Yelp's Q1 2025 Earnings: Contradictions in Multi-Location Services, AI Impact, and Paid Search Strategies

Multi-location services growth, impact of AI on traffic, advertiser sentiment and multi-location services revenue growth, paid search strategy and effectiveness, and AI and search engine opportunities are the key contradictions discussed in Yelp's latest 2025Q1 earnings call.



Revenue Growth and Product-led Strategy:
- Yelp reported $359 million in net revenue for Q1 2025, marking an 8% year-over-year growth, with an increase in net income margin by three percentage points and adjusted EBITDA margin by four percentage points from the prior year period.
- The growth was driven by the strength in the Services business and the rollout of 15 new features and updates.

Services Revenue Momentum:
- Services revenue increased by 14% year-over-year to $232 million, marking the 16th consecutive quarter of double-digit year-over-year growth.
- The increase was primarily due to improvements in Request to Quote flow, adoption of Yelp Assistant, and reduced spend on paid search.

Restaurants, Retail, and Other (RR&O) Revenue Decline:
- RR&O revenue declined by 3% year-over-year to $110 million, offsetting growth in services locations.
- The decline was attributed to macro pressures and cautious spending by multi-location advertisers in these categories.

Advertiser Demand and Cost-Per-Click (CPC) Increase:
- Despite a 3% year-over-year decline in ad clicks, the average CPC increased by 9% year-over-year.
- The CPC increase is attributed to strong advertiser demand in services categories and a shift in category mix.

AI Strategy and New Product Initiatives:
- Yelp is leveraging AI for improved matching algorithms, business summaries, and new call answering services for pros and restaurants.
- These initiatives aim to enhance consumer experiences, deliver more valuable leads to advertisers, and unlock incremental opportunities.