YELP INC

Key Metrics

We regularly review a number of metrics, including the key metrics set forth below, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions.

Ad Clicks and Average CPC

The amount of revenue we generate from our pay-for-performance advertising products is determined by the number of ad clicks we deliver to advertisers and the price we charge for each ad click (“CPC”).

Ad clicks represent user interactions with our pay-for-performance advertising products, including clicks on advertisements on our website and mobile app, clicks on syndicated advertisements on third-party platforms and Request-a-Quote submissions, among others. Ad clicks include only user interactions that we are able to track directly, and therefore do not include user interactions with ads sold through our advertising partnerships. We do not expect the exclusion of such user interactions to materially affect this metric. We report the year-over-year percentage change in ad clicks as a measure of our success in monetizing more of our consumer activity and delivering more value to advertisers.

Average CPC is calculated as revenue from our performance-based ad products — excluding certain revenue adjustments that do not impact the outcome of an auction for an individual ad click, such as refunds, as well as revenue from our advertising partnerships — divided by the total number of ad clicks for a given period. Average CPC represents the average amount we charge advertisers for each ad click.

We believe that ad clicks and average CPC together reflect one of the most significant dynamics affecting our advertising revenue performance: the interplay of advertiser demand and consumer activity. At the level of an auction for an individual ad click, advertiser demand — consisting of advertiser budgets and the number of advertisers competing to purchase the ad click — intersects with the supply of consumer activity — consisting of the predicted levels of relevant consumer traffic and engagement — to determine CPC, with higher advertiser demand putting upward pressure on the CPC and higher consumer activity putting downward pressure on the CPC. In aggregate, advertiser demand consists of the number of business locations advertising with us (which we refer to as paying advertising locations, as discussed below) and the aggregate budget they allocate to purchasing our advertising products. Aggregate monetizable consumer activity depends on the levels of consumer traffic and engagement with our ads, the numbers of locations where we can display ads and other monetizable features, and our click-through rate, which is the ratio of ad clicks to the number of times the ads were displayed to consumers. The relative strengths of these factors in aggregate are reflected in average CPC.

Ad clicks and average CPC also provide important insight into the value we deliver to advertisers, which we believe is a significant factor in our ability to retain both revenue and customers. For example, a positive change in ad clicks for a given period combined with lower growth or a negative change in average CPC over the same period would indicate that we delivered more ad clicks at lower prices, thereby delivering more value to our advertisers; we would expect this to have a positive impact on retention. Conversely, growth in average CPC paired with a negative or lower growth rate in ad clicks would indicate we charged more without delivering more ad clicks; we would expect this to have a negative impact on retention unless we are able to increase the value we deliver through higher performing ad clicks.

The following table presents year-over-year changes in our ad clicks and average CPC for the periods presented (each expressed as a percentage):

In each of the three and twelve months ended December 31, 2024, advertising revenue grew 6% year over year due to year-over-year increases in ad clicks. The increases in ad clicks in both periods were driven by improvements to our advertising technology and, to a lesser extent, our acquisition of Services projects through paid search. Average CPC remained flat in each of the three and twelve months ended December 31, 2024.

Advertising Revenue by Category

Our advertising revenue comprises revenue from the sale of our advertising products, including the resale of our advertising products by partners and syndicated ads appearing on third-party platforms.

To reflect our strategic focus on creating two differentiated experiences on Yelp, we provide a breakdown of our advertising revenue attributable to businesses in two high-level category groupings: Services and RR&O. Our Services categories consist of home, local, auto, professional, pets, events, real estate and financial services. Our RR&O categories consist of restaurants, shopping, beauty & fitness, health and other.

The following table presents our advertising revenue by category for the periods presented (in thousands, except percentages):

Paying Advertising Locations

Paying advertising locations comprise all business locations associated with a business account from which we recognized advertising revenue in a given month, excluding RepairPal business locations as well as business accounts that purchased advertising through partner programs other than Yelp Ads Certified Partners, averaged over a given three- or twelve-month period. We also provide a breakdown of paying advertising locations between our Services categories and RR&O categories.

