Will Yelp’s Marginal Sales And Marketing Expense Decline In The Near Future?
Yelp (NYSE:YELP) has been expanding its operations outside the US for the past few years. The single most important factor that drives Yelp’s value after its revenue growth is the growth in its sales and marketing (S&M) expense. Yelp has had to incur high S&M expense to fuel its rapid expansion, as it needs to rope in new local businesses to attract visitors. Yelp’s S&M expenses were almost $52.93 million, 63.56% its overall revenues, in 2011. While S&M declined over the subsequent years as a percentage of revenues, it increased in absolute terms to $121.84 million and $280.06 million in 2013 and 2015 respectively.
However, as the company expanded to regions outside, its marginal S&M expense per claimed business grew from $77.08 in 2013 to $137.82 in 2015. Most of the claimed businesses are in regions where Yelp has been operational for more than five years. Considering that mature markets witness higher growth rates in claimed businesses, we expect that marginal S&M cost for company will decline in the future, even as S&M expense in absolute term increases. We estimate that the S&M cost per claimed business will increase as the company tries to retain the existing claimed businesses and add new ones to its fold of services. However, marginal cost will decline over the next couple of years, and this trend will continue over our forecast period. The table below summarizes the marginal S&M cost for Yelp in 2017 based on the historical trends in underlying drivers:
- Down 13% This Year, What’s Happening With Yelp Stock?
- Yelp Stock Up 66% Since 2023. Does It Have More Room To Run Post Q4 Results?
- What To Expect From Yelp’s Q3 After Stock Up 50% This Year?
- Yelp Stock is Up 60% So Far. What’s Next?
- Yelp Stock Down 14% Over Six Months. What’s Next?
- Yelp Stock To Likely Trade Lower Post Q4
Check out our complete analysis of Yelp
Have more questions about Yelp? See the links below.
- What’s Yelp’s Revenue And Earnings Breakdown?
- What’s Yelp’s Fundamental Value Based On Expected 2015 Results?
- How Has Yelp’s Revenue Composition Changed Over The Last 5 Years?
- By What Percentage Can Yelp’s Revenues And EBITDA Grow In The Next 3 Years?
- How Big Can Yelp’s International Business Become By 2020?
- How The Value Of Reviews Has Grown For Yelp In The Last Two years?
- How Geographic Expansion Helped Yelp Grow its Claimed Business In The Last 5 Years?
- How Important Has Mobile Platform Become For Yelp In The Last 2 Years?
Notes: