Yelp, an 11-year old online listing and review company, is seeing a halt on its core business. The reason is two folded. First, Yelp’s strength - a strong review community - can also become the
YELP, connects people with great local businesses by bringing “word of mouth” online and providing a platform for businesses and consumers to engage and transact, recently put itself up for sale. Who's buying? After a month, it is safe to say what company is not buying.
Yelp's business model, which is heavily reliant upon businesses advertising, shows slowing growth and rising costs. As an internet company, Yelp's intrinsic value is the perceived value from its customers, which include normal users and merchants. To find out the reason behind the falling business, let’s dig into three distinctive aspects: value to users, relation with merchants, and management perspective.
Yelp’s major business involves restaurant reviews. The typical user flow can be as follows:
user enters the site
searches for keywords for a location
finds a list of results
filters and sorts the list
pick restaurants based on their taste
skims pictures taken by others for dishes and ambience
reads through some reviews
looks up menu items
narrows down to a handful of choices
considers a few factors: distance, parking, price, wait time, ambiance, menu, etc.
calls for reservation if necessary
sends out restaurant details to friends
The problem is that users have to make a lot of effort just to make sure the search result fits their taste. The following are some issues we usually experience.
Lack of user preference: Users have to read through a list of results, no matter what their base preferences are. If user selection and favorites were to be incorporated into calculating the search result, user will feel it more usable and helpful.
Reviews, Yelp’s major value proposition. User reviews by "real people" are all the rage, but do they really provide a useful resource?
Conflicting: started with discrediting words, such as “I don’t usually eat Italian food” for a review of an Italian restaurant.
Subjective: “one-time bad experience”.
Lack of representativeness: most people are not compelled to write reviews; only a few power users will do so.
Irrelevant: almost all reviews are written to address points of personal concern.
Verbose: Reviews are too long and information is unstructured.
Ratings are not normalized.
Most of the reviews are contributed by elite status members, who get free parties and eventually higher status. However, accuracy or objectivity are not mentioned. And it’s also only those young, poor and insecure reviewers who eventually become major contributors. Thus, the model doesn’t lend itself to attracting credible reviewers.
To conclude, everyone has their own way of seeing things, which means that trying to grab useful information from reviews is tedious work.
Filtering and sorting: Users usually have to manually filter/sort the result every time based on their personal preference. Also, with limited factors to filter the information, we still have to go through an extended list of restaurants in order to make a decision.
Photos: Photos are generated by other users, which is subject to the skill and device of the contributor. Information is largely dispersed and not linked to the menu. In order to know the dishes, users need to look through pictures in an inefficient and time-consuming way.
On the user experience side, Yelp is largely a yellow-page minded company.
Not user centric: the landing page is not personalized. It’s currently a mix of search and useless information. It could focus more on bringing the most useful information to the user, and be as simple as AirBnB, or as useful as Amazon.
Bad bookmark system: bookmark is hidden several levels down, and the bookmark map on the website only shows results on the first page. Users’ choices have not been used to improve search results at all.
Poor share function: lack of a decent sharing function on both the desktop and mobile versions.
Unintuitive photo system: beside generally poor-quality photos, browsing them on the website is not very user friendly.
Things get worse on the merchant side. First of all, it charges a membership fee in order to display good reviews from customer. Based on this questionable business model, Yelp has a very high sales cost compared to its rivals. Without creating value for the community, it also…
Affects the integrity of businesses: holding good reviews hostage in exchange for membership fees.
“I sat in on a sales call with a Yelp rep, and after questioning her on the finer details we decided Yelp wasn't for us and told her so. She then became noticeably irritated and said "Good luck getting any positive reviews in the future." link
“I'm not just saying the good reviews go there, all reviews go to that barren land.” link
Yelp also filters reviews using “automated” software with an obscure standard, thus discouraging users from investing time into creating reviews. “We get millions of reviews from our users, and we try to showcase the ones that best reflect the opinions of the Yelp community. The remaining reviews are accessible from a link at the bottom of each business’s profile page, but they don’t factor into a business’s overall star rating or review count.” link
As stated on annual report, Yelp’s core value is “connects people with great local businesses by bringing word-of-mouth online”. And its key strategies are marketing efforts and enhanced monetization. It seems that its value proposition and the means to achieve that are not aligned. On the contrary, it would make more sense for Yelp to focus on researching user behaviour, to create tools to help business connect with users, and to take advantage of recent advances of technologies, such as Natural Language Processing, to make better sense of user reviews.
Secondly, majority of Yelp’s revenue comes from advertisement (94% in 2014). And sales and marketing, which account for 53% of expenses, suggest that Yelp is already pushing the boundary of its business model.
Furthermore, in regarding to growing mobile users, Yelp’s management admit that they have “limited experience” in mobile products, and “may not be able to generate meaningful revenue”. This could be a determinant factor to their poor user experience on web and mobile products.
Trying to work for the majority while ignoring the individual need.
Reliance on user-initiated search rather than preempting user interests.
Successful in being the largest online review business, but also fails in bringing precise recommendations.
Result: User has to spend 5-20 minutes of time for every search.
Solution for food finding
User centric: honor the user’s taste and provide relevant information. For example, customize the landing page. In addition, let the user feel that they are taking control of the community, and encourage users to connect with each other.
Personalized: bring user’s history to the most important place. Instead of popular choice, provide more tailored results. The objective is to bring user information in the long tail rather than the most popular ones.
More credible reviews: adopting blog, professional and newspaper reviews, reduce the randomness from user-generated content. Impose a guideline on reviews.
Improve searching ability: contextual and mood based search, such as healthy, green, meaty, date night.
Improve review relevance: show reviews from users similar to you.
Review sentiment analysis.
Increase exploration level: work with owners to add more dish information such as ingredients, calorie, pictures etc.
Incorporate deals: promoting more deals is a great way to monetize the business.
Foursquare: Start from a location-based tagging service, Foursquare shifted to a recommendation system six years later. But the results are perceived as suboptimal.
Eat Now: Featuring instant personalized restaurant recommendation based on personal taste, location, time, budget etc, Eat Now is a dead-simple mobile-based iPhone and Apple Watch application helping user to find food they love in 10 seconds. Currently it can be used in major cities worldwide.
As an eleven-year old listing and review website, Yelp is seeing a halt on its core business. As discussed above, its crowd-based review model is beset with issues that prevent casual diners from making quick decisions, and may be seen as information overload from the growing number of mobile users.
Yelp could still meet the expectations of its large user base, but it’s challenging for it to keep up with the growing number of users who want quick and decent picks.
Many younger users think of themselves as foodies, but don’t have time to do the comparison and planning. If this trend continues, the ice will melt and the game will change in the near future.