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Yelp Ads May Be Too Expensive and Growth Could Slow, Analyst Says

Yelp (YELP) ads may be too expensive for many small businesses and independent restaurants and that could lead to a slowdown in growth for the online review company.
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Yelp (YELP) ads may be too expensive for many small businesses and independent restaurants and that could lead to a slowdown in growth for the online review company. Pacific Crest Securities talked to small businesses and found many are not convinced the money they are spending on Yelp is having a material impact on revenue. On average, Pacific Crest found that small businesses spend an average of $7,200 a year on local advertising, compared with $4,600 that Yelp reports on average per local account. Yelp said in its recent earnings report that local ads account for 83% of total revenue, with $98 billion in local revenue. The Pacific Crest Analyst says if Yelp ads don't drive a meaningful uplift in sales, the cost of those ads for small businesses may be too hard to justify. Yelp shares have fallen 44% in the past 12 months.

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