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KEY POINTS OF DISCUSSION
- CORE DETERIORATION: YELP's model is predicated on driving new account growth in excess of its rampant attrition, which we estimate is the overwhelming majority of its accounts on an annual basis. YELP’s ability to do so moving forward is a growing concern given what we expect to be a new baseline in elevated attrition rates against y/y declines in its core salesforce-driven new account growth.
- EVERYTHING ELSE IS JUST NOISE: Some believe YELP's ancillary businesses can compensate for its core, but they're not all that different. Self-serve is a just a watered-down version of its Local Ad product with questionable drivers, while National may just be Local by another name. The Transactions segment is all but dissolved following the Eat24 sale as the Grubhub deal is a non-factor. Further, Request-a-Quote will never be anything more than ad inventory.
- ESTIMATES AREN'T ITS ONLY RISK: We estimate that YELP can’t get to 2018 Local Advertising estimates under most reasonable circumstances. Worse, net account declines are becoming a growing possibility as YELP’s account base gets larger (see point 1). But we have another noisy setup into the 4Q17 print, which may push out our first catalyst depending on when YELP wants to own up to 2018 (guide or results).
Let us know if you have any questions or would like to discuss in more detail.