How does Yelp's Hatch acquisition boost AI conversion?

Yelp Inc. has officially completed its acquisition of Hatch, a leading AI-powered lead management and customer communication platform, for $270 million in cash plus $30 million in employee retention incentives.

The deal, announced January 21, 2026, and completed by February 6, positions Yelp to deliver advanced AI tools to local service businesses, helping its 76 million monthly visitors with Hatch's proven conversion technology.

The acquisition is a big step in Yelp's AI transformation. Hatch's platform automates customer communications across voice, SMS, email, and quote requests, addressing critical pain points for home service providers.

Prior to the deal, Yelp and Hatch integrated in November 2025, enabling AI agents to instantly respond to Yelp's 85,000 daily project inquiries, which drove faster lead conversion and appointment bookings.

"Hatch solves challenging lead management and communication pain points for services businesses. By combining our scale with their innovative AI, we can help providers operate and grow more efficiently," said Yelp CE Jeremy Stoppelman.

Hatch, founded in 2018 and headquartered in New York, had reached $25 million in annual recurring revenue (ARR) by November 2025, growing 70% year-over-year despite modestly negative cash flow. The platform's end-to-end capabilities complement Yelp's consumer reach perfectly.

Hatch has now become a Yelp subsidiary, funded partly through Yelp's amended revolving credit facility with JPMorgan Chase and Wells Fargo. The merger agreement, signed January 17, converted all Hatch equity and options into cash rights, subject to post-closing adjustments.

Hatch’s platform is designed to help home service businesses increase conversion rates and retention while lowering overhead costs. Unlike simple point solutions, Hatch manages the entire customer journey, from initial inquiry to appointment scheduling and long-term nurture. Its AI agents can instantly respond to inquiries across SMS, phone, and email, ensuring no opportunity is missed.

This capability is particularly vital given Yelp's massive scale. "This integration with Yelp creates operational consistency that drives revenue growth," said Hatch CEO Chris Bache.

With over 76 million unique visitors each month, Yelp is a primary source of high-intent leads. However, service professionals often struggle to respond quickly enough to secure these jobs.

In November 2025, the companies announced an integration that allowed Hatch’s AI customer service representatives to instantly respond to Yelp inquiries. This existing partnership validated the strategic fit, proving that combining Yelp’s high-intent consumer traffic with Hatch’s automated follow-up could drive measurable revenue growth for service pros.

“Growth comes from two things, converting more opportunities and doing it the same high-quality way every time,” said Bache. “Joining Yelp means we can scale faster and help more businesses grow and succeed. The journey has only just begun, and I couldn't be more excited about what we'll accomplish together.”

Yelp's move reflects accelerating AI adoption among platforms connecting consumers with local services. The company reported Q3 2025 revenue of $376 million (up 4% YoY), with advertising at $357 million. Despite strong fundamentals, Evercore ISI recently cut its price target to $38 from $45, citing market dynamics.

For Yelp, Hatch expands beyond reviews into SaaS revenue streams. The $25M ARR acquisition at 10.8x multiple shows confidence in scaling Hatch's technology across Yelp's ecosystem. Service pros gain AI-powered continuity across channels, while Yelp strengthens its value proposition for businesses reliant on quote requests and project leads.

“The acquisition of Hatch is an important step forward in Yelp’s AI transformation, accelerating our strategy to bring powerful new AI tools to local businesses,” said Jeremy.