We provide our paying advertising locations as a measure of the reach and scale of our business; however, this metric may exhibit short-term volatility as a result of factors such as seasonality and macroeconomic conditions. For example, macroeconomic factors, such as the current inflationary pressures and labor and supply chain challenges, have had a predominant negative impact on RR&O paying advertising locations over the past year. Short-term fluctuations in paying advertising locations may also reflect the acquisition or loss of single advertising accounts associated with large numbers of locations, or the pausing/restarting of advertising campaigns by such multi-location advertisers.

The following table presents the number of paying advertising locations for the periods presented (in thousands, except percentages):

Total paying advertising locations decreased in the three and twelve months ended December 31, 2024 compared to the prior-year periods, as the decreases in paying advertising locations in our RR&O categories were partially offset by increases in paying advertising locations in our Services categories over the same periods. We believe the decreases in RR&O paying advertising locations reflect the challenging operating environment facing businesses in these categories and, to a lesser extent, competition for ad spend from such businesses, including from food ordering and delivery providers.

Reviews and Traffic

We report our reviews and traffic metrics on an annual basis as measures of the volume of our content and the size of our audience, respectively. Although measures of our content (including our reviews metric) and traffic do not factor directly into the advertising arrangements we have with our customers, this dynamic underpins our ability to deliver ad clicks and drive conversion of advertisers’ products and services. Consumer engagement metrics validate our value proposition to businesses as they seek easy-to-use and effective advertising solutions.

Reviews

Number of reviews represents the cumulative number of reviews submitted to Yelp since inception, as of the period end, including reviews that were not recommended or had been removed from our platform. In addition to the text of the review, each review includes a rating of one to five stars. We include reviews that are not recommended and that have been removed because all of them are either currently accessible on our platform or were accessible at some point in time, providing information that may be useful to users to evaluate businesses and individual reviewers. Because our automated recommendation software continually reassesses which reviews to recommend based on new information that becomes available, the “recommended” or “not recommended” status of reviews may change over time. Reviews that are not recommended or that have been removed do not factor into a business’s overall star rating. Users can access the reviews that are not currently recommended, as well as the star rating and other information about reviews that were removed for violation of our terms of service, through a link on the business’s page.

As of December 31, 2024, 308.1 million reviews had been submitted to our platform, of which 281.8 million reviews were available on business pages, including 46.9 million reviews that were not recommended, and 26.3 million reviews had been removed from our platform, either by us for violation of our terms of service or by the users who contributed them. The following table presents the number of cumulative reviews as of December 31, 2024 and 2023 (in thousands):

Traffic

Traffic to our website and mobile app has three components: mobile devices accessing our mobile app, devices accessing our non-mobile optimized website, which we refer to as our desktop website, and devices accessing our mobile-optimized website, which we refer to as our mobile website.

A substantial majority of each of these traffic streams goes to our RR&O categories, with traffic to our mobile app particularly heavily weighted toward RR&O. Because RR&O traffic is particularly sensitive to changes in consumer confidence levels, our overall traffic levels generally fluctuate with macroeconomic conditions. For example, although our traffic has recovered from its lowest levels during the pandemic in 2020, it has remained below our pre-pandemic 2019 traffic levels due to ongoing economic uncertainty and inflationary pressures, among other macroeconomic concerns. We cannot predict the remaining duration of these conditions, or the duration or magnitude of any resulting adverse impacts on our traffic, and we expect that our traffic levels will continue to fluctuate with consumers’ level of confidence.

In addition, we have historically benefited from the integration of our content into Apple Maps, driving a significant amount of traffic to our website and downloads of our mobile app. However, the volume of traffic and app downloads from this source has declined following certain changes to the display of our content in Apple Maps and it may to continue to decline in the future.

As a result of these dynamics, as well as the maturation of our business and high penetration rates in most major geographic markets within the United States and Canada, we generally expect our traffic to continue fluctuating and to decrease in certain periods going forward. In 2025, we expect RR&O traffic to remain challenged as consumers continue to face economic uncertainty and inflation, likely offsetting modest growth in Services traffic. While we believe our largest growth opportunity will be to monetize a greater portion of our existing traffic, rather than to grow traffic generally, we are also investing in a broad set of consumer initiatives to support the long-term growth of our traffic and business.

