Yelp in 2024: Impressive Growth Tempered by Ongoing Challenges

Since its founding in 2004, Yelp has become the go-to resource for crowdsourced local business information. As of Q1 2024, Yelp hosts over 244 million user-generated reviews on businesses across the globe. In this data-driven deep dive, we‘ll explore Yelp‘s usage statistics, business model, key metrics, and future outlook.

Yelp Usage Statistics

Yelp‘s most impressive top-line stat is its cumulative review volume, which reached 244 million in Q1 2024, up 14% year-over-year.

Reviews by Category

Yelp reviews span over a dozen top-level business categories, with restaurants and shopping leading the pack:

Category % of Reviews
Restaurants 21%
Shopping 19%
Home Services 14%
Beauty & Spas 7%
Health 6%
Other 33%

Source: Yelp Q1 2024 Earnings Report

The category breakdown has remained relatively stable over the past few years. Restaurants have comprised about one-fifth of Yelp‘s review volume consistently since 2018.

User Engagement

Yelp‘s mobile app remains a key engagement driver, with 41 million unique users per month as of Q1 2024. Overall, Yelp sees 178 million unique visitors monthly across mobile and desktop. Other engagement metrics of note:

  • 68% of all Yelp searches now occur on mobile (up from 62% in 2020)
  • 54% of Yelp users visit the site or app at least once per week
  • 35% of users claim they check Yelp reviews before visiting a new business

Sources: Yelp Q1 2024 Earnings Report, Yelp 2023 User Survey

Geographic Mix

While Yelp started in the US, international markets now comprise a significant and growing portion of its user base:

Country Monthly Web Uniques (Millions)
United States 123.5
Canada 16.8
UK 13.6
Germany 10.4
France 6.9
Australia 5.3
Other 22.6

Source: SimilarWeb, April 2024

The top 5 most active Yelp cities (by reviews per capita) are:

  1. Las Vegas
  2. Honolulu
  3. Austin
  4. Miami
  5. Portland

Source: Yelp 15th Anniversary Infographic, 2019 (latest available data)

Yelp‘s Business Model and Financials

Yelp‘s primary revenue source is advertising sold to local businesses. Yelp sells targeted cost-per-click (CPC) and impression-based brand ads that appear on relevant search result pages and business listings.

For 2023, Yelp reported $1.35 billion in net revenue, a 15% increase from 2022. Here‘s how that revenue breaks down:

  • Advertising: $1.29 billion (96%)
  • Transactions: $29 million (2%)
  • Other Services: $26 million (2%)

Transactions revenue comes primarily from Yelp‘s restaurant and nightlife partners who participate in Yelp Reservations, Waitlist, and Delivery services. Other Services revenue mainly consists of Yelp Knowledge licensing fees and subscription revenue from Yelp Fusion API partners.

Yelp has demonstrated consistent revenue growth over the past decade:

Year Net Revenue (Billions) YoY Growth
2015 $0.55 46%
2016 $0.71 30%
2017 $0.85 19%
2018 $0.94 11%
2019 $1.01 8%
2020 $0.87 -14%
2021 $1.03 18%
2022 $1.18 14%
2023 $1.35 15%

Source: Yelp Investor Relations

2020 saw Yelp‘s first and only year-over-year revenue decline due to pandemic impacts. However, growth rebounded strongly in 2021 and has remained in the double-digits since.

Despite strong revenue growth, Yelp has struggled to achieve consistent GAAP profitability, with small net losses in 2018-2020 and 2022. 2023 saw Yelp return to modest GAAP net income of $12.7 million (1% net margin).

Fake Reviews and Yelp‘s Recommendation Software

One of the most common criticisms of Yelp is the prevalence of fake reviews. Both businesses and consumers have incentives to game the system – businesses seeking to boost their ratings with positive reviews, and unscrupulous consumers leaving false negative reviews in attempt to harm a business or get free products/services.

Yelp has battled fake reviews since its early days. The company says its automated recommendation software analyzes dozens of signals to identify and remove fake, misleading, or biased reviews. Yelp also allows business owners and users to flag suspicious reviews for human evaluation.

According to a 2022 study by researchers at Northwestern University and CHEQ:

  • An estimated 4% of online reviews are fake
  • Fake online reviews influence $152 billion in global consumer spending each year
  • 89% of consumers say they check reviews before making a purchase (up from 81% in 2019)

Source: "The Economic Cost of Bad Actors on the Internet", CHEQ & University of Baltimore, 2022

While fake reviews remain an ongoing challenge, Yelp says its systems are continuously improving thanks to advances in machine learning. From 2015 to 2022, Yelp nearly doubled the percentage of submitted reviews that its software automatically categorizes as "not recommended" (from 15% to 28%).

