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Yelp and the Rise of Consumer Reviews
Posted on May 2nd 2014
You’re new in town, or you’ve traveled to a new destination and you want to know what restaurants the locals like or where you can find the best shopping. So you reach for your smartphone and consult a trusted advisor. By making a phone call? No, by checking out Yelp. Now more than ever, we’re using reviews and other types of online information to make purchase decisions about everything from where to buy tennis shoes to where to go for a sandwich. By 2011, the sheer number of sources used by an average shopper had nearly doubled to 10.4 sources, according to Google’s Zero Moment of Truth research.
This post will consider the importance of online reviews in our decision making by profiling the story of Yelp.
Yelping for help
Former PayPal executive Jeremy Stoppelman co-founded Yelp back in 2004 as a way for people to get the opinions of other consumers about local businesses ranging from bars to beauty salons. Yelp makes money by selling advertisements to local businesses.
“Yelpers” have written more than 42 million local reviews over the past decade. People also use the site to converse with others, browse others’ lists of favorite establishments and find local events.
When you review a business on Yelp, you can give the business a rating from 1 to 5 stars. Businesses with especially high reviews can earn a window sticker that says “People Love Us on Yelp.” Customer service appears to have the strongest effect on Yelp reviews, according to Mashable.
Yelp has an expanding international presence. In August, Brazil became the 23rd country to welcome Yelp.
Competition and controversy
Yelp has rejected acquisition offers, first from Google and later from Yahoo. Now Google is among Yelp’s competitors in targeting locals who are actively looking for reviews of products or services, having bought Zagat in 2011 in addition to Google’s own efforts with Google Places and its “carousel” for displaying local search results.
Facebook is also taking a run at Yelp with a new “Review” button that encourages people to rate their experiences at local businesses.
Then there’s the controversy that’s occasionally flared up over Yelp reviews. Some business owners have alleged that Yelp manipulates reviews to favor companies that buy ads. And some business owners vented frustrations during a town hall meeting in Los Angeles, one of 22 such events organized by Yelp to ease business owners’ concerns.
Making the Mobile Move
Despite the reviews controversy and the attention of tech giants, Yelp has generated some serious momentum. Stoppelman was recently ranked by Fortune as one of its “40 Under 40” business notables. And Yelp, which is now traded on the New York Stock Exchange, has been getting some attention from Wall Street as it moves toward profitability.
Everyone seems to have a smartphone these days and local business ratings companies like Yelp have all invested heavily in mobile. Yelp now allows people to make reviews straight from their mobile devices.
So what’s your opinion of Yelp, and of consumer reviews in general? Is it important for local companies to account for review sites like Yelp in their marketing strategies? We’d love to hear your thoughts.