Yelp Inc. (NYSE:YELP)
UBS Global Technology Conference Call
November 19, 2013 03:30 PM ET
Rob Krolik - CFO
Eric Sheridan - UBS
Eric Sheridan - UBS
Okay thanks everybody, so by the way, again my name is Eric Sheridan. I'm the U.S. Internet and Interactive Entertainment Analyst here at UBS. We're glad today to have Rob Krolik, CFO at Yelp Company. We have talked a fair bit about in what we have written, especially about some of the opportunities around local and mobile and some of the opportunities, and Yelp is certainly one of the most interesting platforms we've come across in our work on the Internet. So, maybe Rob I will kick it off with a couple of questions, and then we'll open it up to the audience.
I think by way of intro, maybe you can just talk a little bit about the market -- addressable market that Yelp is trying to go after, and over the last 12 months, we've seen a lot of innovation around the platform, new products, new partnerships, and how that might open up the addressable market for Yelp?
The way we think about the addressable market is in a couple of ways, but really BIA/Kelsey has a report out that says this year local ad market in U.S. is about $133 billion, and so obviously quite a large market. If you look at Yellow Pages, last year did about $7 billion, and then if you look at us, this year we're projecting $228 million to $229 million in revenues. So, pretty small slice just getting started really. The other way to look at it is the number of local businesses out there. So, in the U.S., there is -- on our platform, we have about 18 million to 20 million businesses, probably 25 million outside the U.S. right now that's on the platform.
And then when you look at the number of paying customers that we have, it's about 57,000, so we look at that as an incredible opportunity to start monetizing that opportunity. Our sales force is basically a hunting sales force, so we're just basically trying right now to go get more customers. We did open up the Yelp platform, I guess in July. We announced that, so we can talk a little bit about that, but that opens up kind of a transaction platform for us where it allows people to do a lot of buying, and right now it's opened up for food delivery.
Eric Sheridan - UBS
Maybe we can talk about the Yelp platform. It is something where it seems like there is a lot of ways you can go with that from a vertical perspective. You started with food delivery, it is a bit of a change from what Yelp has been historically in terms of connecting merchants and people, and now putting e-ecommerce into the equation as well, so maybe talk about some of the verticals that are on your roadmap, sort of where you sit today from a technology standpoint to innovate around those verticals, and how those could roll out?
Yes, so we have announced six partners, two of which are live, so Eat24 and delivery.com are food delivery partners that have connected to us on the backend, so what happens today is you look for a great local restaurant, you find a place you don't want to go out it’s raining perhaps, and you just have the food delivered to you, so you can just go on the site, order up the food, and then the transaction, the credit card is all taken by Yelp and then we pass that information along to those partners, and then they pass it along to the end restaurant, so we're excited about that. We're generating, I think, 1,000 orders a day or so from that transaction platform that's -- and that's a significant increase from when we just launched with a couple hundred restaurants.
The other four partners that we announced with is ReachLocal, which is in the home and local service vertical; Mind Body, which is in kind of studio fitness vertical; Booker, which is the kind of spa/massage that type, place vertical; and then Demandforce, which is into its product that does help book appointments with dentists.
So you can imagine the time where as we look at it almost becoming like the Amazon of local where, hey you want to find a great local business, you search Yelp, you come up with a dentist, you can book the appointment right there; if you want a massage, you can book a massage right there; if you want to even book the -- get the food order delivered to you.
So in terms of other verticals, we have -- ever since we have announced the Platform, our BD group has been inundated with a wide variety of different verticals, so as we roll these out, we'll announce them but nothing to announce today. But we're excited like I said, food deliveries are live, the others will probably be live in the next three to four months.
Eric Sheridan - UBS
Is there a lot of incremental spend or technology work to be done when you enter a new vertical or is the capability already built into the website and the apps at this point.
Yes, I mean, it should be integrated into the website and the apps today. So, I mean we’re learning, as we rolled out the food delivery, we definitely learned some things that we didn’t know before, so we’ve definitely rolled out some enhancements, but the whole idea is from a consumer experience first and foremost. So, I think revenue is an opportunity down the road, but I think how Yelp looks at things is from a consumer experience standpoint. So, if we can deliver a fantastic consumer experience, they’ll come back and use the platform over and over again, and what we can do is we can use that information, all that transaction information and say, hey Mr. Restaurant, you just had 10 food orders delivered from Yelp traffic last week, why don’t you advertise with us, and maybe you can bump that to 20 or 30 in a week. Same thing with the Mind Body implementation and the Booker implementation once those go live. So, we really want to use that transaction information to close that loop with that last mile, with that business, and we think that that could be pretty powerful.
