Yelp Continues Shift Away From Display Advertising

Despite Shift From Display Ads, Online Review Site Sees Growth

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Yelp's San Francisco headquarters.
Yelp's San Francisco headquarters. Credit: Courtesy Yelp

Yelp said in July that it will phase out display advertising by the end of 2015, an effort to improve the user experience and focus on native and local advertising, while spending more money advertising itself.

It looks like the move is already afoot: Yelp said Wednesday that display ad revenue totaled $9 million in the third quarter, down 4% from the period a year earlier.

Revenue at Yelp grew to $144 million in the third quarter, up 40% from the quarter a year earlier, the company said Wednesday. Net income totaled nearly $13 million, up 30% year-over-year.

The bulk of Yelp's revenue comes from text-based local advertising, which came in at about $116 million, a 36% increase when compared to the same time last year.

Yelp also wants to focus its efforts on mobile, where the bulk of its users engage with the brand. Consumer adoption of the Yelp app remained strong, with the number of unique devices opening the app reaching 20 million across the quarter as a whole, up 39% from the year earlier.

The company has one of the top 25 mobile apps in the market, according to ComScore data provided by Yelp.

App users also make up 70% of all Yelp page views, so it makes sense that the company wants to improve the user experience on mobile. This is further helping the company wean itself off relaince from Google; more users are now using the app to search for restaurants instead of a search engine, the company said Wednsday.

"We executed well this quarter," Yelp founder and CEO Jeremy Stoppelman said. "Consumers are increasingly discovering our app, which represents approximately 70% of engagement across our entire ecosystem. We believe that our highly engaging app, combined with our native local advertising products that generate high ROI for our customers, strongly positions us to capture the large market opportunity."

Cost-per-click advertising, meanwhile, contributed about 50% of local revenue in the third quarter for the company. The company said it wants to focus more of its attention to this sort of advertisement as its clients prefer it.

In a departure from its usual business of selling ads, Yelp last February acquired Eat24, an online-food ordering system. As a result, Yelp saw its transaction revenue skyrocket to $12 million in the third quarter from about $1.3 million a year earlier. About $11 million of that was courtesy of Eat24.

The company will spend about $3 million advertising Eat24 in the fourth quarter and an additional $11 million advertising on itself, it said.

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