Analysts believe that local advertising markets in the U.S. were worth a total of $130 billion last year and project that number to grow to more than $150 billion by the year 2015. A BIA Kelsey report suggest that for several years, much of this market was not catered to by digital players. But that trend is changing, as is evident from this chart below, courtesy of The Wall Street Journal.
Local business review site Yelp (NYSE:YELP) is working hard to acquire a bigger piece of the pie of these advertising dollars. Yelp’s Q2 revenues grew 67% over the year to $32.7 million, surpassing market expectations of $30.5 million. Loss of $0.03 per share was lower than the market’s projected loss of $0.05 per share for the quarter.
By segment, local advertising contributed $21.4 million in revenues, while brand advertising brought in $4 million. Other services accounted for the remaining revenues.
During the quarter, cumulative reviews grew 54% to over 30 million. Yelp also saw 52% growth in average monthly unique visitors to more than 78 million. Active local business accounts grew 113% to 32,000. The company’s focus on mobile has also helped it to grow its market reach. Last quarter, mobile app usage grew 70% over the year to 7.2 million mobile devices per month. Forty percent of Yelp searches are being conducted on mobile apps.
They continued to grow its market reach and is now present in 90 markets worldwide, with latest additions being made in Finland and Norway. But international presence hasn’t guaranteed revenues: Last quarter, most revenues were generated in the domestic markets, and only three out of the other 17 countries Yelp operates in generated revenues.
For the current quarter, net revenues are projected at $34.5 million-$35.5 million, with adjusted EBITDA of $750,000-$1.25 million. For the year, Yelp projects revenues of $135 million-$136 million, with adjusted EBITDA of $3 million-$4 million. The market expects revenues of $34.4 million for the quarter and $132 million for the year.
As part of its market expansion opportunities, Yelp recently announced partnerships with Apple and Microsoft’s Bing. Apple announced plans to integrate Yelp-branded content with Siri and the new Apple Maps application on iOS 6. Through the integration, Apple will feature links that would take users directly to Yelp. They also partnered with Microsoft to power the Bing Local search experience. Search on Bing now features content from Yelp and is, for now, available in the U.S. The companies hope the move will help them compete with bigger players like Google Local.
Players like Google and Groupon are able to acquire bigger local-business ad dollars as they have a much higher penetration in local advertising markets. In addition, Google’s recent purchase of Zagat also helped that company to enhance its search results and social presence by integrating Zagat’s reviews. Yelp surely has a tough field to compete in.
Yelp’s stock is trading at $25.73, with a market capitalization of $1.58 billion. It reached a high of $31.96 earlier this year.