Yelp Today, Gone Tomorrow?
April 22, 2019 11:44 am Comments Off on Yelp Today, Gone Tomorrow?
Yelp’s stock has taken a +/-30% percent plunge recently, says Steve Wyer of Third Coast Interactive. The Nashville-based thought leader explains that Yelp was one of the first consumer reviews sites and the undisputed leader in the food review market during its heyday. Stocks are down for many reasons, Wyer says, and the company may not fully recover without changing its business model.
New avenues
Yelp’s stock went from near $50 per share in September 2018 to just under $35 as of early April 2019. Wyer believes that the downturn is due partly because consumers are turning to new sources of user-generated information. Instagram, in particular, has gained a reputation as the go-to for food reviews, especially when it comes to finer dining. Instagram makes it possible to review an establishment with little more than a picture, and where food is concerned, 1,000 words are rarely necessary.
Google Maps is another unsurprising tool that’s gaining popularity as location-based data becomes more entwined with searcher’s lives. Google allows for on-the-go searching, and results can be filtered based on distance. This tool is invaluable for travelers. Combined with a one-touch map and clearly visible star-ratings, it’s perhaps the easiest and most intuitive review platform out there.
The Better Business Bureau may still be the gold standard for customer reviews. The organization delivers a manual verification process and advanced “Fake Reviews” detection capabilities.
Yelp’s reputation on the line
Steve Wyer notes further that Yelp’s profits may have been affected by high-profile stories of potential extortion. Many small business owners have complained over the years that Yelp has threatened them with the removal of positive reviews unless they pay for advertising. Some claim that Yelp representatives told them in no uncertain terms that money hides negatives feedback. Danny Teran, a New York restaurateur and partner in Watson Hospitality Group, is one business owner who claims to have been badgered by Yelp. He appears in the documentary Billion Dollar Bully, which dives deeper into these accusations and draws an unflattering picture of the 15-year-old marketing mega-giant. While various class action lawsuits, studies, and reports have so far failed to prove the company’s guilt, the general perception by many businesses is that the site manipulates reviews.
A bad move
When Yelp was founded in 2004, businesses were required to sign a one-year advertising contract with an initial cost of $3,000 or more. In a risky move, Yelp changed these terms in 2018 to allow for month-to-month agreements with a starting cost of around $400. This made advertising on the site more affordable for smaller establishments. While Yelp saw an initial uptick in revenue and new accounts, the changes did not pay off. Businesses now often pull out after one or two months if they don’t see a return on their investment. Many business owners have also discovered Yelp reviews aren’t as valuable to their bottom line as they were a handful of years ago.
The future of Yelp
Yelp may not be going away anytime soon, despite its questionable status and revamped Terms of Service. Attempted growth by adding additional business sectors, such as service-based businesses, is proving to be a hard sell. For small contractors, service providers and business-to-business companies it may not make good economic sense. Plumbers, roofers, HVAC and remodeling professionals are now more dependent on sites such as Houzz, Home Advisor, and the Better Business Bureau to present high quality, fair and transparent online customer reviews. Wyer asserts that Yelp remains popular with “average” diners, or those who don’t follow food influencers on social media. It has also steadily grown its reservation system and online waitlist feature by more than 150% within the last year. It is clear that this type of service is more appealing to consumers today since they can get their food critiques elsewhere. If Yelp is to survive in 2020 and beyond, it will have to evolve to meet user demands.
In short, Wyer notes that trust issues may be the site’s major downfall. He believes that once a business loses its credibility, it is tough to regain it. Today’s consumers have choices, and when they don’t trust one site, there is always another just a finger swipe or mouse click away. This is a problem that a few five-star reviews are not going to solve for Yelp.
