What is Yelp? Yelp Reviews

1. Introduction to Yelp

Yelp is a well-known American business review website founded in 2004. It covers businesses in the fields of restaurants, shopping malls, hotels, and tourism. Users can rate businesses, submit reviews, and exchange shopping experiences on the Yelp website.

When you search for a restaurant or hotel on Yelp, you can see a brief introduction to it and comments from netizens. The reviewers will also give a star rating. Usually, the reviewers are consumers who have personally experienced the service of the business, and most of their comments are vivid and detailed.

In December 2018, the World Brand Lab released the "2018 World's Top 500 Brands" list, and Yelp ranked 417th.

2. Financial report data

On February 14, 2020, the U.S. business review website YELP (YELP.US) had a net profit of US$17.15 million in Q4 2019, a year-on-year decrease of 46%.

3. Website Features

Yelp was founded in 2004 by former Paypal engineers Jeremy Stoppelman and Russel Simmons. Compared with traditional review sites, Yelp has the following features:

1. Real users post comments, especially focusing on attracting a small group of users who are keen on commenting. Creating an account, filling out a resume, adding friends, and writing comments are the basic actions of Yelp users;

2. Carry out interaction between users through various forms and give "rewards" to outstanding users.

This model quickly differentiated Yelp from CitySearch, which valued expert reviews and waited for anonymous user reviews. Yelp's Vince Sollitto said: "Some businesses will never like this model: consumers can leave reviews, and businesses must work hard to satisfy consumers."

IV. Development History

In 2004, Yelp established itself in the San Francisco market within its first year of establishment and became an entertainment guide for the new generation of local Internet workers. At the same time, this first batch of users also brought a lot of content to Yelp. Until now, the San Francisco Bay Area still accounts for 30% of all Yelp activities. The next major local markets are Los Angeles, Chicago and New York.

In terms of specific review shares, catering and shopping accounted for the largest proportion, accounting for 23% each, followed by family services, beauty and fitness, and art and entertainment, accounting for 10%, 9% and 8% respectively.

Before 2010, Yelp's expansion was not very fast, with no more than ten new markets added each year. Starting in 2010, Yelp accelerated its expansion. In 2010 and 2011, it added 22 local markets respectively. By the end of 2011, Yelp had a total of 71 local markets, 25 of which were located outside the United States, including Canada, European countries such as the United Kingdom, France, Germany, and Australia.

In October 2012, Yelp announced the acquisition of European competitor Qype for $50 million, accelerating its international expansion.

In February 2014, Yelp announced an alliance with Yahoo to combine its search engine with Yelp data.

5. Operational Strategy

Yelp has been an Internet company with obvious social characteristics since its establishment. Browsing the Yelp homepage and business pages, the most intuitive impressions include:

1) The length of the review is impressive;

2) There is no group buying activity entrance on the homepage, but offline activity entrance occupies an important part;

3) Elite users are very eye-catching, and users frequently "praise" and "interact" with each other through comments and review authors.

As CEO Stoppelman said, "YELP is about the review experience itself. It is more like a blog with a fixed structure."

When analyzing Yelp's operating strategy, the most important point that cannot be ignored is its social operating methods:

First, let’s look at how Yelp expands into a new market: Before officially launching in a new market, Yelp first builds personal homepages for local businesses based on third-party data, providing their location information, reviews, photos, history, etc. When the business is officially launched, consumers can contribute their own reviews and add incomplete business information.

The next question is how to attract more consumers and local businesses. Yelp's strategy is to hire a community manager (of course, he must be a local) in each local market, who will be responsible for improving Yelp's brand awareness and cultivating a local review author community. The development of the community will drive the growth of reviews and continuously attract new users to contribute reviews.

The operation and cultivation of this local community also includes the style and writing of reviews. Yelp focuses on the length of key reviews and the description of details. Currently, the average length of all Yelp reviews is over 100 words. If you are an app user, you can sign in, upload photos, and post simple quick tips, but you are not allowed to post reviews because Yelp believes that mobile terminals are not suitable for writing complete and high-quality reviews.

In addition to online operations, the reviewer community also exists offline.

