Yelp Inc. (NYSE:), the company known for its business reviews and search services, has reported a strong second quarter for 2024. The company’s net revenue reached a record $357 million, marking a 6% year-over-year increase. Yelp’s net income stood at $38 million, with adjusted EBITDA at $91 million, both surpassing expectations.
The services business, particularly the home services category, showed significant growth. Despite challenges in the restaurant and retail sectors, Yelp is optimistic about its strategies for growth and its role in the AI search space.
Key Takeaways
- Yelp’s Q2 2024 net revenue increased by 6% year-over-year to $357 million.
- Net income reported at $38 million and adjusted EBITDA at $91 million, exceeding expectations.
- The company introduced over 20 new features and updates, with strong performance in the services business.
- Home services category grew by 15% year-over-year; request-to-quote project growth accelerated to 35% year-over-year.
- Yelp plans to extend its success with small and medium-sized businesses (SMBs) to enterprise businesses.
- The company is optimistic about opportunities following an antitrust decision against Google.
- Yelp is focusing on driving leads to businesses with fewer reviews and leveraging its unique data in partnerships.
Company Outlook
- Yelp is confident in its strategy to drive profitable growth and shareholder value despite a challenging operating environment for restaurants and retailers.
- The company expects to continue becoming more efficient in its operations and marketing.
- Yelp is confident in its ability to deliver against its roadmap and marketing targets, with a focus on product-led strategy for margin leverage over time.
Bearish Highlights
- The restaurant, retail, and other (RR&O) category revenue is impacted by macroeconomic factors and competition from food delivery platforms.
- Yelp anticipates a slight increase in cost-per-click (CPC) rates and a decrease in click growth in the coming quarters.
Bullish Highlights
- Yelp’s AI-driven product improvements and user experience enhancements are expected to make the platform more accessible and precise in lead distribution.
- The company sees data licensing and their unique data as key factors in their partnerships with AI players.
- Yelp has a robust roadmap for improving their ad tech stack and driving improvements in cost per lead.
Misses
- No specific misses were reported from the earnings call.
Q&A Highlights
- Discussion on the incorporation of Language Model Models (LLMs) into ad tech and search improvements.
- Yelp Assistant launch has shown promise in guiding users through project submissions.
- Yelp is open to providing APIs and licensing data to support various applications.
Yelp’s second quarter results demonstrate the company’s ability to adapt and thrive in a competitive and changing market. With a focus on innovation, efficiency, and strategic growth, Yelp is well-positioned to capitalize on its strengths in the local search and services market.
The company’s optimism, despite the challenges faced by certain sectors, suggests a strong belief in its business model and future prospects. As Yelp continues to evolve and expand its offerings, it remains a key player in the digital space with potential for further growth.
Full transcript – Yelp (YELP) Q2 2024:
Operator: Hello, and welcome to the Q2 2024 Yelp, Inc. Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Kate Krieger, Director, Investor Relations. You may begin
Kate Krieger: Good afternoon, everyone. And thanks for joining us on Yelp’s second quarter 2024 earnings conference call. Joining me today are Yelp’s Chief Executive Officer, Jeremy Stoppelman; Chief Financial Officer, David Schwarzbach; and Chief Operating Officer, Jed Nachman. We published a shareholder letter on our Investor Relations website and with the SEC, and hope everyone had a chance to read it. We’ll provide some brief opening comments and then turn to your questions. Now, I’ll read our Safe Harbor statement. We’ll make certain statements today that are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. In addition, we are subject to a number of risks that may significantly impact our business and financial results. Please refer to our SEC filings as well as our shareholder letter for a more detailed description of the risk factors that may affect our results. During our call today, we may discuss adjusted EBITDA, adjusted EBITDA margin and free cash flow, which are non-GAAP financial measures. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with Generally Accepted Accounting Principles. In our shareholder letter released this afternoon and our filings with the SEC, each of which is posted on our Investor Relations website, you will find additional disclosures regarding these non-GAAP financial measures, as well as historical reconciliations of GAAP net income or loss to both adjusted EBITDA and adjusted EBITDA margin, and a historical reconciliation of GAAP cash flows from operating activities to free cash flow. And with that, I will turn the call over to Jeremy.
Jeremy Stoppelman: Thanks, Kate. And welcome, everyone. Yelp delivered record net revenue and strong profitability in the second quarter. Net revenue increased by 6% year-over-year to $357 million as we introduced more than 20 new features and updates in the quarter, reflecting our product-led strategy. With a disciplined approach, we expanded net income margin by 6 percentage points and adjusted EBITDA margin by 1 percentage point from the prior year period. Businesses in our restaurant, retail and other categories continued to face a challenging operating environment in the second quarter, resulting in a decline in revenue for RR&O of 3% year-over-year. At the same time, our services business, which remains the focus of our product-led strategy in 2024, saw continued momentum. Services revenue increased by 11% year-over-year, making it the 13th consecutive quarter of double-digit growth. We saw even stronger performance in the home services category, which increased by approximately 15% year-over-year. Request to quote project growth accelerated from approximately 20% year-over-year in the first quarter to approximately 35% year-over-year in the second quarter. This acceleration resulted from both organic improvements as well as paid project acquisition. Regarding our paid project acquisition, we continued to see strong top-of-funnel metrics including projects, ad clicks and CPCs. As we scaled spend in the quarter, we also saw early indications of retention benefits among newer businesses with fewer reviews, which often experienced difficulty competing with established advertisers for leads. We plan to leverage this learning to become more precise in lead distribution, narrowing our focus towards the opportunities that we believe have the highest return. With just 20% of services revenue coming from multi-location businesses, we also see an opportunity to extend our success with SMBs in these categories to enterprise businesses. We have been adapting our services product offerings to better fit the needs of these larger advertisers. We recently launched Request-a-Quote for brands and introduced a new leads API. This enables multi-location businesses to compete for the millions of Request-a-Quote projects available on Yelp and seamlessly manage leads across multiple business pages. More broadly, our product and engineering teams continued to leverage AI to further optimize advertisers’ budgets by displaying the most relevant ad content to consumers. In the second quarter, ad clicks increased by 9% year-over-year, while average CPC decreased by 1% year-over-year. We also rolled out a number of user experience and back-end improvements to our website, and introduced a number of new features to make Yelp more useful for consumers with accessibility needs. In summary, we were pleased with the continued progress on our product roadmap in the second quarter, particularly in services, while we delivered strong profitability. Overall, we remain confident in our strategy to drive profitable growth and shareholder value over the long term. With that, I’ll turn it over to David.
David Schwarzbach: Thanks, Jeremy. In the second quarter, net revenue increased by 6% to a record $357 million, $2 million above the high end of our outlook range. Driven by our disciplined approach, net income was $38 million, or $0.54 per share on a diluted basis, representing an 11% margin. Adjusted EBITDA reached $91 million, representing a 26% margin, putting it $16 million above the high end of our outlook range. Continued strength in services categories drove this growth. Advertising revenue in services increased by 11% year-over-year to a record $223 million. As Jeremy mentioned, restaurants and retailers remained pressured in the quarter, resulting in a 3% year-over-year decline in RR&O revenue to $118 million. A decrease in RR&O locations offset growth in services locations in the second quarter. This resulted in an overall decline of 6% year-over-year in paying advertising locations to 531,000. We remain focused on driving growth through our most efficient channels. Self-serve continued its momentum, growing approximately 20% year-over-year in the second quarter. This makes it the 15th consecutive quarter with year-over-year growth at or above this level. At the same time, multilocation revenue came in approximately flat year-over-year, reflecting continued softness in RR&O. Similarly, Yelp audiences maintained its annual run rate of approximately $45 million in the second quarter. We continued to see growth opportunities for Yelp Audiences, and recently expanded its reach to enable advertisers to connect with our high-intent audience through audio platforms, along with additional connected TV platforms. Turning to expenses, in the second quarter, we remained disciplined in our allocation of resources while focusing on opportunities that have the potential to drive incremental returns. This resulted in our net income margin improving by 6 percentage points year-over-year and our adjusted EBITDA margin improving by 1 percentage point year-over-year. We achieved this even as we invested $12 million in paid services project acquisition during the quarter. In the second quarter, we also reduced stock-based compensation expense as a percentage of revenue by 1 percentage point year-over-year, and remained focused on reaching less than 8% by the end of 2025. We expect these efforts to stack over time, improving the quality of our adjusted EBITDA and benefiting GAAP profitability in the years to come. Returning capital to shareholders through share repurchases continues to be a key element of our capital allocation strategy. In the second quarter, we repurchased $63 million worth of shares at an average purchase price of $37.94 per share. As of June 30, 2024, we had $456 million remaining under our existing repurchase authorization. We plan to continue repurchasing shares in the second half of 2024, subject to market and economic conditions. Turning to our outlook. In the second quarter, services revenue maintained double-digit growth, while RR&O revenue remained impacted by a challenging operating environment for businesses in those categories, with