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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