Eric Sheridan - UBS
And then over the last year or two since you’ve gone public, you’ve done a lot to improve the offering even to merchants, so if we think about your advertisers/merchants, there's things like Platform now, there is dashboard, there is deals, there is a growing sense of capability in the system, can you talk a little bit about what you’ve seen from either retention standpoint or inability to improve the relationship with merchants over the all advertising ecosystem as a result of some of these rollouts?
We’ve enhanced the dashboard over the last 18 months to give people, customers, and noncustomers, because as a local business you can log in and claim your account for free and look at a lot of this information for free to see what Yelp is driving in terms of your business, but you can see check-ins and phone calls to your business, and who's mapping directions to your business, all of that.
We also rolled out ads on the mobile app about a year ago now, so that’s enhanced the platform, we rolled out the revenue estimator, so it gives businesses an idea of how much revenue we’re actually generating, and we added a feature this summer called the Call to Action Button which allows businesses to say book it now or they can customize it, make an appointment or contact us, and it goes over the website and we track all that and we give that back to the business owners.
So, I think we have been pretty innovative over the last 18 months in giving businesses back kind of ROI estimate of what it is that we’re delivering for them, and what basically all these things have done is given the sales force additional tools with which to go after local businesses. So, in the third quarter, we grew local advertising revenue about 80% year-over-year, an increase from 77% in Q2.
So, we definitely see these types of tools are something that the business owners like and want, and we’re thinking of new ones every day. And most of it is free to the advertiser so that they can realize what benefit they’re driving on Yelp, and then the ultimate sale is, hey do you want more customers or not. And so, then the business owner has to decide, but the Call to Action button is something only for advertisers right now, and that’s driving a lot of interest.
Eric Sheridan – UBS
You’ve also recently introduced a lower price product, shorter-time commitment product as an advertising package. What drove the company to think about that type of offering in the marketplace and what impact does it have to the TAM longer term.
So just a clarification, it’s a six or 12 months contract with this particular product. What it is, we call it a CPC bundle, and so CPC has been a part of the Yelp platform for a very long time. So, it is cost per click is the model just like Google and other websites out there and we’ve had that ability. We enhanced it at the beginning of this year where it’s a market based driven system, so it's dynamic where you put in your bid and then we charge you based on the market price, so all that was done earlier this year.
So, in September, we always experiment with things, so what we decided to do was bundle that with the CPC product with an enhanced profile which is a product we offer where it enhances your business profile page by giving you video or a slideshow, it gives you the ability to remove competitor ads, things like that and so it makes your profile better, and then along with that, you get kind of a certain budget of CPC, and that is sometimes for some businesses more palatable. So, I think we started out at a couple hundred dollar package for that. It’s probably more applicable to probably restaurants, food, and nightlife industry, and it’s a way for people to put their toe in the water of a CPC product, but understand that they don’t have to bid, like so they put some minimum and max at the beginning, and then they can leave it and the system works on it.
So, we’re pretty pleased, we see that there is a demand for it in the market. We also have a self-serve product, where you can go on the site in as a small business and go ahead and signup yourself for just CPC advertising. What we’ve noticed is that there is a pretty large demand from regional and national chains for our CPC advertising, and they are, what I would call, a more sophisticated buyer, and they’re used to Google of the world, the Adwords and what not. So, they’re actually pretty interested in these products, and we’ve been -- we've now like a national local, which we call national local account sales team talking to these folks about what it is that we can help them with, and it’s remarkable, some of the results, a local hotel chain -- a national hotel chain at a local level has seen kind of a 400% increase in calls and directions since being on Yelp previous to advertising versus now. So, a lot of opportunities, we'll just see how this rolls out, but we’re always kind of putting packages together and seeing what the clients want.
Eric Sheridan – UBS
Okay, I think one of the biggest challenges when we talk to digital advertising companies at their core is proving out the ROI to the end advertiser, and it feels like 2014/2015 are going to be the year of a lot of attribution and measurement work being done to sort of prove out the test case and then the budgets hopefully will flow, you’ve highlighted size of the Yellow Pages business versus your own business. What’s Yelp working on to get advertisers more comfortable with the ROI that’s being delivered, the real-time measurement capabilities inside the platform to help merchants understand what’s being driven from a dollar spent on the Yelp platform?
Yes, I think it’s really all the things that we mentioned. I kind of call local advertising the ground war game where literally we’re reaching out through our telesales force to local businesses across the U.S. and now Europe and educating them on the digital media, so online marketing first and foremost, and then what Yelp specifically can do for them and then showing them all the tools that we’ve rolled out over the last 18 months to help them understand what the ROI is. There is a number of the BIA/Kelsey study at the 133 billion says that 15% to 20% of that’s online. We, BTG did a survey that said only 3% of local businesses are spending online, so we just think this is an education game, and to your point, I think it’s not just 2014 and 2015, it’s more the next five to seven years how businesses transition to that more and more.
I mean, I think we can easily beat the Yellow Pages in showing ROI, and we should be able to prove that. It's just when you have a 15-, 20-, 30-year relationship with somebody, and when it’s pay to play on the Yellow Pages, your reps says, hey you’ve been in the pages for 20 years, if you don’t pay us, you won’t show up, and so that’s a hard thing mentally I think to jump over, but as always we can continue to roll out new tools and help customers understand the value we’re driving, and we just announced about a month ago customer activity feed which is pretty cool. It’s the ability to see what’s happening live on the site.
So businesses get their dashboard, they see that people are calling them in this number, this lump sum number or directions, but then they get this activity feed that says, hey somebody on an iOS phone just checked in your business at 12:36 or somebody just hit directions or called your business on an Android phone. So, it kind of breaks those numbers down into real-life human beings, and I think that’s going to be helpful for the business, the local businesses, to really understand that this isn't just a number, it’s actually people.
Eric Sheridan – UBS
You talked a little bit about the sales force and approaching merchants, there is a lot of various models on how to go about local from a sales standpoint, some people flood the streets with people, some people do it, you guys do, and do a Community Managerand telesales, other people just say log onto a website, can you talk about Yelp’s approach, what you think the opportunities and the challenges are of that approach globally and then how it might have to evolve overtime?
Yes, I mean, when Yelp first started selling advertising, this is the kind of the path we chose which was a telesales presence. So we have offices in New York, Phoenix, and San Francisco, or we have people reaching out and calling businesses, and then we have office in London and Hamburg calling out and reaching people across Europe. We found it to be pretty successful, obviously given kind of our numbers and what we’re seeing in the leverageability in the model, having feet on the street is fairly expensive. I know a few years back, some folks in -- some sales people in Arizona asked to go ahead and just pay instead of doing calling businesses, I have a local territory in Phoenix, why don’t I just go visit them and we’re like okay try it. So, when you compare their results over a month versus the people on the phone, it was pretty dramatically different.
They’d show up to a business, the business owner, the decision maker wasn’t there, they'd have go back the next day, and so they quickly realized after a month that that wasn’t really as productive as being on the phone, so businesses are pretty used to people calling them on the phone, and I do feel like that’s a good solution. I mean, you never know, we may like in London businesses are really close together, a stone’s throw away from a walk, maybe we’ll try it there, but for the most part, we think it’s leverageable. We’ve seen sales and marketing as a percent of revenue come down quite a bit over the last couple of years and specifically in Q3 year-over-year went from 59% to 56%, so it is showing leverage that we’re seeing in the model.
Eric Sheridan – UBS
Okay, the penetration of businesses sort of has been relatively stable around 4%, the ALPA penetration in the business model, help us understand why that sort of is the way it’s played out, and whether there are opportunities to raise that penetration overtime or if there is just something you’ve seen in the market that that's sort of a natural penetration?
Yes, people do that math, so what Eric is talking about is, you take the number of paying advertisers divided by the claimed local accounts, and it is definitely a way to look at it. I think we don’t necessarily look at it that way. We look at, hey there is literally millions of businesses out there, tens of millions in fact, and so that’s the market we’re going to capture. Now, when you claim your account, it’s a great lead, and so we’ll probably give them a call. But then another great lead is if somebody writes a review about a business and gives them a four or five, three, four, five star, and then we can call that business and say you haven’t claimed your page, you haven’t done anything, but hey you have got great word of mouth, why don’t you advertise that and drive more people into your business.