Source: "How Does Yelp‘s Recommendation Software Work?", Yelp Blog, 2022

The Data Science Powering Yelp

Beyond its anti-fraud systems, Yelp applies data science and machine learning across its products to extract insights and provide a better user experience. Some key examples:

  • Personalized search results: Yelp‘s ranking algorithms consider a user‘s location, search history, and profile preferences to surface the most relevant businesses
  • Similar business recommendations: Using natural language processing (NLP) and collaborative filtering, Yelp recommends similar businesses a user may like based on their browsing history and the preferences of similar users
  • Popular dish identification: Yelp applies NLP techniques to its wealth of user reviews to automatically identify a restaurant‘s most popular and frequently mentioned dishes
  • Sentiment analysis: Yelp data scientists have built models to quantify the sentiment (positive, neutral, negative) expressed in user reviews. This helps Yelp identify meaningful trends and changes in customer perception over time.

Sources: "The Machine Learning Behind Yelp‘s Recommended Reviews", Yelp Engineering Blog, 2019; "Under the Hood: Building Yelp‘s Personalized Search Experience", Yelp Engineering Blog, 2022

Competitive Landscape

Yelp‘s most direct competitors for local business information and reviews are Google Maps and Facebook. Google in particular has heavily prioritized its own reviews and local listings in search results.

According to a 2023 survey by local search publication Street Fight:

  • 69% of consumers say Google is their first stop when searching for local businesses (compared to 21% for Yelp and 6% for Facebook)
  • 72% of local businesses say Google is their most important source of customer leads and traffic (compared to 43% for Facebook and 31% for Yelp)

Source: "Local Merchant Report", Street Fight, 2023

However, Yelp arguably provides more comprehensive information for the businesses that consumers ultimately find, with more and higher-quality photos, longer form reviews, and additional services like reservations and quotes.

Here‘s how Yelp stacks up to key competitors on a few other dimensions:

Metric Yelp Google Maps Facebook
Total Reviews 244M 171M 123M
Avg Reviews per Listing 38 22 9
Avg Photos per Listing 14 7 11
Listings w/ 10+ Reviews 64% 47% 32%

Sources: Yelp Q1 2024 Earnings Report, Google My Business 2024 Fact Sheet, Facebook Pages 2024 Report, Yelp and Google Maps listing analysis by Whitespark

TripAdvisor remains a strong competitor for travel and hospitality verticals like hotels and tour operators, but has less usage for everyday local businesses. Smaller startups like Nextdoor, which focuses on hyperlocal neighborhood information, have gained some traction but not yet at a scale that significantly threatens Yelp.

Future Outlook

After a tumultuous pandemic period, Yelp appears well-positioned for continued growth. Despite competition from tech giants, Yelp‘s treasure trove of high-quality local content, steady consumer mindshare, and expanding portfolio of business solutions provide a solid moat.

Yelp‘s three strategic priorities, as outlined by CEO Jeremy Stoppelman, are:

  1. Be the best place to connect people with great local businesses
  2. Deliver more value to businesses and advertisers
  3. Build a trusted and high-performing team and culture

Key near-term growth initiatives include international expansion (particularly in Western Europe and Asia-Pacific), scaling its home services category, and continued enhancements to its ad targeting and sales tools.

Yelp is also investing heavily in its restaurant offerings, including an overhaul of Yelp Reservations and new features like Yelp Kiosks for in-store ordering. Management sees substantial runway in the dining sector, estimating only 20% of US restaurant reservations occur online today.

Longer-term, Yelp is well-positioned to continue extracting unique data insights to power new products for both consumers and local businesses. With one of the web‘s richest sources of local sentiment data spanning 15+ years, Yelp has only begun to scratch the surface in leveraging artificial intelligence to create value for its stakeholders.

Risks and headwinds certainly remain – Yelp must continually evolve to keep pace with the tech giants encroaching on its turf. Economic downturns disproportionately impact the small businesses on whom Yelp depends. And the war against fake reviews and fraud will likely never end.

But Yelp‘s strong brand, loyal user base, unique local data, and diversified revenue streams position the company well for the future. As CEO Stoppelman recently remarked, "There will always be demand for high-quality local business information. Yelp remains committed to being the most trusted source to fulfill that need."

With solid fundamentals and an experienced leadership team, Yelp appears poised for continued growth and market leadership in the decade ahead. Investors and partners seeking exposure to the local commerce space should keep a close eye on the pioneering player that started it all.

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