Yelp co-founder and CEO Jeremy Stoppelman announced in an internal email that the company is going through difficult times. Yelp has to cut expenses, which means a large round of layoffs and some additional measures — 1,000 employees have been laid off.
According to an SEC filing, Yelp had 5,950 employees as of December 31, 2019. Today’s layoffs represent a 17% staff reduction.
The company has shared Stoppelman’s internal email on its website. In addition to layoffs, another 1,100 employees are now on furlough. Those employees are considered on unpaid leave until further notice (with some exceptions) — they will receive two weeks of additional pay and retain their benefits.
Before considering layoffs, Yelp tried to cut costs in different ways. The company has reduced server costs, which makes sense given that traffic has shrunk both on mobile and on the website.
Many projects have been “deprioritized” and executives accepted 20-30% pay cuts. Stoppelman himself won’t take a salary nor vest any stock awards for the remainder of the year.
“The physical distancing measures and shelter-in-place orders, while critical to flatten the curve, have dealt a devastating blow to the local businesses that are core to our mission,” Stoppelman wrote. “Interest in restaurants, our most popular category, has dropped 64% since March 10, and the nightlife category is down 81%. Gyms are down 73%, and salons and other beauty businesses are down 83%.”
Given that Yelp is a service focused on recommending the best local businesses around you, the lockdown has a direct impact on usage. Fewer eyeballs mean shrinking ad revenue as well. A restaurant chain isn’t going to spend money on Yelp ads if it is closed.
The company expects $8 to $10 million in charges due to severance and benefits costs. Yelp shares are trading at $21.74, up 0.46% compared to yesterday’s closing price.