additional pressure as we move through the second half of the quarter. As we look to the third and fourth quarters of the year, we expect these trends to persist. In the third quarter, we expect net revenue to be in the range of $357 million to $362 million. For the full year, we now expect net revenue will be in the range of $1.410 billion to $1.425 billion, a decrease of $12.5 million from the midpoint of our prior range. Turning to margin, our business continues to demonstrate its underlying profitability, and we remain dedicated to disciplined expense management. In addition, as Jeremy mentioned, we are narrowing the focus of our paid project acquisition efforts. And expect to spend approximately $35 million in total for the year on paid search, having spent $19 million in the first half of the year. We expect third quarter adjusted EBITDA to be in the range of $82 million to $87 million. For the full year, we now expect adjusted EBITDA to be in the range of $325 million to $335 million, an increase of $10 million at the midpoint, despite continued RR&O headwinds in the second half of the year. As a result of subleasing a portion of our Toronto office space in July, we expect to incur an impairment charge of approximately $4 million in the third quarter related to right-of-use assets and leasehold improvements associated with the underlying operating leases. We expect third quarter net income to be reduced by the full amount of the charge, but do not expect it to impact adjusted EBITDA. In closing, Yelp’s second quarter results reflect our ability to drive leverage in the business amid a challenging macro backdrop. We continue to believe in the significant growth opportunities ahead as we focus our investment on areas that we believe will drive business performance and shareholder value over the long term. With that, operator, please open up the line for questions.
Operator: [Operator Instructions] Thank you. Your first question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.
Eric Sheridan: Thanks for taking the question. I know we’ll talk a lot about the macro environment tonight, but I wanted to ask maybe two bigger picture questions. First, Jeremy, the AI landscape and what it might mean for search. And local services continues to evolve, and there’s been a lot of announcements around data licensing in that environment as well. Wanted to get your most updated thoughts on the AI landscape and what that might mean for Yelp in the years ahead. That would be number one. And number two. Obviously there was the antitrust decision with respect to Alphabet (NASDAQ:) recently, and I know we don’t yet know what the remedies might be around that. But how do you think about that ruling? And again, what that means — might mean over the medium or longer term in terms of competition in the landscape of search and local services? Thanks.
Jeremy Stoppelman: Sure. Happy to take those, Eric. Thanks for the questions. AI landscape, I would say, very exciting. Obviously, we’ve already taken steps to leverage LLMs and find early wins. Obviously, within search there’s improvements that we’ve made summarizing business reviews, we’ve rolled that out. We’ve incorporated LLMs into our ad tech as well as leveraged neural nets. So within the business itself, there’s so much that we’re able to take advantage of. Yelp Assistant comes to mind, obviously, a recent launch that helps walk people through submitting a project, and that’s really showing some promise. So, very exciting from an on Yelp product standpoint. And then when you look out at the wider landscape, I think really exciting opportunities for Yelp. One early search engine out there is Perplexity. When they were looking at where to get their local data and how to service their users with trusted local information, they turned Yelp. And so that’s a really good sign. Obviously, they’re one of many companies that are working on this. We would hope to see many more of these flourish. And that of course ties into your antitrust question, which I could take in a second. On the data licensing side, we do have a significant data licensing business. There’s lots of conversations going on in that area, we’ll keep you posted. We do see a lot of opportunities there, both to grow our existing business as well as find additional revenue streams through folks that are looking to leverage AI. And, of course, we also have an AI API that we’ve put out there that’s showing some early signs of promise. And also, when I think about the Yelp Assistant and the way that that product works, that lends itself quite well to a potential Yelp API application as well. And so you think about some of these next generation search services when a user is asking something that has local intent, that’s about a home services project that can be then hitting our API and matching that user with relevant businesses, it has monetization built in. So I think that’s a really exciting new area for us to pursue. Obviously, we haven’t even built the thing, but it’s just something on my mind. There is a clear vision and opportunity that we have there. On the antitrust decision side, DOJ versus Google, obviously, that’s a huge watershed moment, I would say, for antitrust. And certainly we’re very excited about it. This is something that we’ve been calling for scrutiny of Google regulation and antitrust enforcement. So, we’re very excited, obviously. The wheels of justice turned slowly. I testified in front of the Senate in 2011, so it’s been a long time that we’ve been advocating for scrutiny of Google and its illegal monopolistic practices. And so, it’s great that we’ve reached this moment. I do think it is going to breathe a lot of oxygen into the search space. It’s going to create opportunities for startups, it’s going to create opportunities for innovation for smaller companies like Yelp and others. So, it’s very exciting. There’s a lot of factors at play here. It’s hard to predict exactly what might the remedies be, how will it play out. Obviously, Google will do its best to delay things, as well as likely appeal etc. So, it’s going to take some time to fully play out, but I think a very positive development for Yelp.
