Yelp’s ad revenue increased by 13% to a record $1.28 billion in the final quarter of 2023. This year the company will focus on quality leads for advertisers — especially in the services category — to drive up revenue.

2023 was an exceptional year for Yelp, filled with record results and product innovations that appealed to consumers and advertisers,” wrote Jeremy Stoppelman, Yelp’s co-founder and chief executive officer, in the annual shareholders report. “Our team has repeatedly shown our focus on long-term strategic initiatives can drive durable growth, and we plan to build on this momentum in 2024, with a focus on our robust Services product roadmap.”

The company’s good news did not woo investors. Ad clicks rose 5% year-over-year, and the average cost per click (CPC) rose 9%, but Yelp’s stock price fell about $6 to $38.11 in afternoon trading on Friday.

Increases in ad clicks and average CPC resulted in a 13% year-over-year increase in total advertising revenue, bringing it to a record $1.28 billion.

Quality vs. quantity in the services business boomed. Yelp reported a record-breaking $793 million — up 14% compared with the prior year — in advertising revenue from Services

The Home Services category in particular stood out with 20% year-on-year annual revenue growth.

Yelp reported a 10% increase to a record $483 million, driven by growth in advertiser demand in the Restaurants, Retail and Other (RR&O) sectors.

The company said it plans to increase search advertising and marketing efforts across its Home Services subcategories during the following quarters, with the potential to accelerate overall project growth during the long term—all to support “service pros.” And, increase its use of technology like artificial intelligence.

Self-serve and multi-location channels accounted for about half of Yelp’s 2023 advertising revenue. Self-serve revenue increased by 20% YoY and multi-location revenue grew by approximately 15% YoY.

“We continue to believe in the significant long-term opportunities ahead and our team’s ability to capture them,” the company wrote in the Q4 2023 Letter to Shareholders.

In 2024, Yelp expects net revenue to come in around $1.42 billion to $1.44 billion as its Services initiatives gain traction and drive growth. EBITDA should come in between $315 million to $335 million.

In the second half of 2023, Yelp said improvements in matching and new ad formats helped return ad clicks to YoY growth, which was 9% in the fourth quarter.

Strength in advertiser demand drove a 4% year-over-year increase in average CPC in the fourth quarter. Although the retention rate for non-term advertisers’ budgets fell YoY in 2023 due to the increased turnover associated with stronger customer acquisition, Yelp said the combination of growth in ad clicks and moderating CPCs in the second half of the year made a positive impact.

Quality vs. quantity seems to drive revenue — especially in the services category, where brands that advertise on the site spent their budgets.