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KEY POINTS OF DISCUSSION
- BACKSTORY: 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 elevated churn is likely due to poor advertiser ROI, which we suspect is due to a lack of sufficient ad inventory. In short, YELP has been serially overmonetizing its platform throughout its public history.
- PULLED THE GOALIE: We believe the model started to fail in mid-2017, which is when we estimate that gross adds in its core salesforce-driven business started declining on a y/y basis. YELP responded by allowing its reps to sell non-term ad packages, which greases the wheels for gross adds but exacerbates churn at the same time. We believe non-term ad packages will exhaust YELP's TAM at an elevated rate.
- LOOKING FORWARD: We believe declining PAAs is just a question of when. In the interim, YELP didn't do itself any favors in the way it handled its 2018 guidance, especially considering that its about to lap the initial roll-out of non-term ad packages. We will discuss the fundamental setup for the remainder of 2018, and into 2019.
YELP 2018 DECKS & REPLAYS
- INTERNET | BEST IDEAS MID-YEAR UPDATE | 6/28/2018 | CLICK HERE
- YELP | NEW BEST IDEA SHORT | 2/5/2018 | CLICK HERE
Let us know if you have any questions or would like to discuss further.
