Yelp Inc (YELP) Strong 2Q Driven by Record Local Advertisers

Yelp Inc (YELP) Strong 2Q Driven by Record Local Advertisers
By User:ZyMOS [Public domain], via Wikimedia Commons

Yelp Inc (NYSE:YELP) is expanding itself to include other consumer services but will be focused on its core business model, which is local advertising said CEO Jeremy Stoppelman on Wednesday during the company’s second quarter earnings call with analysts.

Yelp Inc (YELP) Strong 2Q Driven by Record Local Advertisers

Stoppelman answering to questions from analysts said that Yelp Inc (NYSE:YELP) will remain focused on the local advertising, which is the core area of business, on being asked whether new services like allowing users to order deliveries from the site or a mobile app will form a greater part of Yelp’s revenue.

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“From our perspective, we still feel like the local ad model is core to what we do, and we’re going to keep doing it for a very long time.”

New service from Yelp

A new program launched by Yelp Inc (NYSE:YELP) includes on site food ordering program by Eat24 and Through this program local businesses will be able to provide other for-purchase services and users will get the facility to book a spa treatment or book and pay dentist appointments directly through Yelp.

2Q performance

For the quarter, Yelp Inc (NYSE:YELP) posted a loss of 1 cent per share and revenue surged 69 percent year over year to $55 million. Earnings beat the analyst’s estimate of a loss of 4 cents per share and revenue of $53.3 million. Stock of Yelp surged 7 percent in after hours trading.

Local advertising business is the core of Yelp’s business model, which contributed majorly in the second quarter revenues. Local revenue for yelp came in at $44.8 million, an increase of 77 percent from the corresponding quarter of the previous year. The customer base expanded to another 6,800 paying customers, which is the largest increase in a quarter for Yelp.

For the fifth straight quarter the company has performed better than the high end guidance of its revenue. Revenue from brand advertising came in at $7 million and increased 24 percent year over year. Though the company posted small numbers, overall results were strong.

In the earning call, Yelp Inc (NYSE:YELP) announced that around 59 percent of searches in the second quarter came from mobile devices.

Share price of the company has gained 88 percent since RBC Capital Market initiated in March. A report from RBC Capital Markets says that it had been wrong, as since March, estimates and multiples of Yelp have increased. Report believes that, with price/sales ratio of around 10 times its estimates, there are less chances of any “material multiple upside” from the present situation. RBC Capital looks positive on the company owing to string revenue growth, “nice expense leverage, developing new platform features and likely new monetization opportunities, and proving that it is a major beneficiary from the Mobile Internet surge.”

Yelp wants to be like Amazon

The chief executive added that though the company may eventually consider revenue options for Yelp platform, he wants to first make Yelp the, Inc. (NASDAQ:AMZN) of local, where users store their payment information so they can buy whatever they want from neighborhood merchants, says a report from CNET.

Stoppelman praising experience on Amazon said that the site provides all the information about anything the user wants to buy. He said that he wants to create the same kind of experience on Yelp Inc (NYSE:YELP), and the company is focused to achieve that and “not necessarily the monetization at this point.”

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