchase something, so allowing them to transact seamlessly makes the business that much better. It’s a huge opportunity with all of these verticals. We just started with delivery, but we have deals in place to go into a lot of other verticals… and in the next year or so it’s really going to build out.”

The company has not disclosed the details of its agreements with early partners like Delivery.com and Eat24 for food delivery and Booker for scheduling, but executives at the firm stressed that the initiative would not have a significant impact on its business model for the time being.

“As [Yelp Platform] develops, our understanding might change, but from our perspective the local ad model is core to what we do, and we’re going to keep doing it for a long time,” Stoppelman added.

It will be a delicate line for Yelp to walk as the product develops. The company painted its acquisition of SeatMe as filling the market for lower-tier alternative, not a competitor, to the higher-end product provided by OpenTable, which Yelp has used for years to allow users to make restaurant reservations from within its site. But the delicate wording is indicative of the challenges ahead for the company’s business development team as it looks to scale itself as a platform without limiting its own autonomy in pursuing potentially lucrative revenue opportunities associated with building its own product.

The new initiative comes as Yelp’s audience aggressively shifts to mobile. The company said that 59% of searches came from mobile devices in the second quarter, with nearly half coming from the mobile app and a little less than a third of its 108 million unique visitors from its mobile site.

From a revenue perspective, the company has managed to avoid the burn felt by publishers as users move to mobile by bundling mobile and desktop inventory. Four out of ten ad impressions were served on a mobile device in the second quarter. Local revenue grew 15% from the previous quarter to $44.8 million as the company added over 6,800 paying accounts during the same period.

Steven Jacobs is Street Fight’s deputy editor.