Like a good-old long-term relationship, you only appreciate Yelp once it’s gone. As someone who lives in a Yelpless land, take my word for it. Appreciate.

Today we’ll be looking at Yelp from the angle of Yelp’s pocket, or in other words, we’ll examine how Yelp generates revenue.

To help get us started, allow me to first throw some numbers at you-
2004 Yelp was founded
2012 Yelp IPOed
5 companies acquired by Yelp (Qype, SeatMe, Restaurant-Kritik, Cityvox, Eat24)
32 countries get to yelp
20M mobile devices with the Yelp app (Q4, 2015)
140M unique website visitors (Q4, 2015)
+100M reviews written
2,200 Salespeople employed
$551M in revenue (2015)

Two main take aways (food lingo intended)-
1. Adding a community on top of ‘Yellow Pages’ – a pretty good idea.
2. Reading the rest to see how Yelp makes money – also a pretty good idea.

 

So how does Yelp make money?

1. Local Advertising

Over 80% of Yelp’s revenues comes from local advertisers, AKA local business owners, who operate in up to 9 physical locations. In 2015, Yelp had over 110,000 local businesses advertising on its platform, but it’s only the tip of the iceberg. Yelp is going after what it considers to be a very lucrative market, with over 20 million local businesses in the US alone, who spend ~$150B on advertising.

These businesses have 2 main options-
– Self service advertising
– Full service advertising (AKA more expensive advertising)

 

Self service advertising

With Yelp’s self service advertising you can-

a. Run a search ad campaign-
– Monthly budgets ranging from $50 to $1,000 on average for local advertisers
– CPC ranges from $1 to $20

 

yelp - CPC ROI for local advertisers

 

b. Enhance your Yelp profile page-
– Disable competing ads on the profile page
– Add more room for a photo slideshow
– Add a prominent “call to action” button
– All for a monthly cost of $50-$100

Screen Shot 2016-05-04 at 10.18.50 PM

 

Full service advertising

The main difference between the self, and the full service is, as the name would suggest, you get full service. If online advertising just isn’t your thing, they’ll do it for you. Instead of letting marketing agencies offer these services and join the feast (like Facebook does), Yelp tries to do it all.

On top of service, full service clients also get to add a featured video to their profile and have the ability to track calls coming in from Yelp users.

Bottom line, it’s mainly about the service.

Butler

 

2. Affiliation on Deliveries

Eat24

Acquired by Yelp in 2015, Eat24 is a food delivery & takeout app.

It operates in 1,500 cities across the US, in 30,000 restaurants, generating $45M in 2015 alone.

The business model is simple. Restaurant owners sign up for free, get listed on Eat24 and can promote their restaurant by paying a fee per actual order (10%-12.5% of the order value).

Given the money comes from the restaurant owners, Eat24 can offer improved service, with no service fees, to corporate accounts, who order food for all their employees.

 

Eat24

Yelp’s Affiliate Program

For the past few years, Yelp has been operating an affiliate program, giving affiliates the option to promote its deals to users, for a 10% cut of the deal.

Affiliates can sign up on various affiliate networks (for example) and use Yelp’s API to bring in the supply.

 

3. Reservation Management (SeatMe)

Acquired by Yelp in 2013, SeatMe is a tool that lets restaurants and bars manage their table reservations.

SeatMe has ~2,700 clients, who pay $99 p/m, which means just over $3.2M in revenue (2015).

Yelp - seatme

 

4. Brand Advertising

Brand advertising accounted for ~7% of Yelp’s revenues in 2015. With over 140 million unique visitors to yelp.com in Q4 2015 alone, Yelp has plenty of page views to go round, allowing big advertisers to run big display ad campaigns. With that said, it seems Yelp is killing its display ads business, to focus more on its core- local advertising.

 

 

In summary

Yelp is a local advertising monster, that can deliver (food). It’s growing pretty fast, so if you can’t beat it, order in.