VALUATION HIGHLIGHTS

1. Advertising constitutes 86% of the Trefis price estimate for Yelp's stock.

WHAT HAS CHANGED?

1. Yelp Q3 2025 Snapshot

Yelp delivered a modest Q3 2025, with revenue rising about 4% year over year to $376 million as solid 7% growth in its Services category helped offset ongoing softness in Restaurants, Retail & Other. GAAP net income was roughly $39 million, translating to a margin near 10%, while adjusted EBITDA reached about $98 million for a 26% margin. The quarter reflected the company’s continued pivot toward higher-value service-provider advertising, though broader local-ad softness and weak restaurant spending remained drags on overall growth.

2. Outlook

Yelp struck a cautious tone with its Q3 2025 outlook, guiding full-year revenue to a slightly trimmed $1.460–$1.465 billion while nudging adjusted EBITDA expectations higher to $360–$365 million as cost discipline offsets softer top-line trends. For Q4, the company expects $355–$360 million in revenue and $77–$82 million in adjusted EBITDA, reflecting both normal seasonal slowing in its Services category and continued weakness across Restaurants, Retail & Other. Management emphasized that macro headwinds remain elevated, meaning growth will likely stay muted in the near term even as profitability continues to improve.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Local Advertising

• Yelp's Active Local Business Accounts: Yelp had over 521,000 active local business accounts in 2024. We currently forecast the number of active local business accounts to steadily increase, as it continues to expand aggressively, reaching around 600,000 by the end of our forecast period.

Yelp Deals revenue

• Yelp's revenue from Yelp Deals, partnership and other services: This figure grew to $59 million in 2022 and further up to $63 million in 2024. We expect the division's revenues to grow to $83 million by the end of our forecast period.

Sales And Marketing Expenses

• S&M as a percentage of Revenue: We currently expect Yelp's selling and advertising expenses (S&M) to increase slightly from around 39% in 2024 to 40% by the end of the forecast period. Given the increasing competition in the online business review and recommendations space, Yelp may have to incur increasing amounts of marketing expenses going forward.

BUSINESS SUMMARY

Yelp is a local business search, review, and recommendation service that allows consumers to access ratings and read reviews on local hotels, restaurants, salons, dentists, and mechanics on their website Yelp.com. These businesses are reviewed and rated by contributors.

Yelp currently has more than 280 million reviews of local businesses in the North American markets. The company currently offers information on more than 4 million businesses in the markets it operates in. It had around 97 million monthly unique visitors at the end of 2024.

Yelp generates revenue mainly from local business advertising, display advertising, and additional services like Yelp Deals, and deals with reservation services like OpenTable. It competes primarily with other online business reviews services like Google Places, Yahoo Local, Angi (formerly Angie's List), CityLocal, and Gumtree; display advertising players like Google, Yahoo, Facebook, and AOL; and daily deal sites like Groupon and LivingSocial.

SOURCES OF VALUE

Local Advertising is Yelp's most valuable business

Yelp is a local-business review platform in the United States and 96% of total revenue generated through advertisements. Its local advertising platform leverages the power of inbound marketing, which leads to a higher customer conversion rate than traditional display advertising. We expect its local advertising revenue to grow in the coming years, as it expands into multiple international markets.

Huge repository of local business reviews and large user base

Yelp has the largest database of local businesses in the markets in which it operates, especially in the United States. It has around 280 million user reviews of around 4 million local businesses. Due to its large repository of user-generated information, it attracts around 97 million monthly unique visitors every month, which makes it a very attractive advertising and marketing platform for local businesses, that are trying to attract new customers.

Proven expansion and market development strategy

Yelp has a proven market development strategy that it uses to expand into new markets in the United States. While it has exited the international markets, it plans to expand its services aggressively in the untapped U.S. markets.

Large community and network effects

Yelp has one of the largest communities of active contributors, who write detailed reviews about local businesses. Its large repository of reviews attracts around 97 million unique visitors every month, which makes it the perfect advertising platform for local businesses looking to gain new customers. This, in turn, helps Yelp generate increasing amounts of revenue from local and display advertising, as well as offerings like Yelp Deals and hotel reservations.