Yelp Talks About Its Efforts In Ad Sales

Yelp released its Q1 earnings report on Wednesday, disappointing investors and sending its share price downward. The company did emphasize its rapid mobile growth. Another big focus of the companyR...
Yelp Talks About Its Efforts In Ad Sales
Written by Chris Crum
  • Yelp released its Q1 earnings report on Wednesday, disappointing investors and sending its share price downward. The company did emphasize its rapid mobile growth. Another big focus of the company’s earnings call was on its salesforce.

    On its previous earnings call, Yelp had talked about beefing up its sales staff, saying it planned to increase sales headcount by 40% this year, with growth coming mostly in the U.S. despite its international growth efforts.

    “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 at the time.

    Sales headcount in the first quarter grew roughly 25% year-over-year.

    On Wednesday’s call, CFO Rob Krolik said they implemented a territory change within their sales organization at the beginning of the year in an effort to reach more local businesses, and this had had a negative impact on sales productivity. The change was reversed in March, however, and productivity has begun to recover. He also said Yelp intends to grow the sales team focused on national, mid-market, and franchise businesses.

    Donaker further explained that every year for the last five or six years Yelp has reassigned territories at the beginning of the year, but this year for the first time, hey took geography out of the equation because they wanted to make sure they got leads in to the hands of reps more quickly. They figured out, however, that geography was more important than they thought.

    They figured this out by the end of February, noting the “truisms of local sports teams, scores, and weather and when you’re talking to two different clients right after the other turned out to be pretty important.” They reassigned territories based on geography, and immediately started seeing improvement in March and into April.

    The company’s brand advertising revenue was down 11% year-over-year. It attributes this to the shift to programmatic advertising and the “industry’s desire to have advertising products that are disruptive to the consumer experience.”

    40% of Yelp’s local advertising revenues in Q1 came from CPC advertisers, which was up from 32% in Q4.

    “This rapid shift to performance-based advertising has occurred faster than expected and we’re still relatively early in the development of our CPC product,” said CEO Jeremy Stoppelman. “We’re investing additional resources to scale functionality and expect CPC to remain a promising area of growth for our local advertising business.”

    Asked about how long it would take to roll out new pricing, Donaker said it wouldn’t take long and that it’s something they can do any time. He said it’s even already happening with parts of the salesforce selling “entry level” products to local businesses, which can start with smaller prices if they choose. These can be as low as as $25 or $50 a month for certain products.

    “That’s not typical but it is a product that is available today on a self-serve basis and increasingly available in full service as well,” he said.

    “What still needs to happen from a CPC perspective…kind of auction based pricing for us is no longer new, we’ve been doing this for a couple years now,” he later said. “It’s something that obviously there is a lot of expertise out in the marketplace and now with 90,000 advertisers and even more than that in terms of locations, there’s just a lot to be done to continue to make sure we’re doing the best we can for all our advertisers from the self and full serve perspective.”

    One analyst asked Donaker why Yelp isn’t building out its self-service ad business versus adding salesforce.

    He responded, “It’s growing quite fast as our full serve channel. We feel good about our 55% revenue growth overall and I think at the end of the day while we will continue to invest in our self-serve channel, what we continue to find in the marketplace is that local business owners actually want to talk to us on the phone. They want to be handheld through that experience. Whether they ultimately choose to do some of that work on a self-provisioning basis which we think of as sort of assisted self-serve or from a pure and full self-serve which is of course where we do all the setup for them. These are in many cases not marketing experts. They’re folks out running their businesses every day and they actually want to speak to somebody on the phone who can actually walk them through it.”

    This is, of course, where so many businesses have complained about their experiences with Yelp. There’s a documentary about that in the works, which surprisingly didn’t come up in the conversation on the conference call, despite making plenty of headlines in the media last month.

    Yelp maintained that the company will continue to hire more salespeople, and while additions were lighter than expected during the first quarter, Yelp expects to maintain that 40% increase for the year.

    The company also said it’s expanding the list of partners it’s working with in the programmatic field, where it’s already seen “fairly large growth”.

    Image via Yelp

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