Yelp’s Q2 Results Highlight Growth in Local Ad Market

Yelp came out with a strong Q2 report yesterday, with earnings per share (eps) of $0.11, beating the consensus estimate of $0.01. That was a big jump from eps of $0.05 in Q2 2021. All this expectation-beating news helped boost Yelp’s share price in after-hours trading yesterday.

Here are some highlights from the earnings report.

Net revenues were $299 million for the quarter. That’s a 16% growth rate over Q2 2021. And they came in $9 million above Yelp’s own Q2 business outlook.

EBITDA also grew, but at a lower pace, leading to a margin contraction for the quarter. Yelp reported $67 million in EBITDA for the quarter, a 6% growth rate over Q2 2021. Margins declined by two percentage points to 23% for the quarter.

Paying advertising locations grew 8% to 569,000. This surpassed pre-pandemic levels. Yelp says it hit a record for advertising revenue per location in Q2 but declined to share specifics. This may be the most compelling data point in the earnings report because it implies a robust local advertising market. At least for now.

Service-based business revenues showed solid growth. Advertising revenue from services businesses increased 14% year-over-year to a high of $174 million, driven by strength in the home services category. This is notable given Yelp’s perceived strength in dining and retail, which it categorizes as restaurants, retail, and other (RR&O). Actually, Services is the larger of the two categories based on revenue. RR&O also grew briskly, driven by the post-Covid recovery. RR&O was up 18% year-over-year to $109 million. This was driven by an increase in paying locations, which perhaps indicates restaurant re-openings or new openings as consumers returned to in-person dining.

Product-led Results

On the Q2 earnings call, Yelp CEO Jeremy Stoppelman and his executive team emphasized the company’s focus on product initiatives was behind the strong results.

“Our second quarter results show that our product-led strategy is delivering just what advertisers need in a time of economic uncertainty,” Stoppelman said at the start of the call. “Ad products that connect them with a large and high intent audience that provides measurable performance. 

Stoppelman singled out multi-location restaurants as a particularly strong player in Q2, growing 30% vs 18% for the entire RR&O category.

“Our expanded portfolio of ad products and attribution solutions is helping multi-location advertisers reach our valuable high intent audience, both on and off Yelp,” Stoppelman said. “Our performance in the second quarter demonstrates the power of our owned and operated ad platform.”

A key 2022 product launch was Request a Call, which lets Yelp users request phone calls from businesses to ask questions, scope a job, or get a service quote. This makes the feature particularly fitting to service-based businesses, such as home services.

Request a Call built on the momentum from Yelp’s existing “Request a Quote” feature. The option to request a call could increase the surface area through which customers can contact businesses. And for businesses to generate new leads and incoming interactions.

Request a call “continues to reduce friction when a consumer is calling,” Stoppleman said on the earnings call. “That’s considered by business centers to be a super high-value lead. It allows the consumer also to communicate very complex projects, which we think is important in some of the highest value leads that we can drive to businesses.”

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