Yesterday, Yelp ran its first daily deal in San Fancisco, and it killed.Yelp’s first deal was for a massage in San Francisco, which are relatively common in the daily deal space — a $110 massage for $49 from the well-reviewed Psoas Massage + Bodywork. (It’s not linked from their home page but you can do a google site search for them).
How did it do? Really, really well. Yelp sold 1,616 deals at $49, or a total of $79,184.
How does that compare to Groupon? Groupon sold three deals in San Francisco yesterday. None of them sold more than Yelp’s in terms of revenue or quantity. In fact, Yelp’s one massage deal brought in more revenue than all three Groupon deals combined. (Groupon’s three deals brought in a total of $67,398 compared to Yelp’s $79,184).
Assuming Yelp pockets 30% (compared to Groupon’s 50%), the company took home $23.8K in a single day. That’s the monthly equivalent of 79 hard-earned small business advertisers on Yelp’s current advertising product.
Yelp’s 2010 annual revenue is estimated at $50 million. If Yelp runs a daily deal across its major markets and gets a grand total of 10 times what they got in San Francisco yesterday, that’s the equivalent of $71.4 million of additional revenue. I don’t have an account on second market; but, if I did, I would be buying Yelp stock right now.
As when we first reported that Yelp was testing daily deals, we believed they had all the components to be a winner in the space. It should also be a wake-up call for other media companies with an audience and authority to step up. (See our analysis on how media companies should offer daily deals.)
Yelp may have finally found its killer revenue stream. What local sleeping giant will wake up next?
(Lastly, we do note that it’s possible Yelp took a lower commission on their first deal to draw interest from a great small business. Regardless, that doesn’t changes the view that Yelp has a clear winner on its hand.)