We use the metrics set forth below to measure each of our traffic streams. An individual user who accesses our platform through multiple traffic streams will be counted in each applicable traffic metric; as a result, the sum of our traffic metrics will not accurately represent the number of people who visit our platform on an average monthly basis.

App Unique Devices. Prior to 2024, we calculated app unique devices as the number of unique mobile devices using our mobile app in a given month, averaged over a given twelve-month period. As a result of our ongoing efforts to improve the accuracy of our key metrics, in 2024, we updated our methodology for measuring app unique devices to exclude devices that access our mobile app in a given month but do not meet a minimum level of engagement with it during such month by, for example, viewing a business, performing a search, viewing or submitting content, or other similar interactions (“minimum required level of engagement”). Under both our current and historical methodologies, an individual who accesses our mobile app from multiple mobile devices will be counted as multiple app unique devices. Multiple individuals who access our mobile app from a shared device will be counted as a single app unique device.

App users generate a substantial majority of activity on Yelp, including the page views and ad clicks that we monetize. The following table presents app unique devices for the periods presented (in thousands):

In 2024, app unique devices decreased year over year as consumers visited restaurants less frequently amid macroeconomic pressures. It also continued to be negatively impacted by the reduced volume of app downloads driven by Apple Maps.

Desktop and Mobile Website Unique Devices. Prior to 2024, we calculated our desktop and mobile web traffic metrics based on the number of “users,” as measured by Google Analytics, who had visited our desktop website and mobile website, respectively, at least once in a given month, averaged over a given twelve-month period. We referred to these metrics as desktop unique visitors and mobile web unique visitors. However, as of July 1, 2024, Google discontinued the Universal Analytics version of Google Analytics that we previously used.

We now calculate desktop web traffic and mobile web traffic as (1) the number of devices identified by our internal measurement tools that have visited our desktop website and mobile website, respectively, at least once in a given month, (2) adjusted to exclude devices that do not meet our minimum required level of engagement during such month, (3) averaged over a given twelve-month period. We believe this methodology will allow us to better analyze web traffic data. We refer to our web traffic metrics calculated under this methodology as unique devices rather than unique visitors to conform to the name of our app unique devices metric as well as to better reflect that these metrics measure devices that visit our website rather than individuals who visit our website, as discussed below.

Our internal measurement tools and Google Analytics measure devices and “users,” respectively, based on unique identifiers. As a result, an individual who visits our website from multiple devices with different identifiers may be counted as multiple unique devices or unique visitors, as applicable, and multiple individuals who visit our website from a shared device with a single identifier may be counted as a single unique device or unique visitor. Accordingly, the calculations of our unique visitors and unique devices may not accurately reflect the number of individuals who actually visit our website.

The following table presents our web traffic for the periods presented (in thousands):

Improvements to our desktop and mobile websites, including matching improvements and a more visually appealing user experience, drove slight year-over-year increases in desktop and mobile web unique devices in 2024.

Active Claimed Local Business Locations

We report active claimed local business locations annually as a measure of the scope of our Local advertising business. The number of active claimed local business locations represents the number of claimed local business locations — business addresses for which a business representative has visited our platform and claimed the free business page for the business located at that address — that are both (a) active on Yelp and (b) associated with an active business owner account as of a given date. We consider a claimed local business location to be active if it has not closed, been removed from our platform or merged with another claimed local business.

The table set forth below presents the number of active claimed local business locations as of the dates presented (in thousands).

Results of Operations

The following table sets forth our results of operations for 2024 and 2023 (in thousands, except percentages). The period-to-period comparison of financial results is not necessarily indicative of future results.

(1)Percentage changes are calculated based on rounded numbers and may not recalculate exactly due to rounding.

(2)For the year ended December 31, 2024, other revenue includes revenue generated from transactions with consumers, which we reported separately as transactions revenue in prior periods. Prior-period amounts have been reclassified to conform to the current-period presentation.