Eric Sheridan: Thank you.
Operator: Your next question comes from the line of Jason Kreyer with Craig-Hallum Capital Group. Your line is open.
Cal Bartyzal: Great. Thank you. This is Cal on for Jason. So, first question, can you just kind of walk us through what you’re seeing in paid search? Looks like you might be pulling back the budget a little bit this year, but just curious the thoughts on your confidence in that opportunity, and whether you’re seeing any early signs of users returning to the platform after you’ve acquired them through paid search, more engagement. Just kind of curious, your thoughts there.
Jeremy Stoppelman: Yes, Cal, I can take that question. So to set the stage a little, we’re talking about Yelp driving projects through paid search. So, those projects show up as Request-a-Quote. And if you look at the top-of-funnel metrics, Request-a-Quote project’s up to 35%, you can see that impact there. So we’re really excited about what we’ve learned. Sure enough, there is a large pool of untapped leads that we can bring into the Yelp ecosystem, at what we think are pretty reasonable prices. So that’s a really exciting first step. As we saw those projects flowing through our system, where we saw the most opportunity was, and the businesses that seem to be reacting to those additional leads the fastest seem to be businesses with fewer reviews. So no reviews or just a few reviews, they seem to be really picking up on the additional value. And so as a result, as we go into the back half of the year, we’re going to be focusing on that lead distribution, trying to drive those leads to the businesses that are most likely to change their behavior, whether it’s upping their budget, retaining for a longer period, etc. So I think, it’s still a very exciting area for us. We’ve learned a lot and so we’re honing in on where the ROI is. And obviously, we want to be thoughtful with our shareholders’ money and drive a healthy ROI over the long term.
Cal Bartyzal: Perfect. Makes sense. And then secondly, can you just kind of give any additional color on the progression of some of these RR&O pressures throughout Q2 and how that’s kind of progressed into Q3?
Jed Nachman: Sure, Cal. This is Jed, I can take that. Yes, certainly as we move to the back half of the second quarter, we saw some additional pressure on the restaurant, retail and other category. And that was a continuation as well from what we saw kind of in the first quarter. Really our large restaurant, retail and other customers have felt the impact of declining transactions and not really being able to really take price like they were able to do over the last couple of years. And that’s reflected in some of the current marketing budgets. We do believe that we are in a cyclical moment for RR&O, and while the timeframe for recovery is unknown, we expect consumer spending to return and are well positioned to participate in that recovery when that happens. In the meantime, we are laser-focused on the services opportunity with a multi-location. Right now, service — only 20% of services revenue is multi-location. And we recently launched a bunch of improvements to the business owner platform that allow for streamlined handling of leads on the Yelp platform, as well as releasing a leads API that gives our enterprise customers the ability to ingest Yelp leads into their own CRM and work within their own internal processes. We’ve also created a playbook for multi-location customers to utilize the Request-a-Quote system for the first time. And we’re running full speed ahead on that opportunity while we wait for a full recovery. I will say we’re keeping up relationships, certainly on the restaurant, retail on other side, and feel that those are very strong. And we’ll be well positioned when that comes back.
Cal Bartyzal: Great. Thank you guys.
