Yelp: Display Advertising Will Be 'Discontinued' by End of Year

The Online Review Company Said It Will Instead Focus Its Efforts Toward Native and Local Advertising Products.

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The company said it will also spend $20 million in marketing for the remainder of 2015.
The company said it will also spend $20 million in marketing for the remainder of 2015. Credit: Yelp
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Online review site Yelp will phase out display advertising by the end of the year, the San-Francisco based company said during its second-quarter earnings call Tuesday. Yelp will instead increase its efforts toward selling native and local advertising products. At the same time it's investing in its own marketing efforts.

"We believe that eliminating brand advertising, which we also refer to as our display advertising product, will benefit the company over the long term," said Yelp founder and CEO Jeremy Stoppelman. "The industry trend toward increasingly disruptive display advertising is at odds with our focus on the consumer experience, particularly within [our mobile] app."

Revenue from brand advertising totaled $8.3 million, down 8% when compared to the second quarter of 2014. "While we recognize there's a near-term impact on revenue, we believe this is the right decision for the long-term success of the company," Mr. Stoppelman added.

Yelp isn't getting out of advertising entirely. Display advertising only accounted for 6% of the company's $133.9 million in second-quarter revenue. The lion's share of that overall revenue -- 81% -- came from local advertising. Yelp's local advertising revenue grew 43% year-over-year to $107.9 million and is expected to grow as it becomes even more central to the company's business.

"We expect local advertising will continue to be our primary driver of growth as we work towards our goal of generating one billion dollars of revenue in 2017," Yelp's CFO Rob Krolik said in a statement.

The company has been testing its own TV and radio ads in select markets during the second quarter. Mr. Stoppelman added that Yelp saw "promising results" and that the company will spend about $20 million of the $30 million it has set aside for marketing during the third and fourth quarters.

That move, coupled with imminent discontinuation of display advertising, were the primary reasons that Yelp slashed its outlook for 2015. Shares of Yelp plummeted as much as 17% after it cut its outlook.