Yelp Inc.’s YELP shares have gained 13.1% in the past three-month period, outperforming the Zacks Computer Technology sector and the S&P 500’s return of 9.5% and 5.6%, respectively. The company has also outperformed the Zacks Internet Content industry, which has declined 2.2% in the past three months. This outperformance reflects investors’ confidence in Yelp’s strong position in the business reviews and ratings market and allied advertising services.

Advertising Services Aid Yelp’s Topline

Yelp earns a major part of its revenues through advertising services, which contribute to more than 95% of its total revenues. The company has been able to grow its advertising business consistently. In the third quarter of 2024, advertising revenues for the Services business grew 11% year over year to $228 million, driven mainly by strong demand from advertisers and a rise in paying advertising locations.

Moreover, Yelp’s shift toward selling advertising plans without any fixed duration is resulting in a solid rise in paying advertiser accounts. Further, it is witnessing strong retention rates and improving overall retention for cost-per-click (CPC) advertisers. Yelp’s strategy to provide products across a range of price points will give users more ways to grow with it.

Yelp's continued investment in Artificial Intelligence and machine learning has enabled it to increase ad clicks and decrease average CPC. It has also implemented various other user experience and backend improvements, including features designed to cater to users with accessibility needs. These initiatives reflect the company’s broader commitment to enhancing the user experience, which is likely to drive higher engagement and loyalty on the platform, ultimately contributing to sustained revenue growth.

Yelp Price Performance Chart

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Yelp Expands Its Reach With New Partners

To upgrade its offerings and serve a bigger marketplace, Yelp has integrated itself with Toast TOST and Alphabet’s GOOGL Google Reserve. The company is also integrated with the offerings of other tech giants like Amazon AMZN, Apple and Microsoft.

Yelp has integrated itself with Reserve with Google, thereby enabling diners to join a waitlist or book a table and access additional information about the restaurants. It partnered with the leading cloud-based restaurant management company, Toast, to improve its overall operational efficiency. Moreover, YELP is also integrated into MSFT Bing, AMZN Alexa and Apple Maps.

Integrations with Toast, Amazon, Apple, Microsoft and Google make Yelp’s content readily accessible to users across devices and platforms. These partnerships bring traffic from leading platforms like Apple Maps, Bing and Alexa directly to the company, strengthening its brand value, ensuring higher traffic on the website and driving the top-line.

For 2024, the company anticipates revenues to be between $1.397 billion and $1.402 billion. The Zacks Consensus Estimate for revenues is pegged at $1.41 billion, indicating year-over-year growth of 5.7%.

Yelp Brings Depth to Its Platform With New Features

So far in 2024, Yelp has enriched its platform with multiple features. These features include AI-powered review insights, personalized home feed, expanded recognition and tipping transparency for customers. Businesses listed on Yelp’s platform can now benefit from AI-enhanced inboxes, smart selection for ads and competitor insights.

Yelp has also added new features to Yelp Assistant, which now supports text and call requests. These features will enable users to explore and discover new ways to connect to businesses, thereby increasing the app’s efficacy.

Furthermore, Yelp enhanced its platform with Summer Ad Product Updates where it introduced new tools for advertisers, including Spotlight Video Ads, Yelp Audiences Expansion and Conversion API. In its spring product release, the company introduced Yelp Assistant, Yelp Fusion AI API and new enhancements in Yelp Guest Manager. These features have added a new user base, thus driving YELP’s top line.

What Should Investors Do?

Yelp has managed to grow its revenues on the back of its strong advertising services, robust partnerships, latest features and prudent product integrations.

Considering all these factors, we suggest investors to buy this Zacks Rank #2 (Buy) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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