Operator: Your next question comes from the line of Colin Sebastian with Baird. Your line is open.
Colin Sebastian: Thanks. Good afternoon, everybody. Nice quarter, guys. Maybe just to follow-up a bit on the outlook provision for the second half and the decision to pare back on the paid project acquisition. Was there more of a general decision to favor profitability over growth given macro or other considerations? Or is it really just a reallocation of priorities? And I think related to that, I guess, if you’re pleased with the levels of retention, do you have confidence that other ways of engaging consumers and service providers will kind of give you that same level of, I guess, lifetime value? Thank you.
David Schwarzbach: Hi, Colin, it’s David. I’ll answer the first part of that. On the outlook, the decision around paid search was very much independent of the overall profitability that we saw in the second quarter and the outlook for the year, and the impact of what’s happening to RR&O on revenue. So, they’re actually very separate. I want to underscore that we think that we continue to become even more efficient. And so we are driving that underlying profitability and that’s what put us in a position to raise the guide for the full year. And then when we think about the LTV of these, the opportunity with advertisers, we, as Jeremy said, are really looking for the folks who are going to be most responsive. And there’s work to do in order to ensure that we’re actually funneling those leads directly to the advertisers that are most responsive. And what we did see was that folks who are unreviewed or only have a few reviews, they do respond when they get those leads. So, we’re directing it there, but there’s more work to do. We’re going to keep you posted. We’ll come back, obviously, on the Q3 call to provide the next update, and we’re going to continue to refine it.
Colin Sebastian: Okay. Thanks, David.
Operator: Your next question comes from the line of Sergio Segura with KeyBanc. Your line is open.
Sergio Segura: Great. Thank you for taking the questions. I wanted to return back to the RR&O weakness you guys saw in the quarter. So the shareholder letter mentions competition from food delivery as a secondary reason for the weakness in that category. I guess, given the solid results those food delivery platforms reported this quarter, just what gives you the confidence that competition is any more significant factor than the challenge — for the challenges that you’re seeing within that category?
Jed Nachman: Thanks, Sergio. I can take that. This is Jed. Certainly at the margins there are some pressures from the delivery ad platforms. But our belief is it is largely macro. And in talking to customers, their posture in light of what’s happening to the consumer these days and spending habits, and what is a volatile outlook for the second half of the year, then it largely falls in the camp of macro. That’s not to say there’s not a marginal competitive dynamic coming in from these delivery ad platforms. A lot of that had been baked in kind of from prior years as consumer behavior changed.
Sergio Segura: Understood. And then maybe a second one. I was hoping if you could just talk about the EBITDA outperformance for the quarter, that came in nicely above the outlook you gave. So just wondering what was the primary driver behind that or what was different versus your initial outlook? Was it more finding efficiencies in the business or just a shift in investment spend to the second half? Just any color behind the EBITDA outperformance for the quarter would be helpful. Thanks.
David Schwarzbach: Sure. Thanks for the question. So in terms of the second quarter, we did see increased efficiency in our marketing spend. So, while we spent $12 million on paid search across our other marketing spend, we’ve been able to actually improve the results that we’re seeing. And so we got leverage there that was a significant factor. Another, probably on the more technical side, relates to capitalized software CapDev. We had more projects that we were able to capitalize, so that contributed. There are, third, just the normal puts and takes from a forecasting perspective around things like healthcare that have some variance to them that ended up being positive. So when you combine those things — and again, just to underscore what I was saying to Colin, we do think that we are continuing to be even more efficient as a business. So we took those, and maybe just to clarify what I said in response to Colin’s question, certainly the reduction of $5 million from the prior expectation of $40 million of spend in 2024 to $35 million contributes to the higher EBITDA, even though those decisions, again, are quite independent. So, that is a contributor. But fundamentally, we just see ourselves continuing to get better and better at delivering against our roadmap and against our marketing targets. When you take those things together, I think that 26% adjusted EBITDA in the second quarter, again, is yet another proof point of the continuing leverage that we think we’re building in the business.
Sergio Segura: Understood. Thank you.
Operator: Your next question comes from the line of Josh Beck with Raymond James. Your line is open.
