Yelp’s switch in May from annual ad contracts to no term contracts has given the company new momentum, as it seeks to evolve in the face of a lowered presence on Google but a higher dependence on its apps.
During a 2Q earnings call last week, and in an accompanying letter, the company announced it added 31,000 net new accounts in the first two quarters of 2018, and now counts 194,000 paying accounts, up 31 percent from last year. Earnings from 2Q ads were up to $226 Million.
On the call, company executives noted that a $400 a month deal with advertisers is turning out to be a “different beast” than a $3,000 to $4,000 annual contract, which is a “highly considered purchase” for most SMBs. And that’s a good thing.
The switch to no term has carried a bunch of risks (heavy SMB churn, hard to reach SMBs). But Yelp grabbed the chance, seeing plenty of upside and pressured by declining ad revenue per existing advertisers.
Yelp has been especially emboldened by a growing suite of services, such as “Request-a-Quote” for home services like moving, cleaning and landscaping; and “No Wait” food pickups and custom ads. It also has been emboldened by its investment in a growing, 3,300 person sales force, which has allowed it to go after previously reluctant advertisers.
The result? Sales reps “acquired three times as many new-to-Yelp advertisers as they did in the same quarter a year ago,” says the company. At the same time, “the company saw an increase in the number of prior customers who reactivated their Yelp advertising, and longer-term advertisers.”
Home vertical advertisers have been a special focus, perhaps signalling that Yelp may be challenging other home-oriented verticals, like YP.com and Home Advisor/Angie’s List. Yelp’s home service advertisers typically spend 3x more than its restaurant advertisers. Last quarter, they made up more than $75 Million, or 31 percent of the company’s ad take. That tally represents a growth rate that was one-and a-half times faster, year on year, than all other business categories combined.
Looking forward, Yelp says it expects to foster continued growth by focusing on “proprietary experiences” and driving more user engagement via new features and increased photo and review submissions.
In-app cross promotion is coming up especially big, as the company bets that it can convert its strong base in restaurant reviews to other local verticals, especially home services. Yelp says in-app cross promotions have boosted traffic in such categories by 20-30 percent.