Years Ended December 31, 2024 and 2023

Net Revenue

Advertising. We generate advertising revenue from the sale of our advertising products — including Yelp Ads and business page upgrades — to businesses of all sizes, from single-location local businesses to multi-location national businesses. Advertising revenue also includes revenue generated from the resale of our advertising products by certain partners and monetization of advertising inventory through third-party ad networks, as well as revenue from the RepairPal Network. We present advertising revenue on a disaggregated basis for our high-level category groupings, Services and RR&O.

Advertising revenue increased in 2024 compared to 2023, primarily driven by a 6% increase in ad clicks.

Other. We generate other revenue through non-advertising contracts, such as our subscription services, which include our Yelp Guest Manager product, and through our Yelp Fusion and Yelp Fusion Insights programs, which provide Yelp content and data for a fee. In addition, we now report transactions revenue together with other revenue to reflect that neither transactions revenue nor the underlying business is a core part of our current business model. As a result, other revenue now includes revenue from various transactions with consumers. We generate revenue from such transactions through our partnership integrations, which are mainly revenue-sharing arrangements that provide consumers with the ability to place food orders for pickup and delivery through third parties directly on Yelp. We earn a fee for acting as an agent for transactions placed through these integrations, which we record on a net basis and include in revenue upon completion of a transaction.

Other revenue increased in 2024 compared to 2023, primarily due to the continued growth of our Yelp Fusion, Yelp Guest Manager and Yelp Fusion Insights programs, partially offset by a lower volume of food takeout and delivery orders.

Trends and Uncertainties of Net Revenue. Net revenue in the year ended December 31, 2024 increased by 6% year over year as momentum in our Services categories continued. We expect net revenue for the first quarter of 2025 to decrease slightly from the fourth quarter of 2024, reflecting typical seasonality and ongoing operating challenges for businesses in our RR&O categories.

Costs and Expenses

Cost of Revenue (exclusive of depreciation and amortization). Our cost of revenue consists primarily of website infrastructure expense, which includes website hosting costs and employee costs (including stock-based compensation expense) for the infrastructure teams responsible for operating our website and mobile app, and excludes depreciation and amortization expense. Cost of revenue also includes third-party advertising fulfillment costs and credit card processing fees.

Cost of revenue increased in 2024 compared to 2023, primarily as a result of an increase in website infrastructure expense of $8.8 million, primarily as a result of investments in maintaining and improving our infrastructure as well as higher cost of labor.

We expect cost of revenue to increase on an absolute dollar basis in 2025 compared to 2024.

Sales and Marketing. Our sales and marketing expenses primarily consist of employee costs (including sales commission and stock-based compensation expenses) for our sales and marketing employees. Sales and marketing expenses also include business and consumer acquisition marketing, community management, as well as allocated workplace and other supporting overhead costs.

Sales and marketing expenses increased in 2024 compared to 2023, primarily due to:

•an increase in marketing and advertising costs of $23.0 million, driven by increased investments in acquiring Services projects through paid search; and

•an increase in employee costs of $16.2 million resulting from higher cost of labor, partially offset by lower average headcount.

These increases were partially offset by a decrease in workplace operating costs of $9.8 million resulting from reductions in our leased office space. See Note 10, “Leases,” of the Notes to Consolidated Financial Statements for further detail.

We expect sales and marketing expenses to increase in 2025 compared to 2024 as our sales and marketing employees become more tenured as well as additional headcount from the acquisition of RepairPal. However, we expect sales and marketing expenses to decrease as a percentage of net revenue as we realize efficiencies from our sales and marketing initiatives.

Product Development. Our product development expenses primarily consist of employee costs (including bonuses and stock-based compensation expense, net of capitalized employee costs associated with capitalized website and internal-use software development) for our engineers, product management and corporate infrastructure employees. In addition, product development expenses include allocated workplace and other supporting overhead costs.

Product development expenses decreased in 2024 compared to 2023, primarily due to a decrease in employee costs of $5.8 million resulting from more employee costs being capitalized and lower average headcount, partially offset by higher cost of labor.

