Yelp released its earnings report for the fourth quarter and full year 2014 on Thursday, and as previously reported, the company grew its local advertising accounts by 48% over the course of 2014.
Yelp execs discussed the progress of its ad offerings quite a bit during a conference call. The company intends to increase its sales headcount by 40% this year. This will mostly be in the U.S. despite the company’s international growth efforts (it launched in five new countries in 2014).
The news is sure to draw some eye rolls from those accusing Yelp salespeople of extorting them by holding positive reviews hostage (allegations that have never been proven and that Yelp has always successfully combated on a legal basis). Yelp announced last month that the FTC closed an investigation related to this without taking any action against the company.
“Many of those folks [salespeople] tend to come to us either straight out of college or within a few years thereafter, but we take all comers and there’s all different kinds of folks,” said COO and Director Geoff Donaker on the conference call (via Seeking Alpha’s transcript). “But it is a sales training program and so most of that headcount is folks who are reaching out to local businesses of different stripes. Of course, within that number, there is some international and there is some sort of specialty sales and mid-market franchise and national accounts, but the majority of it is kind of traditional local sales headcount here in the U.S.”
Donaker noted that while Yelp has traditionally focused on selling impressions-based packages, it made its packaged CPC product widely available in September. He said they’re happy with the “fast uptake” of that, and that CPC advertisers accounted for 32% of local revenue during the fourth quarter (up from 23% in Q3).
“The next logical step in our closing-the-loop efforts is to connect advertising spend all the way through to customer leads and spending,” said Donaker. “We are now tracking these ad-driven leads and associated revenue estimates for all advertisers, and we’ll be making this data available in our business owner tools in the coming quarters.”
He mentioned that local CPC customers experience an average ROI of over 500% on their Yelp ad spend.
Yelp has also seen increased growth from those utilizing its self-serve ads. More and more people are starting their advertising process there, and then electing to call up Yelp salespeople, Donaker said.
“Taken together, we believe that most business owners will continue to prefer consulting with our sales people, though many of these conversations may increasingly be what we think of as assisted self-serve,” he said.
In response to a question from an analyst, Donaker said Yelp has “an awful lot” of unused or unsold ad inventory.
“Also, we’re seeing that in some more competitive categories or geo categories, if you will,” he said. “We do see that prices quickly rise within packaged CPC because that is an auction-based dynamic where folks effectively are bringing in an amount of money that they’re going to spend on CPC advertising and then leaving it to the bidding to determine what the prices will ultimately be for that inventory. And so you can imagine tight categories like movers in San Francisco, those prices are able to move up pretty quickly. So I think there is headroom in both price as well as inventory generally.”
One analyst noted that core search players are recommending bids at about 2x the levels of Yelp.
“We noticed the same thing as we’ve done a little bit of benchmarking, and it obviously gives us comfort with both the ROI that we’re giving to advertisers today as well as the headroom in those categories for pricing,” Donaker responded. “And so the simple answer is just acquisition, and that’s why we continue to be focused on bringing in as many CPC advertisers as we can because over time, more competition should mean prices will rise as well as, hopefully, more happy customers.
At one point, CEO Jeremy Stoppelman noted that more than half of Yelp’s advertisers are taking advantage of video offerings.
Image via Yelp