Yelp 2Q16 Earnings Call Notes

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Because of Yelp’s broad base, no single customer has significant bargaining power

“First, I’ve been impressed to see how well diversified and therefore defensible Yelp’s core business is. No single customer represents more than 0.5% of total revenue, no single geographic market is more than 15% of revenue and even our largest category home and local services, comprises less than a third of local revenue. And when you look at where our revenue growth is coming from, Yelp is still producing annual revenue growth rates of 30% to 40% on average, even in our longest standing markets. To me, that makes Yelp a broad-based and very local business, one with significant operating scale and nationwide reach that would not be easily or inexpensively replicated.”

Charles C. Baker – Chief Financial Officer

 

An effective sales force is integral to Yelp’s growth

“The vast majority of our sales organization is dedicated to broadening Yelp’s local coverage by selling to small independent businesses. This core local sales organization of 2,000-plus reps is a large and effective team, and our local sales model delivers attractive and highly predictable rates of return on the investments we’re making there. In the second quarter, the core local team generated more than half of the year-to-year increase in local revenue and grew small business advertisers in the segment by nearly 30% year-over-year.” Charles C. Baker – Chief Financial Officer

 

App users are increasing as desktop users begin to decline slightly

“Really, what’s happening there is the continued shift to mobile and so you can see mobile growth remained strong at 27% year-over-year with 23 million app unique. And if you look at our overall penetration, it’s 38% in the U.S. which is up, which is great, but it leaves a lot of headroom. So, we feel like there’s still a lot of room to grow, the web is mature and so desktop is in slight decline and mobile web growth is a little soggy there, as everyone moves over to app.” Jeremy Stoppelman – Co-founder and Chief Executive Officer

 

Yelp chooses to focus on the US market over the international market

“Yeah, on the international side, we have to keep it in perspective where it’s very all part of our revenue picture. It’s therefore a lot of our focus is on deepening our relationship with advertisers and consumers in the U.S. That’s where the business is. We still feel encouraged by what we’re seeing there with 20% contribution growth, but there are some distribution challenges and we’re trying to unlock additional distribution. We’ve talked pretty openly about how Google made our life a little bit more difficult there, starting a couple of years ago. And we haven’t seen a real change, so we have material traffic internationally, but it’s just not growing the way we would like it to, so we have some focused efforts there to try and unlock more.” Charles C. Baker – Chief Financial Officer