Following our last blog post that dealt with ethics and legalities regarding what you can or should post on a blog or Facebook page or otherwise publish to the internet, it is interesting to now look at Yelp.
Like so stories we have all heard before, Yelp was started by two creative minds, Russel Simmons and Jeremy Stoppelman, both in their twenties at the time they founded the company. Working for PayPal in 2004, the two teamed together to establish the social networking and user reviewer website known as, “Yelp”. Based in San Francisco, the two software engineers created a database of user-created reviews of local businesses. Over time, they have selectively expanded their efforts to other cities.
Beginning with $1 million in funding from their PayPal boss, Max Levchin, the company struggled at first but now, after 5 years, has annual revenue that Inc. Magazine estimates to be in the range of $30 million. Levchin, a man who has made tens of millions with PayPal, describes Yelp by saying that he expects it to be one of the “highest-return investments I’ve ever made.”
Consumer Driven Reviews and Ad Sales at Yelp
Here’s the basis of the Yelp business model. The website sells advertising space to small businesses. As a business pops up repeatedly with consumer reviews on the Yelp site, the Yelp ad sales team encourages the business owner to claim his business identity on Yelp. Once a business has established its claim, the business is then allowed to respond to the user written reviews and comments about the business. The business also receives regular traffic reports from Yelp.
If a business wants a more visible positioning on Yelp, it can buy a $300 monthly sponsorship, which allows the company’s ads to be seen in other locations on the Yelp website. For an additional charge, ($300-$500 monthly) companies may select a favorite review and have it moved to the top of their listing, a strategy particularly helpful to companies that have garnered multiple negative reviews and need to offset the damage.
This is No Tupperware Party
In an interesting twist, the Yelp business model involves “parties” as an important way to grow business. The party concept began when Stoppelman decided to entertain a few of the website’s most loyal users. He invited roughly 25 people to join him in an open-bar party, but instead of two-dozen, nearly 100 people showed up. Afterward, traffic to the website began to build.
Yelp parties, known as events for the Yelp Elite Squad, quickly gained status. You had to post—you had to contribute—in order to gain an invitation. After only a few months, Yelp’s small band of faithful posters had grown to some 12,000 people in the San Francisco Bay area. Seeing the beauty in the idea, Yelp took on another $5 million in venture capital, most of it targeted for throwing more Elite Squad parties.
Without a doubt, a snowball was building. Restaurants and bars grew eager to host the events, sometimes donating much or all of the food and beverage. By 2006, the Yelp database included over 100,000 reviews and the website was drawing more than a million viewers monthly. The young company faced the dilemma all dotcoms and venture capital funded companies dream of—the buyout offers were starting to come in. But the two founders were no longer ready to sell; they were ready to take their show on the road.
Measured Risk or Great Opportunity?
If Yelp is in your metropolitan area, then there is no denying that it can offer many types of business great visibility. With roughly 18 geographic cities profiled worldwide, a reported 26 million monthly viewers, and a consumer-created content base of over 8 million reviews, no one can deny Yelp’s visibility. The former site Citysearch was once considered a rival of Yelp, but Citysearch has fallen by the wayside as Yelp’s dominance has become clearly evident.
But the dynamic behind Yelp challenges many people’s comfort levels. Elite status reviewers must provide a photo and reveal their identity. Some have questioned whether the vetting process for the Elites is thorough and effective.
Another question raised about Yelp is the fact that anyone can post a review and remain anonymous. That includes the whole assorted cyber world of angrys, hostiles, nutcases, and chronic complainers. It also includes a business’ competitors. One report says that as many as 85 percent of reviews are positive. But with a 5-star ranking system, a business could receive as few as 3 stars, the ranking still be considered positive, and yet , depending upon the rankings of competitive businesses, 3 stars might actually be a detrimental ranking.
Many businesses claim that Yelp rankings have helped them. Yet in some cases, Yelp has brought out the worst in people with one incident even resulting in a personal confrontation between the business owner and the critical reviewer that ended with a physical attack and police involvement.
Some unhappy businesses are involved in defamation lawsuits against Yelp. Others claim to suffer in silence rather than taking legal action or even just aggressively challenging negative reviews, which can bring on more criticism, with other reviewers ‘piling on’ with negative attacks of their own.
As Inc. Magazine says, “‘Everyone’s a critic.‘ The cliché has long been a useful way to brush off a caustic remark or a biting comment. But now it’s true—and it’s driving entrepreneurs crazy.”
Yesterday’s Social Media blog published 10 Step to Make Sure Your Tweets or Blogs Don’t Land You in Jail— we could have also called it “10 Steps to Social Media and Online Responsibility.” Yelp is only the platform; unfair and destructive comments come straight from the anger, resentment, or sense of having been wronged that boils up inside the individual. Social media is a powerful and effective way for people to be heard as long as we all remember that the companies on the receiving end are composed of people, too.
When we confuse the words “attack” and “constructive criticism” our voice, magnified by the worldwide web, has a tremendous power to do good … or to do permanent and irreparable damage.
Where Does Yelp Fit into the Social Media Picture?
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