So, I think the way we look at it is a little bit different. We’ve been increasing claims local accounts by probably about 100,000 to 120,000 a quarter, and -- but we don’t do a lot of what I’d call marketing around that. I think that’s just businesses finding out about Yelp. We don’t do paid advertising, so it’s great that they’re finding out and interested in the platform, but I think it’s much broader than just that number.
Eric Sheridan – UBS
When you think about, let`s just do the U.S. for a minute, the competition for the opportunity you’re skating after. How do you see the competition today and sort of what do you think are the biggest opportunities and also the biggest potential competitors that you have to sort of operate around as you think about executing against the plan?
We see that most dollars are being spent offline, so that’s where we see -- when we call local businesses, that’s where they’re spending a large amount of money, and so we look at the offline world, the competitive world is really where the dollars are being spent today. We would expect that over the next five, 10, 15 years, that really does shift more and more online, especially with all the tools that people are rolling out, especially us. So people are still using, as I said, Yellow Pages, newspapers, coupon books if you get those, the value pack coupons in the mail, billboards, and what not.
People are doing definitely some online advertising, so -- and Google is definitely up there in terms of who they’re using. Usually they’re using it through a third party, but they do know they’re driving traffic to their business through that. So we look it as there is more than enough money out there for a lot of different players. We want to play the horizontal, so there is also vertical players like an Angie’s List and home and local or TripAdvisor and hotels and reservations and what not. So, but we look at ourselves as more of a horizontal player and plus it’s free to use.
So 80% of the time when you just check out Yelp and if you’re not getting a particular result, then you can maybe go check out TripAdvisor or Angie’s List and pay for the content, but 80% of the time you should be able to find what you’re looking for, it’s kind of like Amazon where you may be looking for whatever it is, and you find it, but if you’re looking for a diamond, may be go to Blue Nile.
Eric Sheridan – UBS
And then, one other opportunity I wanted to ask you about and then maybe we will open it up for questions, brand advertising as an opportunity for the company, you know (inaudible) which you’re now driving a fair bit of engagement, obviously there is an opportunity there for big brands that think about the platform and putting money to work. What are those conversations like today, and sort of how could they evolve over the next couple of years?
Yes, the way we're looking at brand advertising, it is 5% to 10% of our revenue, it’s a pretty small piece today, and I think that as we evolve and as we focus -- continue to focus on local advertising that will become probably a smaller piece as a percentage. I think the conversations with the brand advertisers is, you can advertise and do display advertising, but I think more importantly is to think about CPC advertising, subscription advertising, enhanced profile advertising, those types of opportunities that we want to encourage them to do.
So, we made the changes beginning of the year to our brand sales team. I think they’ve done a really great job, and that will continue to be the case because we do have a lot of traffic, and so therefore a ton of page views, but I think really our big focus is going to be on this local advertising ad market that we can go capture.
Eric Sheridan – UBS
Okay, well, I do want to give some time to questions in the audience, so I’ll throw it out if nobody does, I’ve got more in case.
Based upon what you’re seeing in the international markets and versus sort of your older cohorts, how do you think international markets will ramp, and what have been some of the biggest surprise about the Qype acquisition to-date?
Yes, so we started out migrating and opening up, what we call, Yelp markets by putting a community manger overseas probably about four or five years ago starting in London., and we’ve been expanding ever since. We have about maybe 50 to 51 of our Yelp markets out of 111 outside the U.S. now. We did acquire a company last October called Qype who is the number review site in Europe, and we’ve been very pleased with how that acquisition and how that transition has been going.
So at the beginning of this year, we moved their London sales folks into our offices and stopped selling Qype in London and selling Yelp, and so that’s worked out fairly well. And in Q3, we did about $3 million in revenue overseas, about 5% of our revenue and that’s up about 680% year-over-year, so we’re pretty pleased with how all this is working.