We expect product development expenses to remain relatively consistent on an absolute dollar basis in 2025 compared to 2024, but decrease as a percentage of net revenue as our distributed operations provide leverage.

General and Administrative. Our general and administrative expenses primarily consist of employee costs (including bonuses and stock-based compensation expense) for our executive, finance, user operations, legal, people operations and other administrative employees. Our general and administrative expenses also include our provision for doubtful accounts, consulting costs, as well as allocated workplace and other supporting overhead costs.

General and administrative expenses decreased in 2024 compared to 2023, primarily due to:

•a decrease in impairment charges of $17.7 million related to our leased office spaces. See Note 10, “Leases,” of the Notes to Consolidated Financial Statements for further detail;

•an $11.0 million loss contingency recorded in 2023 in connection with the agreement to settle a putative class action lawsuit asserting claims under the California Invasion of Privacy Act (the “CIPA Action”). See Note 14,“Commitments and Contingencies,” of the Notes to Consolidated Financial Statements for further detail; and

•a decrease in employee costs of $5.3 million, primarily driven by lower average headcount.

These decreases were partially offset by an increase in our provision for doubtful accounts of $4.9 million due to higher customer delinquencies and higher advertising revenue.

We expect general and administrative expenses to increase slightly on an absolute dollar basis in 2025 compared to 2024 to support the continued growth of our business, but remain relatively consistent as a percentage of net revenue.

Depreciation and Amortization. Depreciation and amortization expense primarily consists of depreciation on computer equipment, software, leasehold improvements, capitalized website and internal-use software development costs, and amortization of purchased intangible assets.

Depreciation expense decreased $3.2 million in 2024 compared to 2023, primarily due to a decrease in depreciation expense of leasehold improvements from asset retirements related to lease abandonments and expirations as well as certain other assets becoming fully depreciated since the prior-year period.

This decrease was partially offset by an increase in amortization expense of $1.4 million related to intangible assets acquired as part of the acquisition of RepairPal. See Note 8, “Acquisition,” of the Notes to Consolidated Financial Statements for further detail.

Other Income, Net

Other income, net consists primarily of the interest income earned on our cash, cash equivalents and marketable securities, research and development tax credits, the portion of our sublease income in excess of our lease cost, accretion of discounts and amortization of premiums on investments, credit facility fees, foreign exchange gains and losses, and, in the year ended December 31, 2024, the release of a reserve related to a one-time payroll tax credit.

Other income, net increased in 2024 compared to 2023 due to the release of a $3.1 million reserve related to a one-time payroll tax credit, higher tax incentives of $1.9 million related to research and development activity in the United Kingdom, and $1.8 million of higher interest income earned on our cash, cash equivalents and marketable securities primarily due to higher federal interest rates.

Provision for Income Taxes

Provision for income taxes consists of: federal and state income taxes in the United States and income taxes in certain foreign jurisdictions; deferred income taxes reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The increase in the provision for income taxes in 2024 compared to the prior year was primarily driven by an increase in profit before tax as well as a decrease in the discrete tax benefits related to the federal and state tax provision to return adjustments.

As of December 31, 2024, we had approximately $139.6 million in net deferred tax assets (“DTAs”). As of December 31, 2024, we consider it more likely than not that we will have sufficient taxable income in the future that will allow us to realize these DTAs. However, it is possible that some or all of these DTAs will not be realized. Therefore, unless we are able to generate sufficient taxable income from our operations, a substantial valuation allowance may be required to reduce our DTAs, which would materially increase our expenses in the period in which we recognize the allowance and have a materially adverse impact on our consolidated financial statements. The exact timing and amount of the valuation allowance recognition are subject to change on the basis of the net income that we are able to actually achieve. We will continue to evaluate the possible recognition of a valuation allowance on a quarterly basis.

We continue to estimate that our effective GAAP tax rate (before discrete items) for 2025 will be in the range of 24% to 28%. However, our GAAP tax rate is impacted by a number of factors that are not in our direct control and that are subject to quarterly variability, which limits our visibility into the applicable rate for future fiscal periods.