Mobile use is growing for local search engine Yelp, helping to drive strong click-through rates for ads appearing on the mobile site. As a result, the company is also planning to introduce in-app ads soon.

In its second quarter financial results, Yelp reported that 40 percent of searches are now conducted on its mobile apps, becoming the majority on weekends. Additionally, the brand?s mobile app was used on 7.2 million mobile devices per month in the second quarter, up 70 percent year-over-year.

?Mobile remains a top priority at Yelp and we expect it to be a key driver of engagement and success in the future,? said Jeremy Stoppelman, CEO of Yelp, San Francisco, during a conference call with analysts to discuss the results.

?Mobile changes the consumer engagement model dramatically and we have by far the best app in the market for finding local businesses,? he said. ?With the phone in hand our users can contribute more content faster.

?When you consider that 40 percent of our searches come from mobile apps there is quite a bit of un-monetized mobile traffic that we expect to unlock in the near future.?

Mobile?s many challenges
There is a significant opportunity for Yelp to monetize mobile given its strong use by smartphone users who are on the go and looking for a local business, especially in categories such as restaurants, where there is high immediacy and local intent.

However, Yelp faces many of the same challenges that Facebook and others have encountered in monetizing mobile.

One of these challenges is that the average revenue per user could fall if more users are accessing the service from a touch point that is under monetized, as has been the case so far.

Another challenge Yelp faces is figuring out a way to integrate ads into the mobile experience in a way that is congruent.

Facebook has reported promising initial results for its new Sponsored Stories ads on mobile. Additionally, foursquare recently introduced Promoted Updates as a way to monetize local traffic.

?About 10 percent of Yelp?s monthly uniques access the service through mobile apps,? said Michael Boland, senior analyst and program director at BIA/Kelsey, Chantilly, VA. "But that 10 percent accounts for a disproportionate 40 percent of Yelp?s search query volume.

?And if you segment just weekends, mobile searches actually outweigh desktop searches,? he said. ?Those numbers point to a huge opportunity once Yelp flips the mobile monetization switch.

?Yelp will likely utilize location awareness and other mobile signals to more effectively send local advertisers phone calls and foot traffic. This could materialize in ways similar to the Promoted Updates that Foursquare just launched.?

Attracting ad spend
Another challenge Yelp faces is encouraging advertisers to spend on mobile. Right now, mobile usage and ad inventory is outpacing demand from advertisers, resulting in lower prices for mobile ad units compared to desktop.

?The challenge is made greater for companies with legacy products online, as emphasis and resources are naturally swayed towards those higher margin products,? Mr. Bolan said. ?But mobile is where the growth is.

?That resource allocation ? and innovating mobile products while unencumbered by legacy products and organizational inertia ? will continue to be a challenge for lots of companies vying for mobile ad market share,? he said.

Mobile a high priority
In the second quarter of 2012, Yelp posted record revenue, which grew 67 percent year-over-year for a total of $32.7 million.

Additionally, the company reported that reviews grew 54 percent for a total of 30.3 million, average monthly unique visitors grew 52 percent to roughly 78 million. Approximately 24 percent of unique visitors are accessing Yelp?s mobile site.

Yelp also reported that it has released new features that make it easier for users to contribute content from a mobile device.

As a result, the company reports it has seen significant increases in mobile contributions for photos, tips, and business listing updates. For example, 50 percent of contributed photos on Yelp are coming from a mobile device

While Yelp does not currently display ads in its mobile apps, it does display ads on the mobile optimized version of its Web site, with results showing that the click-through rate for mobile ads is significantly higher than on desktop.

The company says its ad unit translates to mobile apps as well and it is looking to introduce a mobile app monetization strategy soon.

?We haven?t announced an actual date, but it?s obviously a high priority and something that that we?ll be doing soon,? Yelp?s Mr. Stoppelman said during the conference call with analysts.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York