What is Yelp? Yelp is an American Company website that serves as anonline Urban city guide and helps people find popularplaces to eat, shop, drink, relax, etc. Yelp is based on theopinions of a community of locals and people who haveexperienced the place of interest before. If one has a good or bad experience at a restaurant forexample, they will “Yelp” their opinion for the public toread. Yelp is a form of “Word of Mouth” marketing. Yelp’s Mission Statement: “To Connect People With LocalBusinesses”
Yelp History Yelp was founded in October 2004 by Russel Simmonsand Jeremy Stoppelman to help people find great localbusinesses such as dentists, mechanics, hairstylists,etc. In 2008, Yelp grew internationally into countries likeCanada, United Kingdom in 2009, France and Spain in2010, and Australia in 2011
Decentralized Organization Decentralization is a type or organizational structure inwhich daily operations and decision-makingresponsibilities are not made by one central figure, butis empowered by different levels of management. There is much decentralization in a network of serviceswithin a company like Yelp. When it comes toinnovation and new business ideas, which Yelp doesmuch often, this comes from bottom up organizationand different crowds within the company, rather than aspecific member. Yelp innovates and makes itswebsite better year after year.
Decentralization Examples Yelp user’s can upload pictures of businesses, foodsthey ate at a local restaurant, etc. User’s can provide tips to other visitors of the business Users of course can write reviews and owners of thebusiness can reply to the reviews to better theirbusiness. User’s can rate businesses based on their experiences.
Key Competitors & Partners1. FourSquare which is a “Check In” application where one would“check in” to any restaurant or business and allows you to write atip or review about the business. It became a competitor to Yelpin 2009. In 2010, Yelp introduced the “Check In” feature to keepup with competition.2. Tripadvisor is also a competitor to Yelp. Tripadvisor serves as atravel guide. It’s big when it comes to writing reviews abouthotels, restaurants and vacation spots around the world.3. Groupon: Groupon is a deal-of-the-day recommendation servicefor consumers. It became a competitor to Yelp once Yelp startedto offer coupons and promotions. Yelp is partnered with OpenTable which allows you to makerestaurant reservations online, and now you may make areservation through Yelp.
Customer Base Yelp’s main customer base would be all “Yelpers” so let mefirst start off by defining what a “Yelper” is. A “Yelper” is one that usually trusts other people’s opinionsabout a local business or restaurant before experimenting itthemselves. This means that the “Yelper” will go onwww.yelp.com, type in the restaurants name for example andread what people have to say about the restaurant and checkits star rating out of 5. In other words, Yelp’s main customer base would be everyconsumer and local business. Yelp does not have a maincustomer base, they simply try to connect people to localbusinesses around the world who take “word of mouth”opinions into consideration.
Stakeholders Important stakeholders to Yelp is anyone who affects orcan be affected by the organizations actions. The mainstakeholders include: Businesses Employees Shareholders Customers Community
Decentralization in Eco-System With the use of a decentralized organization like Yelp, it allowsthe business to collaborate, coordinate, and compete in the eco-system Decentralization allows for smooth collaboration betweenemployers, managers, customers, partners, shareholders, andthe community which leads to organized set of outcomes.Outcomes such as innovations and improvements within thecompany. Decentralization allows an organization to be easily coordinatedwhere knowledge, ideas, and information flows from the bottomto the top of management. A decentralized organization leads to better services which is keywhen it comes to competitors in the ecosystem.
Yelp’s platform Yelp’s platform and constant innovation is thecompanies key asset. With Yelp’s IOS app (hugeasset), it allows one to search a list of popular placesnearby. This update provides local businesses witheven more reason to maintain a presence on the Yelpplatform. Yelp says that nearly half of all searches on its platformcome from the mobile app because consumers nowwant to discover new places while they are out andabout.
Yelp Funding Funding: For Yelp to first get established, it fundedmillions of dollars from venture capital agencies. In 2005, $5 million was raised from Bessemer VenturePartners to expand into New York City, Chicago, andBoston. In 2006, another $10 million was raised with BenchmarkCapital. In 2008 $15 million was raised with DAG Ventures In 2010, Yelp raised $100 million in venture capital fromElevation Partners to fund an increase in sales staff.
How Did Yelp Make Money? Yelp generates almost all of its revenue fromadvertising-90% of it’s revenue is from both local andbrand advertising. Local advertising makes up 77% of its revenue which isfrom businesses that want to be featured on Yelp such asrestaurants and clothing stores. Brand advertising makes up the rest of the 13% andbrand advertising is display and text ads on Yelp.comwhich gets lots of traffic from search engines.Yelp is currently not profitable, but they believe they willsustain future profitability.
Crowdsourcing Crowdsourcing is the process of getting work orfunding online, from a crowd of people. Crowdsourcing is done on Yelp where Yelp has peoplewriting reviews on businesses. Yelp involves crowdsourcing through a commons-based production where people donate their time andeffort to provide their opinions of their experiences tolocals and businesses.
Yelp and Ratings Yelp delivers highly relevant ratings to businesses. Itallows one to rate a business based on their personalexperience. Each paid business listing result contains afiltered 5-point rating, filtered reviews from other sitevisitors, and details such as the business address,hours, accessibility, and parking and phone number. Critics of Yelp may say that Yelp hurts local businessesbecause one may only Yelp if they had a badexperience, or competitors may create fake negativereviews
Effect of Ratings onCustomer Decisions In 2012, a study was done by students from Universityof California which studied 300 restaurant reservationsand cross referenced them with Yelp Reviews. Thestudied found that: A half star rating increase from 3.5 to 4 caused anincrease from 30% to 49%, in the sellout rate for 7pmbookings. This study showed what a huge impact just a half starrating had on a business
Yelp’s Revenue Model 2011 Yelp Revenue Breakdown• Yelp needs to invest in anenormous sales force togenerate revenue fromlocal advertising.• Yelp also generates profitsthrough open sourcing asshown as “other services”from the customers thatgo online on Yelp, use dealsoffered and by “Checking in”
Intellectual Property &Ownership The intellectual property that comes within Yelp is theknowledge of the customers that put in their time andeffort to write reviews about a business. Once one writes a review on www.yelp.com about aspecific experience they had at a local business, theycapture ownership of the review. Managers of thebusiness may reply back to the review whether it wasgood or bad in order to better their business.