Josh Beck: Thanks for taking the question. Maybe to go back to Eric’s earlier question about generative AI, I’m kind of curious on how you maybe disect the data licensing benefit from just potential traffic. It certainly seems like, just with Perplexity, that you’re featured quite heavily when it’s local or review-oriented query. And I’m just wondering, which one of those two dimensions do you see as the most important? And a little bit related, we’ve got a pretty good idea of what the Apple (NASDAQ:) intelligence system will look like with iPhone 16 and beyond. Does that kind of create any opportunity for you within the Apple ecosystem?
Jeremy Stoppelman: Hi, Josh, happy to answer those questions. On how do we think about data licensing versus traffic, I mean, this is the age old question for Yelp. We’ve had lots of these structures in the past. And I think the fact of the matter is, we have very unique data. We have very accurate information on local businesses. We have sort of attributes about them. We have hours, things like that. And then we have all the subjective information around ratings and reviews with incredible depth. And so, if you are an AI player looking to do a search experience in local, we are a natural partner to turn to. And of course there’s Google out there, but they’re competing with everyone else. And so I think that plays into our positioning as a go-to source of information in the coming years. So I think it’s an exciting opportunity for us. There’s different ways that we can work with some of these potential partners, we can provide APIs, we’re happy to do that. We have some APIs out there, we’re going to continue building that out. For certain experiences, it may make more sense to license data. We certainly do that already in a variety of non-AI applications. So that’s a possibility as well. So, it’s a target-rich environment. It’s rapidly developing. It’s hard to say how big it will be and what it means. But I think the thing that we can all come back to is, Yelp is an incredible resource for local information, for helping people to connect with businesses. And so, to the extent that we are the best channel for that kind of information, the best place to go, I think that will position us well for whatever develops in the AI space. And then for pivoting to the Apple question. We have a great relationship with Apple. Our data is incorporated throughout their Maps application. You may have noticed, Request-a-Quote has been added recently to Apple Maps. And so that’s great. As far as what their plans are in the future, I have no idea. Obviously, we’re a resource to them. So to the extent there’s opportunities we’re always — the doors are open for that. But really can’t comment on the direction that Apple’s going to take things in from an AI perspective.
Josh Beck: Okay. Yes, I think we all await anxiously. And maybe more of a just financial framework question. EBITDA margins have kind of roughly been low to mid-20s for the last three to four years. Is that somewhat of a line that you would look to hold depending on various macro scenarios as we think about ’25? And then just anything else that we need to be mindful of in terms of trends as we’re thinking about key factors for growth next year?
David Schwarzbach: Josh, thanks for the question. And obviously we’ll have a lot more to share when we get to the Q4 call next year. But fundamentally, I just want to underscore again, we think that a product-led strategy will enable us to deliver margin leverage over time. And I’d say over the past several years, margins actually have increased. And then, what we have done is taken the opportunity, as we were doing with paid search, to invest in the business. So, we’re always looking at ways to drive top line performance. And a theme for us most definitely has been tapping into all of this off-Yelp traffic, whether it’s through paid search, whether it’s through syndication on sites like Facebook (NASDAQ:), and whether it’s monetizing our own audience of off-Yelp through something like Yelp Audiences. So we’re going to continue to look for those opportunities and we’re very disciplined. If we think there’s an ROI to be had, then we’re going to make that incremental investment. But again, what we have been able to do over the past number of years is to continue to drive margins up and take time along the way to continue to invest in the business. So, the whole time we’ve been talking about profitable growth, our commitment is to deliver long term profitable growth. And we’re always evaluating the best way to run the business that takes into account the trade-offs between top line growth and delivering EBITDA. That’s something that we’ll continue to do and we’ll look forward to sharing more about ’24 when we get there, I mean, excuse me, for ’25 when we get there.
Josh Beck: Super helpful. Thank you both.
Operator: Our next question comes from the line of Dion Lee with Evercore. Your line is open.
Dion Lee: Great. Thanks for taking the question. First, I have a just to follow-up on the AI search again for the, you mentioned Perplexity. But maybe at a high level, do you have a sense of whether the traffic through these AI search engines have better conversion or higher intent? If you can just kind of share any color around what you’ve seen in user behavior around Yelp content and then AI search context?