Basically what’s happening is Qype revenue is declining at a pretty rapid rate, and then Yelp revenue is climbing at a pretty rapid rate. We just actually switched over Germany in October, late October. We started -- and so now we're not selling Qype at all internationally, and we started selling Yelp in Germany as of October 1. At the end of October, I think October 30, we converted 1.8 million reviews on the German site from Qype over to Yelp, so we brought all that content over to Yelp, and then about 1.4 million photos, and we have done that for Ireland, Italy, Spain, France, and UK. UK and France were in Q3.
So we've been pretty pleased with migration. We’ve got great SEO benefit from all of this and we are pretty pleased, and we think that long-term, you know just like a lot of the other Internet companies out there that are fairly large and international, 30% to 40% of our revenue can actually come from overseas. I mean we have the benefit right now of U.S. growing at a phenomenal rate, so it's hard for international to catch up, but those guys are definitely trying.
So kind of all things are pointing up into the right. We have been increasing our reviews outside of even Germany. We’ve been increasing our traffic because of that great content coming to us, and again we don’t pay for the traffic, so pretty nice business model, and I would say if you look back, we’re probably -- in Europe, probably five years ago maybe six or so where we were on the U.S. is kind of how I’d look at it.
Eric Sheridan - UBS
Is there anything from either a social or competitive or pricing standpoint that would differentiate some of these international markets from what we've seen in the U.S. You know some of the cohort analysis, as the woman alluded to is sort of very good as we have built up markets in the U.S., but as you look overseas, is that a replicable business model or is there anything you can call out that might make it look a little different one way or the other?
I mean, so far the playbook works internationally just as it does in the U.S. I mean, we started out at San Francisco. San Francisco is a bit of a unique market, decided to roll it out to a couple of other markets including New York and La, it worked there. We eventually went to Canada. We went to London, it still worked. We went to a non-English speaking country such as France or Spain or now in Germany, seems to be working. People are pretty engaged. People are continuing to contribute content, so far I think culturally each obvious country is a little bit different, but we have local community managers that live their lives in that city. And so, they encourage the community to review and to contribute a lot of content, and so that’s pretty replicable.
You know, we'll see how it works out over the next couple of years, but there is nothing that we can see today that would prevent a city in Europe or anywhere from being a pretty big city that can contribute revenue. And again, just so everyone is aware we only stated monetizing our international markets in Q3 of 2012, is when we set up a sales force in London to start calling local businesses for advertising revenues, so we're like at the beginning stages of all this, pretty exciting actually though.
Can you talk about the longevity or the turnover of your telesales force, and how can you improve productivity and get more leverage out of the telesales force?
We don’t give out specifics on the telesales force. You can imagine that it’s probably in line with a lot of the other telesales force attrition rates. One thing that we have noticed over the last year is a bit of an increase in productivity. You know, the sales people would tell you that’s because of their training. The product people will tell you because of all the tools that we’ve given them to make them more productive and sell more. I don’t know that it matters much as long as it's up.
But yes, I don’t know that it is any necessarily different than any telesales force. And we hire -- just so to give some background, we hire generally right out of college. So most of our sales forces are young and eager and very smart, and what we've shown them is a path in terms of the organization, so the people that run, the person that runs our New York office, Phoenix office, San Francisco office actually all started out as AEs, which was new grads out of college and have risen to manage a pretty large sales force in their own right, London as well. So they definitely see the path, and we are growing our sales force at about 50% year-over-year, and so everybody loves the growth and sees the path to managing other people and what not, so it's been good.
Eric Sheridan - UBS
One of the questions we get a fair bit from people is understanding, you’re early in the lifecycle of producing EBITDA profitability, you know, how that continues to develop over the next couple of years, because you have the unique position that you have older cohorts that are throwing off pretty nice EBITDA margins, you’ve got things you’re investing in whether it be talent or product innovation or overseas markets that are suppressing what we can see from margins -- I mean as public market investors and analysts, but maybe help us understand a little bit about the trajectory of margins and sort of what you see being some of the things we should be looking for where there is leverage in the business model as it matures a little bit over the next three to five years?
I think there is tremendous leverage in the model. I think if you -- what we call the Philadelphia example in our investor relations deck, which is on the site, you can download and it walks through like we have a community manager in Philadelphia, Michelle who has been there a long time. She is a marketing communications major, makes X amount of dollars trying not to give out her salary, and then we have probably in 2012, probably 10 people from our sales organization calling into Philadelphia, and they make between $30,000 and $40,000 a year plus commission. And in 2012, we generated about $1.2 million, $1.3 million in revenue, and that's outlined in -- there is an appendix that has some of this information.
