Q2 Earnings: Mobile Users Driving Yelp’s Growth, Levchin Resigns From Board
While a group of Yelp executives gathered Tuesday for the quarterly earnings call, a mob of enraged animal-lovers, many armed with the Yelp mobile app, descended upon the Internet.
Yelp’s mobile app saw 83 million unique mobile visitors in the second quarter, a 22% increase in visitors from last year. Surely, Tuesday’s internet outcry pushed that number up even higher, as hundreds of users took to Yelp to protest a Minnesota dentist’s killing of a famous Zimbabwean lion. Users obliterated the dentist’s Yelp business page rating by posting hundreds of one-star reviews, contributing to the 83 million cumulative reviews that 11-year-old Yelp has collected.
The company had stronger-than-expected revenues of $133.9 million, but posted a loss of $4 million, or $.02 per share, missing analysts’ estimates. Yelp’s stock price dropped 14% in after-hours trading Tuesday.
“Consumers are turning to apps for everything,” said Jeremy Stoppelman, the company’s chief executive said on the call Tuesday. He said that the company’s executive team is guiding Yelp toward a revenue stream composed mainly from localized advertising.
The company also announced that Max Levchin had resigned as chairman and director of Yelp’s board. Levchin, the CEO of Affirm who was one of Yelp’s first investors, said he is leaving to increase focus on his own company. The board hasn’t appointed a new chairman but will consider the issue at a meeting in September.
On the call, Stoppelman said mobile use is expected to continue increasing, and clarified how tracking users by their mobile usage should be more accurate, since counting two additional unique visitors from a home computer and a work computer probably triples the user count. Further, Yelp saw a huge increase in unique mobile devices that have the Yelp app installed since last year — a 51% increase for a total of 18 million.
Yelp’s management pointed to the 20% year-over-year growth that was generated mostly by the mobile app. The team expects future growth to be initiated by app users driving the type of engagement they want to have. Yelp plans to invest quite a bit to continue developing the company’s mobile app and improve the user experience, according to the team of executives.
Further, the 269% return on investment that Yelp claims its advertisers receive isn’t overstated, said COO Geoff Donaker: “We take the dollars that are being spent by the average advertiser for Yelp ads, and then look at the number of leads being generated by those ads. So this would be calls or clicks for directions, and then multiply that by the average revenue in each category that advertisers have told us through past surveys that they derive from a new customer.”
For $267 spent in one month on CPC or CPM ads, the estimated monthly revenue from ad-generated leads is $983. The company continues to develop tools for advertisers to use to help them calculate what they are paying for and how much they are getting for it.
The company is also ramping up marketing efforts and plans to spend $20 million on marketing strategies by the end of the year.
In terms of revenues, brand advertising is in decline. Since 2011, brand ads have been decreasing as a percent of total revenue, and Yelp plans to phase it out by the end of 2015.
By 2017, the company hopes to bring in $1 billion in revenue, but the international playing field is still small, and will stay that way for at least the next couple of years.
“In terms of the components of [our billion dollar goal,] it’s really localized revenue that takes up the lion’s share,” Donaker said.
April Nowicki is a contributor at Street Fight.