Jeremy Stoppelman: This is Jeremy, I can take that one. Again, I think AI search represents an exciting opportunity for Yelp as a partner to the ecosystem that develops here. I think it’s really too early to sort of describe the characteristics or know what it means. The players that are out there, Perplexity or otherwise, are all pretty small still. And if you step back and look at the overall search industry, it’s still very much structured the same way it always has been, which is Google is completely dominant and an abusive monopoly as the court recently ruled. So unfortunately, that structure remains. How AI search develops and infuses competition is an interesting possibility. And I think antitrust could also play into that. So depending on how that all plays out, that could breathe oxygen into the environment and create a lot of new and interesting competitors for Google.
Dion Lee: Got it. And second question, just on ad pricing. If you can parse out the CPC trends for services and RR&O separately, I’m assuming that you’re seeing more pricing pressure on RR&O side, if you can double click on that. And also, just given the improvement you’ve made in the ad tech stack, should we expect this to be reflected in ad pricing improvement maybe to counter or to offset some of the macro pressure as you’re able to drive greater ROAs from the ad stack improvement? Thank you.
David Schwarzbach: Thanks for the question. Just zooming out for one second if I can. We have built an auction system for matching consumers with advertisers. That auction system takes into account a very large number of parameters. And what we’re really doing is finding the market clearing price at a moment in time for that visitor in the category they’re searching for, in the geography at that time of the year. And what we’re always striving to do is to get better and better at doing that matching. And fundamentally what we believe is that when we do that well, we drive incremental value to the advertisers in terms of cost per lead, and we drive incremental value to the consumer in the form of relevance. So, the trends over the past several quarters has been around the same level of growth, which is 9% click growth with about flat CPC growth. Now, I just want to underscore, we did see real strength in growth in clicks in the second half of next year. So, over the coming two quarters, we do expect that CPCs will moderate and that is to go up a few percentage points. Click growth will come down a few percentage points. But obviously, it’s clicks time CPC, and that’s what supports the guide that we’ve given you. Now, what are the things that we’re concerned with in terms of being able to continue to deliver value with continuing to also deliver on the revenue targets? That is where we’re always trying to drive, and again I just want to underscore, cost per lead. If we have a more relevant lead, then we do believe that advertisers would be willing to pay more on a cost-per-click basis. So, that’s something that we track very closely. It’s something that we’ve been able to do in the past. And we do have quite a robust roadmap to continue to drive improvements in the ad tech stack.
Dion Lee: Thank you very much.
Operator: [Operator Instructions] Your next question comes from the line of Georgia Anderson with Wolfe Research. Your line is open.
Georgia Anderson: Hi, I’m on for Shweta Khajuria, and I just had a question in relation to your guidance for the full year. What kind of — what’s giving you confidence that you can raise EBITDA by $10 million? And how do you really plan to offset this weakness in RR&O that we’ve talked about so far?
David Schwarzbach: Thanks for the question, Georgia. Fundamentally, there are a couple of things that are happening simultaneously that do give us the confidence to be able to raise the EBITDA guide. The first is, again, notwithstanding the fact that we have spent $12 million on paid search in the second quarter and still have, so that’s $90 million in the first half, we’ve revised our estimate to $35 million. So even as we spend $60 million in the second half, we believe that the improvements that we’ve been able to make to the way that we build our advertising programs, that those will persist. And there’s something I did want to underscore that’s very important about our broad effort around paid search, something that we’ve said in the past which is, as we have built out our capability to purchase leads at scale, and as we’ve worked to do that efficiently and generate a ROAs, we’ve made numerous improvements to the site from the experience, whether it’s new account creation, magic links for login, the way that we buy those ads, the landing pages that we land folks to, we’re now embarked on improving the way that we direct those leads. That has benefit not just for paid search around consumer acquisition, but more broadly, all of the marketing that we’re doing in paid search, for instance, around business acquisition. And then broadly enabling consumers to use Yelp in a more seamless way. It also rolls over to the Request-a-Quote side where we’ve continued to make improvements. So, you take this focus on continuous improvement, you combine it with very, very strong discipline around incremental spend, and we feel that that supports, obviously, the guide that we’ve provided for the second half of the year.
Georgia Anderson: That’s helpful. Thank you.
Operator: This concludes the question-and-answer session and concludes today’s conference call. Thank you for joining. You may now disconnect your lines.
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