And so from a contribution margin standpoint, because we don't load up each market with G&A and product and technology because that's more platform wide, it's pretty high, and that's in our second cohort market like Philadelphia versus like San Francisco or New York. So we're pretty pleased with that we can generate a lot of leverage, and it does give us confidence to -- we've given out a target model that says EBITDA margins in the target should be 30% to 35% longer term.
And so, we've seen sales and marketing as a percent, think when we went public, it was 66%, 68%, we're now down to 56% as a percent of revenue. G&A has come down as a percent, product and marketing -- sorry product and technology has fluctuated, maybe around 15% to 17%, but we consider that a huge opportunity to invest and roll out all these new tools, and as a total dollar amount, it's fairly small.
So I think there is tons of leverage in the business. I think what other people would say is why don't you just go out and hire another thousand sales people and really double down on this, and I think we're doing it as fast as we can, we kind of have the Goldilocks approach, not too fast not too slow, and we're investing in -- before we went public, we were I think negative 1% margin, and in the last quarter we had 13% adjusted EBITDA margins, so we’re making a lot of progress to that end goal, but there is such a huge opportunity here that we want to invest to go get it, so it's a little bit of a balancing act.
Eric Sheridan - UBS
One of the strategies the company has used is also looking at acquisitions to grow the business either geographically, we talked about Qype or from a functionality standpoint you bought a company called SeatMe. Can you talk a little bit about how M&A versus organic building up businesses, building out geographies fits into the playbooks and the roadmap?
Yes, we're definitely pretty careful about M&A. I mean in the first eight years of life of the company, we had not bought any companies, and so we're obviously fully organic at that point. Last year, we did see an opportunity to accelerate our growth in Europe by buying Qype and so it's basically a content and traffic play, and so we saw that as an opportunistic acquisition, and so far so good it's panned out.
SeatMe is a technology company, so SeatMe has a fairly low cost $99 reservation waitlist solution that allows us to bolt on their technology and then offer it to consumers. So, we have a relationship with OpenTable, so they have a relationship with OpenTable, so they have relationship with about I think 20,000 U.S. restaurants. And so, what you can do is you can go on the site, find a great local restaurant, and then book a reservation seamlessly there through the desktop or app without going over to OpenTable and to book that reservation.
So SeatMe is the same, we just actually this week rolled out the widget to allow the same functionality with SeatMe. Now SeatMe only has a few hundred clients, so it's going to be -- versus 20,000 is going to be a little different, but we're pretty excited about the opportunity because it's underpenetrated market, meaning we have a ton of traffic in what we call the restaurant food and nightlife category, and from a consumer experience standpoint, we want people to book a reservation or put themselves on a waitlist. And then, what we can do is feed that information back to the business owner and ask them to advertise.
So SeatMe is -- we have about a million restaurant food and nightlife locations on Yelp in the U.S. And so, when you compare that to OpenTable, we think that there is a huge opportunity there. So Qype is really about content and traffic, SeatMe was really a technology bolt on that was a build versus buy decision, and we chose to buy for about $12 million, though it was a good idea.
And so, if there are other things that come along that is interesting to us, that allow us to either build out our content or traffic or from a technology standpoint give consumers a great experience, but also feed that information back to business owners, that is something we'd be interested in, so we did just do a follow on, so we raised some additional capital that allows us a lot of flexibility in that area.
Eric Sheridan - UBS
I think that's another question we get from people. Right now, Yelp sits predominantly as an advertising play, but I think most people view local as more of a merchant services type play, possibly longer term which is why I think the Yelp platform got so much excitement around it from investors when you did launch it, so how do you think about moving from maybe just a purely advertising model to possibly a merchant services model and also by its nature that would put you in completion with names like OpenTable or Groupon or Living Social over time, and how you think about that sort of evolution as a company?
