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Business Operations Business Models

How Does Yelp Make Money (Business and Revenue Model)

The Yelp business model

How Does Yelp Make Money?
Here’s what you should know:
  • What is Yelp, and how does Yelp work?
  • How does Yelp make money?
  • Advertising
  • Transactions
  • Other Revenue
  • Yelp’s Subsidiaries, Acquisitions, and Exits
  • Yelp’s profit and revenue
  • What is the Yelp business and revenue model?
  • Yelp’s funding and market cap

How does Yelp make money? Here is a full, in-depth, breakdown of their three (3) revenue streams and the different products and services they offer, as well as the Yelp business model, their year-over-year revenue, and how Yelp works.

What is Yelp, and how does Yelp work?

Yelp is a website that connects people with local businesses, publishes user-based reviews of businesses, and gives recommendations of things to do in a browsing user’s area.

Founded in 2004 by two former PayPal employees, Jeremy Stoppelman and Russel Simmons, Yelp’s platform now has more than 5.3 million active local businesses on it with over 224 million reviews left by users.

How Yelp works is: Once a user signs up for a Yelp account, they can search for local businesses based on the zip code they enter. As well as read and write reviews, place food orders, and more.

Some of Yelp’s competitors include Foursquare, OpenTable, Yodle, Tripadvisor, Yahoo, and other local business review websites.

Yelp App in Apple App Store | Yelp Business Model | How Does Yelp Make Money?
Source: Apple App Store

How does Yelp make money?

According to pages 45, 46, 47 of Yelp’s 2020 Form 10-K, Yelp had a combined 127.6 million unique visitors between their app and website in 2020. To add to that, there are more than 5.3 million local businesses active on the platform that have been claimed with over 224 million reviews left by users.

So how does Yelp make money off of all those users and businesses?

Below is a breakdown of how much money Yelp makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 3 ways of how Yelp makes money (in 2021):

Yelp has a revenue model that makes money in three (3) ways – advertising, transactions, and other revenue.

#1. Advertising

Yelp makes the majority of its money through its business advertising. In fact, $836.1 million or 95.78% of Yelp’s total revenue came from advertising in 2020.

Yelp offers four (4) products for businesses on Yelp: Yelp Ads, Upgrade Package, Business Page, and Connect.

Two of the business offerings are free, whereas Yelp Ads and Upgrades come at a price. Yelp Ads can cost a business a minimum of $5 per day, while each Upgrade on a business page starts at $1 per day or can be bundled together in Yelp’s Upgrade Package.

Yelp Advertising Cost:

  • Upgrades: as low as $1 per day
  • Yelp Ads: minimum $5 per day
Yelp Ads | Yelp Business Model | How Does Yelp Make Money?
Source: Yelp

Note: 95.78% of Yelp’s total revenue came from advertising in 2020.

#2. Transactions

In addition to advertising revenue, Yelp also makes money through transactions made on the Yelp platform.

Transactions on Yelp are, as Yelp describes it on page 4 of Yelp’s 2020 Form 10-K as, “features and consumer-interactive tools to facilitate transactions between consumers and the local businesses they find on Yelp.”

For example, if a user places a food order through the Yelp platform with a partnering integrator, such as GrubHub, Yelp receives a “commission fee” on that order. These commission fees raked in another $15 million of revenue for Yelp in 2020.

Note: Yelp’s largest transaction volume and revenue come through its partnership with Grubhub.

#3. Other Revenue

Yelp also makes money through a number of smaller revenue streams that they lump together on their financial statements as “other revenue.”

These services are Yelp Reservations, Yelp Waitlist, Yelp Knowledge, Yelp Fusion, and other partnerships. Which brought in a combined revenue of $21.8 million for Yelp in 2020.

As written on page 4 of Yelp’s 2020 Form 10-K, Yelp describes “other revenue” to be “revenue through subscription services, licensing payments for access to Yelp data and other non-advertising, non-transaction arrangements.”

Yelp’s Subsidiaries, Acquisitions, and Exits

To date, Yelp has made a total of 7 acquisitions, 1 investment, 1 lead investment, and 1 successful exit.

Yelp Acquisitions
Source: Crunchbase

Yelp’s profit and revenue

In 2020, Yelp reported $872.9 million in revenue.

Note: Because Yelp Inc. is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Yelp’s publicly released financial reports, including annual reports, through Yelp’s investor section on their website.

What is the Yelp business and revenue model?

Yelp makes money through a few revenue models that they combine within their company, they are:

  • Advertising business model
  • Commission based business model
  • Subscription business model
  • Licensing business model
  • B2B2C (partnerships) business model
  • Mergers & acquisitions (M&A) business model

Yelp’s funding and market cap

According to Yelp’s Crunchbase profile, Yelp has raised $56 million over 6 rounds and has a market cap of $2.85 billion as of August 2021.