Yelp yesterday reported Q2 earnings, along with most of the universe of publicly traded companies. It reached record net revenue and strong net profit at the high end of its outlook range. Growth was fueled primarily by its core advertising revenue stream, with some help from other diversified areas.
Specifically, net revenue was $357 million, up 6 percent year-over-year. This was $2 million more than the high end of Yelp’s Q2 earnings outlook. Again, ad revenue was the torch bearer, with 11 percent year-over-year growth within the category. Meanwhile, ad clicks grew by 9 percent year over year.
Other highlights include 158 percent year-over-year growth in net income, totaling $38 million and representing an 11 percent margin. Adjusted EBITDA grew 9 percent year-over-year to $91 million – a 26 percent margin. Overall, Yelp sits in a finite club of tech players that are propelled by a post-Covid world.
Growth Engine
But more notably, home services was the growth engine within Yelp’s ad revenue. The category grew 15 percent year over year (compared with 11 percent ad revenue growth across all verticals, and 6 percent overall revenue growth, as noted). The vertical now accounts for 65 percent of ad revenue at Yelp.
That last part may seem surprising to most folks who view Yelp as an Arts & Entertainment play (read: restaurants & bars). Its strength in home services is a confidence signal in our minds that its product is more versatile, and able to carve out new growth engines. It’s done similarly in professional services.
With home services, Yelp has successfully jumped on some favorable macro trends, such as interest rates. For example, with higher interest rates, homeowners are deciding to renovate and expand versus buy/move. This has created immense demand for connecting homeowners and home services pros.
Survival Imperative
These earnings also come close behind Yelp’s recent Summer Ad Release. As we wrote at the time, Yelp is doing more to tap into the meaty multi-location brand (MULO) segment. This includes MULO-built versions of key features like Request a Quote, Yelp Guaranteed, Verified License, and Portfolio.
These multi-location directions make a lot of sense for Yelp. Not only is MULO a sizable and influential component of the local media & advertising worlds, but their operational dynamics are a bit nuanced. So creating a suite of features that’s purpose-built for them could represent a power play for Yelp.
That expansion to MULO – much like Yelp’s growth in home services – reflects versatility and revenue diversification. These are survival imperatives for mature businesses that have to find revenue growth, which gets harder as markets are penetrated and revenue bases grow. This is what we’ll be watching for.
