In an email sent to the entire workforce of San Francisco-based reviews-and-ratings platform Yelp, its co-founder and CEO Jeremy Stoppelman announced that by this afternoon, over 2,100 employees would be left without a job, while others would have their hours (and, presumably, pay) cut.
The message was also posted to Yelp’s blog. In it, Stoppelman wrote that as a result of the coronavirus crisis, “interest in restaurants, our most popular category, has dropped 64 percent since March 10, and the nightlife category is down 81 percent.” Other business categories experienced similar drops, which means “we have had to make some incredibly hard decisions to reduce our operating costs.”
Those decisions, Stoppelman says, mean “we will let 1,000 of our colleagues go and furlough approximately 1,100 more, while reducing hours for others.”
According to an SEC filing, as of December 31, 2019, Yelp boasted 5,950 employees, making today’s layoffs a staffing reduction of around 17 percent. The company, which was founded in 2004, announced last year that its revenues had hit $1 billion, and the Street reports that as of March 31, the company had $491 million in cash, cash equivalents, and marketable securities.
It’s obviously not going to make that in 2020: As the company’s revenue is based on advertisements sold to businesses like restaurants, shops, and service providers (a model that’s been in place since the company’s creation), if those businesses are shuttered during the shutdown, there’s no reason for them to buy ads on Yelp.
In addition, given that the restaurants that do remain open are struggling just to cover paychecks and rent, it’s unlikely that they have additional revenue to spend on Yelp ads, whose effectiveness has long faced skepticism. Finally, there’s the user-generated reviews that provide the content backbone of the site. With traffic to restaurants down, reviews are less likely to be written — and with some chefs vigorously arguing against any Yelp use during the pandemic, it’s likely that people who spend their free time reviewing local businesses are also doing so with less vehemence than they did prior to the crisis.
Despite that expected revenue shortfall, which Stoppelman says is expected to drop even more, as that is “where the data indicate we are headed,” the company announced a $25 million ad credit for businesses as part of an restaurant-and-nightlife support package that included a controversial partnership with GoFundMe. It’s unclear how many businesses took the company up on its free ad deal, and a spokesperson for Yelp did not respond to Eater SF’s questions on the matter as of publication time.
The layoffs and hour reductions join a host of other cost-cutting measures, Stoppelman says, including a reduction of server costs, and 20–30 percent “pay cuts for all execs.” Stoppelman says he will not take a salary (for an indeterminate period of time), and “I also will not vest any of my 2020 stock awards for the remainder of the year.”
In a report filed with the SEC this week, Yelp said that it expects to spend between $8–10 million on severance and benefits costs related to the layoffs, and Stoppelman writes that laid off workers “will be offered severance pay, and reimbursement for up to three months of health insurance coverage” while “employees on furlough will be put on unpaid leave, unless otherwise noted, but will retain the bulk of their benefits during this time and receive two weeks of additional pay.” Those with reduced hours will retain their current benefits, Stoppelman says.
According to Stoppelman’s memo, laid-off workers will be notified Thursday morning by their “department leaders,” “and letters with more details and FAQs will follow this afternoon.”