Just as Yelp's slogan says, real people real reviews, Yelp encourages users to create their own social graphs. Similar to general social networking sites, Yelp will recommend email contacts to new users and suggest inviting other friends to join Yelp.

6. Business Model

As the first company to integrate local business, social networking and mobile, Yelp can also be seen as a vertical community with local consumption as its theme. In addition to producing and reorganizing information in niche areas, vertical communities are closer to the industry itself, so users have the need to obtain services in addition to information.

The business models brought about by the demand for information and the demand for services are: media advertising model (CPM) and agent-like profit-sharing model (CPC/CPS). Usually, vertical communities that are closer to transaction behaviors are more likely to adopt the latter, such as clothing, daily necessities, and travel (Ctrip); while vertical communities where transaction behaviors usually occur offline are far away from transaction behaviors and generally use media advertising models, such as housing (Soufang), automobiles (Yiche), and catering (Yelp).

Yelp's business model is closer to the media. According to Yelp's prospectus, Yelp's main revenue comes from local advertising, national brand advertising and other services including group buying services ("Yelp Deals"). Currently, there is an overall marketing plan for local merchants, including keyword advertising (CPM) hyperlinks, homepage improvement, etc. Yelp mainly generates revenue by selling advertisements on its website.

In 2011, its revenue reached $83.3 million, a year-on-year increase of 74%, of which 70% came from local advertising business and the rest from national brand advertising business. In addition, Yelp's exploration of profit models includes group buying service Yelp Deals (in the second half of 2010), income from third-party advertising agency platforms and sharing with other partners.

Yelp Deals' charging model is similar to that of group buying websites. It helps merchants send discount information in real time through websites, mobile clients or emails, and charges a certain agency fee (recognized as revenue in the financial statements); other partners' share includes cooperation with online reservation service website OpenTable and travel service website Orbitz.

7. Advantages

Reviews are at the heart of the Yelp experience and a key differentiator from competitors. Reviews on Yelp form a rich database that consumers use to make the best decisions about local purchases. Yelp has more reviews and covers a wider variety of businesses than its competitors. This breadth of content gives consumers greater choice. In addition:

Yelp is authoritative

Users have been using Yelp for years and will go to Yelp to check relevant information before making purchases in their location. If Yelp can bring a higher conversion rate for each group purchase, Yelp users will be more valuable than users of other daily order websites.

Yelp has distribution targets

Yelp has 33 million monthly visitors, more than four times the number of registered users of Groupon; Yelp's traffic is more than twice that of Groupon.

Yelp has a sales team

It has also established connections with thousands of small business advertisers. One difficulty for a website that operates a daily order business is to expand its scale to multiple cities. Yelp has sales teams in more than 50 cities.

Mobile App

According to media reports, 27% of Yelp's site searches come from iPhone apps. It turns out that mobile apps will be an essential auxiliary tool for daily group buying activities.

8. Risks

As a company whose main revenue comes from advertising, Yelp's main competitors include: outdoor advertising companies and providers, newspaper, television and other media companies, search engine companies such as Google, Yahoo, Bing, and other online service providers.

With the development of group buying websites and LBS services, a group of companies such as Groupon and Foursquare have grown rapidly. These new forms have strong advantages in serving consumers and local businesses, which are more advantageous than Yelp's model of obtaining advertising revenue from businesses through reviews. Although Yelp also launched a group buying business, it cut the number of sales staff of the group buying service Yelp Deals by half after only one year of operation. The traditional business model has encountered challenges, but the expansion of new businesses has been weak, which has become the main reason why investors are not optimistic about Yelp.

IX. Website Listing

In November 2011, Eastern Time, Yelp submitted an IPO application to the U.S. Securities and Exchange Commission (SEC).

On March 2, 2012, the review website Yelp (Nasdaq: YELP) was successfully listed on the New York Stock Exchange. Yelp's opening price was $22.01, up 46.7% from the issue price of $15. It then fluctuated upward and closed at $24.58, up 63.87% from the issue price of $15. The share price increased by $9.58. After-hours trading fell slightly by $0.05 to $24.53.

Yelp issued a total of 7.15 million shares this time, with a total share capital of 59.8732 million. Based on the opening price, the company raised $157 million, and based on the current share price, its market value reached $1.47 billion.