Yelp 2Q15 Earnings Call Notes

This year hasn’t gone as smoothly as anticipated

“While this year hasn’t gone as smoothly as we anticipated, I am as confident as ever about our future, particularly about the success of our apps and local advertising products. With the strength in our core business, we continue to believe that we can be a $1 billion revenue company by the end of 2017.”

30% reach on smartphones

“Recent comScore report show that Yelp had, as of 2015, approximately 30% reach among the U.S. smartphone users. While this suggests that Yelp is the definitive leader among local search and discovery apps, it also means that we have significant room to grow.”

Exiting direct brand advertising

“Direct brand advertising sales is in decline, while programmatic advertising has its own challenges with privacy implications, ever declining CPMs, and lower ad quality. For example, ads that play video or audio intrude upon the consumer experience increasing load times and data usage on smartphones. We believe that prioritizing the consumer experience while delivering highly relevant native local advertising will provide us with the strategic long-term advantage. Given that our brand advertising as a percent of total revenues declined from 25% in 2010 to 6% in the second quarter of 2015 now is the right time for us to reallocate those resources to our highly differentiated core business.”

Max Levchin stepping down

“Before I turn the call over to Rob, I would like to take a moment to thank Max Levchin, Chairman of Yelp who has decided to step down from the board to pursue other interests. Given the demands on his time, we have mutually agreed this is the right time for him to transition off the board. Max provided the seed capital to start Yelp and I am forever grateful for all of his contributions and wish him all the best going forward.”

Website traffic down with SEO changes, but app traffic does continue to grow

“Now, website traffic internationally is down, that’s right, we mentioned 3% decline in website traffic and that is mostly a function of SEO and things that effectively we see Google having done with their algorithm there. The good news is that as with the rest of our business we do see app traffic growing very nicely in all of our markets. And given that, that is now majority of all kind of user activity, the good news is that their app traffic does continue to grow for us in cities all over the world not just domestically.”

The unicorn bubble is affecting us

“As to the unicorn bubble question and we certainly are feeling those impacts. What are we doing? I think we are trying in general take that Goldilocks approach we have always talk of trying to maintain a high-quality bar on hiring and retention and promoting from within. And we have been really delighted by general strength in our ranks across the sales force in the product and engineering group. And I think for the most part, it is something that we just have to ride out. That having said, you can see the cost in a couple of these areas have gone up, in particular, product and development as a percentage of revenue continued to creep up and that’s a function of compensation in the marketplace. So, we will do what we can to kind of hold the dam on that whole thing and not ride it out, as you said.”