Honestly, I think the next couple of years, few years, anyway is really about local advertising. So, that’s our biggest revenue line item, its growing at 80% year-over-year. We only have 57,000 customers, and there’s millions to go get out there. So, for the foreseeable future, that’s really the opportunity that Yelp is going to possess. I think the Yelp platform does give us a lot of flexibility, I think again it’s about the consumer experience that you’d find a great local business and you’d book it, and then feeding that information back to the local business owners from a closer loop, that is literally truly is the last mile, I can tell XYZ restaurant that they had 10 orders of food on our platform last week and that’s, I mean we can’t argue with that, and expanding to other verticals helps that situation. But longer-term transactions will be an interesting play, and garnering all that consumer credit card information on to our platform, because that’s literally one of their requirements for the platform is that we control the consumer experience, so capturing that information and having what we call a local one click. So, you want a massage, your credit card is already on our platform, you book it; you need a dentist, book it; you order food, book it; and it's all captured on our platform and it’s seamless and easy for the consumer.
So, longer term, there is a great opportunity, but I think for the next few years it’s really about local advertising.
Eric Sheridan - UBS
And I guess to close the loop on that, the deals product that you guys have launched those sort of, what have you seen from a launch of a product like that, and how has that strengthened the merchant relationships that you’ve -- that’s you’ve established up to this point.
It’s been great. We have about 60,000 deals on the site, and what we do is we approach it differently than maybe the Groupons and the Living Socials of the world. We look at it as more of a demand fulfillment versus a demand generation, so we’re not emailing out bunch of potential customers to say, hey this is what we’ve got. We have 117 million uniques on the site every month; they’re looking for specific local businesses.
They’re looking for a plumber, they’re looking for a restaurant whatever it is, and what we allow the business owners to do is put up deals so that when the consumer is looking for that, their deals get highlighted. So, it’s an easy sale. If you have two restaurants that are fairly rated the same, the idea that a consumer would go to one with that has 10 per 15 deals is probably a better chance than one without a deal.
So, we feel like that’s more of the demand fulfillment of our consumers and providing them a great consumer experience, and on the flip side, the businesses see that in their dashboard, we take 30% of the cut, so if a business does 20 for 30 deal, we take $6 of the $20, we book all this net, so there is no confusion, and we think it’s a great service and deals is growing at a very fast rate.
Deal revenue is included in our other revenue bucket. So, we have three, we have local advertising brand sales and other – and it is included into other and it’s growing at a pretty fast clip, and we feel like business owners love it because it’s a self-serve product. Our local ad folks are not selling it necessarily, they might mention in the pitch but it’s a Mad Libs type of forum where you just kind of fill out what you want and easy to use, if any knows what Mad Lib is.
Eric Sheridan - UBS
I think we're updating ourselves. Any other questions from the audience?
So the question is about how do you encourage the reviews, the hit rate of reviews in terms of positive, having positive reviews or --.
Eric Sheridan - UBS
I’ve just heard from another company that the number of reviews might be even more important than it doesn’t matter if some of them are negative as long as there are reviews for restaurants, for example the likelihood that I will actually go there increases, I would assume that that’s important for your model.
It is and the reason it is important to have a lot of reviews is its content. So, when I search for the best burrito in town or the best sushi or get very specific and say something like I want a clean tattoo that is in reviews. So, even if the person had a negative experience, they’re still writing about that business, and when I search even and we open ourselves up to the Google search crawler, and that’s indexing to Google. So that’s why we show up, I think, fairly high in Google, and we have great content. So, even if a business had some negative reviews, that also gives some color on the business so that consumers feel like they can trust the site.
We do have a review commendation engine. So, we highlight reviews that we recommend that from trusted sources versus not recommend. So, then that kind of prevents businesses from e-mailing 20 of their best friends to write great reviews. So, we try to take care of that issue with our review recommendation engine. But, the more reviews, the better the content is for that particular local business, and that’s what really makes Yelp so great.
In terms of the community that's contributing that review, they’ve been growing at a pretty astronomical rate as well, review growth is up, I think over 40% year-over-year. We’ve obviously opened up a lot of Yelp markets where our community managers are embedded in the community and that is really the secret sauce of Yelp. We solve local through community versus through technology, we have a great technology platform but we solve it through community with all this great content and that’s really our motto.
Eric Sheridan - UBS
Great, I want to thank Rob from Yelp for being here today.
Thanks Eric. Appreciate it, thanks.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: firstname.lastname@example.org. Thank you!