Yelp’s Plans To Shift Offline Orders Online With Eat24

While Yelp has always been vague about how it plans to monetize the platform — outside of advertising dollars — what it appears is helping Yelp grow most is acquisitions of other companies that help Yelp be a more engaging, consumer-friendly and restaurant-friendly product.

But that’s not enough for the company to produce a quarterly profit. Yelp posted a net revenue of $118.5 million, which was a 55 percent growth, year over year, but it also posted a net loss on the quarter of $1.3 million, which was half of the net loss of last year’s Q1 net loss of $2.6 million.

Yelp’s most recent big acquisition that occurred in the first quarter was Eat24, the online food ordering company. The deal was closed on Feb. 9 for $75 million in cash and 1.4 million shares of Yelp Class A common stock, for a total value of $134 million. Eat24 was founded in 2008 in order to expand the online food ordering industry. Currently, it has over 20,000 restaurants in over 1,500 cities as ordering destinations, though it has to compete with fellow online ordering giant GrubHub which has over 250,000 menus available despite the same amount of restaurants using them for ordering and delivery service.

“Our goal with the acquisition of Eat24 is to increase engagement in one of our most important verticals: Restaurants. Based on a recent Nielsen study that we commissioned this month, approximately 70 percent of food orders in the U.S. were placed offline,” Yelp CEO Jeremy Stoppelman said yesterday (April 29) in the company’s earnings call with analysts. “We believe there is significant opportunity for growth with order-ship online. By leveraging Eat24’s product with our traffic, and our more established brands, we believe we can grow Eat24’s online food ordering business — much like we’ve done with the restaurants with our reservation solutions.”

The examples of growth that he cited are SeatMe, which was acquired by Yelp on 2013, and Yelp Reservation, which the company launched last year. Combined, the two services had more than 12,000 nightlife and restaurant establishments accepting online in Q1; that figure is a 50 percent increase, quarter over quarter, but from a revenue standpoint it’s still a very small piece of Yelp’s earnings pie. Eat24’s revenue for the quarter hit $5 million, which is a 63 percent growth.

“Prior to SeatMe and Yelp Reservations, online booking capabilities were constrained and limited by expensive and complicated reservation solutions. Our inexpensive, cloud-based solutions represent a significant market expansion as we’ve seen non-traditional customers adopt SeatMe — ranging from a winery in Long Island to an arcade and bar in Tennessee,” Stoppelman said. “We’re continuing to invest in our reservation products and we look forward to extending our reservation capabilities to an even broader array of restaurants and nightlife establishments.”

By the end of Q1, he said Yelp has conducted 1.5 million transactions since its inception in July 2013. While Yelp has succeeded in taking over companies to help spur more online transactions, there’s still a gap in the number of customers who actually use the platform for payments. And that’s what Yelp needs to really monetize the service. Through more customer loyalty and engagement, the company hopes transactions will become a more embedded part of the customer thought process when using Yelp.

“While Yelp’s mission is to connect people with a greater amount of local businesses, we also want to enable consumers to take that next step and transact,” Stoppelman said.

In terms of other specific earnings figures provide, average monthly visitors for the quarter grew 29 percent, year over year, to 79 million and average monthly desktop unique visitors dipped 3 percent, year over year, to roughly 80 million. Average monthly unique visitors for both desktop and mobile grew 8 percent on the year to roughly 142 million.

“Looking to the rest of the year, we will continue to seek ways to increase engagement and drive awareness, while striving to demonstrate the value we can deliver to local businesses in order to capture the large local advertising market opportunity,” Stoppelman wrote in the company’s earnings release.

Yelp’s competition, GrubHub, also reported yesterday and posted a revenue of $88.2 million, a 51 percent increase, year over year. Unlike Yelp’s profit dip, GrubHub posted a net income of $10.6 million — a 143 percent increase from 2014’s Q1 profit of $4.4 million. Gross food sales from GrubHub hit $590 million for the year, a 36 percent increase from the year prior.

“As previously announced, in addition to the DiningIn acquisition we closed in early February, we completed our acquisition of Restaurants on the Run later in the month and continue to be excited about providing delivery as part of an integrated suite of products for our independent restaurant partners,” GrubHub CEO Matt Maloney said in the company’s earnings release. “We believe that by providing the last mile, we can improve the diner experience, increase the total market and potentially lower the cost of delivery by leveraging our unequaled scale.”