In the fourth quarter of 2020, Yelp saw a net revenue of $233 million, the company announced Tuesday (Feb. 9), marking a 13 percent year-over-year decline. Net income, however, was up 23 percent from Q4 2019 to $21 million, and the company predicts it will see a “return to sustainable revenue growth in 2021.”
The company’s performance during 2020 was directly associated with the severity of the COVID-19 pandemic and with the resultant restrictions placed on businesses. As CEO Jeremy Stoppelman said Tuesday on a call with analysts, “While our consumer traffic remained below 2019 levels at the end of the fourth quarter, and we saw a slight decrease in activity during the winter, the positive trends we observed over the summer as COVID cases declined gives us confidence that engagement will return organically as more people are inoculated and restrictions ease.”
He pointed out that Yelp is already seeing more user activity in February with a slight decrease in cases nationwide. Chief Operating Officer Jed Nachman added, “As many of you probably have followed [COVID cases] have started declining pretty dramatically in recent weeks and so we are seeing a pickup once again with consumer activity but it but it’s still early, but that gives us some, some confidence that it’s going to play out pretty consistently across the year.”
Yelp has been focusing on retaining its advertisers through enhanced marketing features, reducing the barrier of entry for features like Yelp Connect and waiving fees for page upgrades. The company is also working on optimizing its matching algorithm, making sure that ads are being shown to the consumers to whom they are most likely to appeal. “Despite the difficulties that local economies faced over the last year, we are pleased that our efforts resulted in strong improvements in the retention rate for non-term advertiser budgets,” said Stoppelman. “This increased by 13 percent year over year in 2020 and ended the year, up approximately 25 percent year-over-year in the third and fourth quarters.”
Consumer traffic was lower in 2020 than the year before, and Yelp does not expect traffic to return to pre-pandemic levels in the immediate future. However, the company is hopeful for a gradual recovery as consumers are vaccinated. “We are focused on achieving mid-teens percentage annual revenue growth in 2022, as well as adjusted EBITDA margin exceeding 20 percent,” Chief Financial Officer David Schwarzbach said on the call, later adding, “We look forward to building our revenue momentum and strengthening margins as COVID recedes later this year.”
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