Yelp – Not Your Dad’s iYP

With an estimated 61 million unique visitors in December 2011, Yelp is among the largest local search sites. Yelp offers local business information and reviews provided by consumers. These are indexed by address, neighborhood or zip code. In addition to responding to customer reviews, local businesses can buy targeted ads on a CPM or cost per click basis. Yelp also works to build an online local community atmosphere on the site by encouraging user feedback and conversation. Those that post reviews on the site tend to be between the ages of 18-34 years old, with college degrees and a household income of at least $100,000. Categories that perform particularly well on Yelp include restaurants, bars, nail salons, hotels, childcare providers and doctors. Along with competitors Citysearch, Google Places and Yahoo Local, Yelp presents a very compelling business case.

But the Yelp business case goes beyond that typically offered by the majority of online directory properties. To a great extent, what sets it apart is its focus on ratings and reviews. These ratings and reviews not only show up consistently and prominently in the search engine results, but they also impact consumer buying decisions at the Zero Moment of Truth. This term, coined by Google, refers to the moment that a user responds to a series of stimuli (for example, advertising messages) by turning to the search engines in order to make a buying decision. This decision is heavily influenced by consumer generated content in the shape of ratings and reviews. According to a Comscore study in 2011, 59% of consumers consider ratings and reviews an important factor in selecting a business.  In fact, many consumers consult multiple sites in order to survey a variety of reviews. There is no question that businesses need to participate in claiming their business listings as well as monitoring and responding to all online reviews in order to ensure that they don’t lose market share. Yelp’s focus on and ubiquity in this space gives it a value that goes beyond the traditional metrics associated with an iYP. Further, Yelp content forms the primary review data provided by the Siri voice operated application on the iPhone. Given the penetration of this device in North America, this is clearly a major value driver for advertisers on Yelp.

That said, it’s not all good news for Yelp. There has been widespread criticism online which is typified in a recent blog by Rocky Agrawal that focused on Yelp’s high prices compared to its competitors when ads are purchased on a CPM (Cost Per Thousand) basis. Yelp does provide reporting typical with the space, including call or click tracking from an aggregate national level down to individual locations. This allows advertisers to track direct return on investment generated from the channel on a market by market basis (in keeping with the DAC Group criteria for selecting performance media channels). However, it is important to track the broader, indirect benefits that Yelp provides in order to fully understand the value of advertising in the property. Yelp has positioned itself as a premium offering as a result of taking a different path in a crowded space. It is likely that more local search sites will follow their lead, but the first mover advantage it currently enjoys will continue to provide a benefit to the property and value for the advertiser for some time to come.

Sandy Scopa, Research Director  

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