Crowd-sourced review website Yelp announced this morning that it will lay off 1,000 workers and furlough an additional 1,100 employees. The staff cuts are currently expected to last four months, says a source familiar with the changes but unauthorized to comment.
Yelp’s layoffs and furloughs constitute 35% of the company’s staff of 5,950, reported in December 2019.
Sources tell Fortune the restructuring will be substantial, with some staff previously in managerial positions being moved into front-line sales roles, and some at the director level taking on lower-level managerial roles.
“The physical distancing measures and shelter-in-place orders that are critical to preventing the spread of COVID-19 have had a devastating impact on the businesses that are core to our mission,” a Yelp spokesperson said in a statement provided to Fortune. “This rapid shutdown of local economies has directly affected our business, and the magnitude and duration of the impact are unknown. To ensure that Yelp can weather this crisis and be best positioned to serve the community when the recovery begins, we must significantly reduce our operating costs.”
In a note sent to employees this morning and since posted publicly, Yelp CEO and co-founder Jeremy Stoppelman described the cuts as “a last resort,” writing that “today is an awful day for all of us.”
Stoppelman’s note says that employees on furlough will be put on unpaid leave, unless otherwise noted. They will retain the bulk of their benefits during this time and receive two weeks of additional pay.
Yelp says it has also reduced expenses including servers and ongoing projects, and cut executive pay by 20%-30%. Stoppelman says he will not take a salary or vest stock options for the remainder of the year.
Yelp is particularly vulnerable to the impact of coronavirus because much of its revenue relies on selling advertising and other services to small businesses that are now largely or entirely shut down across much of the world. Yelp reports that search interest in restaurants has dropped 64% since March 10, while nightlife interest is down 81%, and beauty businesses are down 73%.
In an SEC filing on April 9, Yelp also said that traffic in its services category, including home, professional, and automotive services, declined 40% from the first half of March to the second half of the month. Those services, according to the company, account for a majority of Yelp’s revenue.
In its 2019 annual earnings report, Yelp reported $268.8 million in revenue for the year, and profit of $40.9 million.
The stock market has reacted unfavorably to Yelp’s news. Shares in the company had dropped 6.42% as of this writing.
This is a developing story, and may be updated as we receive new information.
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