Yelp has done a number of high profile deals recently. Earlier this year Yahoo announced it was integrating Yelp content into its local results. More recently Yelp and YP unveiled a partnership, which benefits YP advertisers.
Yelp also has significant deals with Bing and, of course, Apple Maps. Beyond this the company has an API that numerous third parties use to integrate Yelp content into their sites or apps.
This would all appear to be good for Yelp, making it the de facto reviews source for the broader local internet. (Foursquare is trying to challenge that to some degree.) But it’s not necessarily a good thing, as Yelp’s increasing power generates increasing resentment among business owners.
The latest drama comes as Yahoo is replacing its own reviews with those of Yelp, something Yahoo confirmed. Yelp reviews have been given priority over existing Yahoo reviews. An anecdote from a Wall Street Journal article this week illustrates the problem and frustration for business owners:
Colonial Hardwood Flooring of Lexington, Mass., amassed six years of mostly positive feedback on its Yahoo Local listing, says owner Dan Tringale. But several weeks ago, after Yahoo began posting reviews from Yelp, nearly 50 Yahoo reviews disappeared, he says.
Potential customers searching Yahoo won’t see a 2012 recommendation that Carla Fortmann confirms she and her husband wrote: “This floor is beautiful and it was very carefully done.” Nor will Yahoo searchers find a June 2012 review from Regina Sasso, of Wilmington, Mass., who says Colonial “provided a competitive quote and delivered meticulous service and work.”
Such praise has been replaced by a single, punctuation-challenged Yelp review, from the “Paul M” screen name, “Respected budget got difficult stain taken care of very attentive and house got an offer opening weekend.”
There’s plenty of anecdotal evidence to suggest that there’s considerable anger and frustration toward Yelp among the SMB community. The latest episode with Yahoo described in the WSJ piece compounds it. True, some SMBs love the site but others continue to be mystified by its “review filter” and what many perceive to be too-aggressive telemarketing tactics.
I believe the solution to these and other problems for Yelp is to migrate more of its revenue to a transactional model. It doesn’t currently charge businesses for appointments or reservations but it could take a fee for each booking it delivers (or a flat fee per month for the general capability).
Yelp could expand booking and scheduling across an array of services categories. The company could also get into credit-card processing on behalf of SMB customers and take a fee for handling the transaction. Assuming the fees were fair, the value of these services is pretty self evident. Most business owners would be willing to pay for them.
The company could then be more selective and targeted about the SMBs it approaches for ad revenue. Right now it’s just going after businesses with X reviews, Y positive reviews — as it has done since the advent of advertising on Yelp.
As Yelp handles more bookings it could also address its review filter problem. Like Amazon, Hotels.com or OpenTable it could follow up with customers whom it knows booked through the site. They would be verified purchasers and could be trusted accordingly.
In the process of soliciting those reviews Yelp would also be helping business owners gain reviews. This is a major pain point for business owners currently. And if the reviews were negative it could alert the business owner in advance of publication to enable “mediation” or a “make good.” (That might create a “conflict of interest” for Yelp however.)
Regardless, I think a move toward transactions and transaction-based revenue, which doesn’t preclude advertising, works for both business owners and Yelp on multiple levels. It would more directly align Yelp and business owner interests — and would help solve many of the site’s current problems and challenges.