eCommerce

Yelp’s Year Of ‘Big’

There is no arguing that online reviews aren’t important in the digital age.  Depending on which figures you fancy, between 65 percent and 90 percent of consumers check online reviews before they shop and 88 percent of people treat an online review with the same level of consideration they give a review from a personal source.

With the advent of mobile phones, online reviews are arguably more important because consumers can literally read them right up until the final moment of making a purchase.

And often do – a brief and highly unscientific study of random social media users indicated that at least half continue reading reviews after they’ve already put an item in their shopping cart.  Not their digital cart – their physical cart in a physical store.  About ⅔ of the 100 or so people we polled also indicated they were more likely to keep reading reviews if the purchase was something they were on the fence about – and perhaps looking to be talked into (or out of).

There are a variety of websites and social media portals that one can access for the chance to play reviewer – but for most everyday web users, the area of cyberspace most synonymous with reviews is Yelp. Started for food – but now grown into almost everything – Yelp is where one goes when there are praises to be sung or axes to be ground.

More axes are ground than praises sung, BTW.

And that is the essential trouble with Yelp in specific – and review sites and sections in general – they’re important, which means they have a tendency to attract trolls, paid reviewers and all make and manner of other crazies that tend to muddy up the results. That is a problem for everyone – in the last few months Amazon has begun cracking down on faked or paid reviews on its site – but for Yelp it is particularly problematic since a high volume of junk reviews and trolled garbage runs counter to the core premise under which Yelp was founded.

“[Yelp has] one simple and powerful mission, connecting consumers with great local businesses,” CEO and co-founder Jeremy Stoppelman told investors during a call last week.

Delivering on that mission has not always been easy – a year ago Yelp was beset with falling earnings and revenue – and questions about whether its crowdsourced review page was offering nearly as much of a benefit to consumers as it was creating a bane for merchants.

In popular culture, Yelp became less known for being a product research tool and more associated with being a tool to punish dentists that shoot lions and other business owners users dislike – whether or not those reasons have anything to do with their business.  Cecil’s killer may have deserved public scorn, but Yelp doesn’t want to be the vehicle for it because whether or not he’s a bad hunter isn’t really relevant to whether or not he’s a good dentist – and Yelp’s purpose is to screen out bad dentists, not bad hunters.

However, the closing days of the summer of 2016 are looking better for Yelp than their 2015 ending. Earnings are up – a turn of events that more shocked the street than beat it – and Yelp made a strategic investment in its partnership of Nowait.

Yelp may be synonymous with online reviews – but the bigger ambition for the firm lies beyond merely observing the marketplace.

“With the Nowait partnership we are really expanding on our core mission, which is making it easy for our users to connect to businesses. Part of that is research, the next logical step is using Yelp to directly connect all of those businesses to all of our users,” a Yelp spokesperson told us.

So what does the future of that direct connection looks like?

Signs Of Renewed Core Product Strength

While earnings season often has surprises – Yelp did have the distinction of being one of the good ones.

The second quarter saw Yelp crush analyst’s expectations – since the consensus position of analysts was that the San Francisco-based company was going to post losses of $0.07 off of revenue of $169.8 million. Instead, Yelp delivered $449,000 in profit – as compared to a loss of $1.3 million.  According to Sensor Tower, the Yelp app was downloaded 800,000 times in July 2016, indicating Yelp is having something of a Renaissance.

“In the second quarter we connected consumers and local businesses more than 300 million times through mobile calls, clicks for directions and map views, food orders, restaurant reservations and new reviews, and many other ways,” Stoppelman told his investors on the strong results. “The number of Yelp-powered connections is growing faster today than it was a year ago. And it’s this robust activity that drives our business model, with over 108 million reviews, our unmatched content and compelling product experience brings millions of consumers to Yelp every day.”

Those millions of views every day came care of Yelp’s 23 million active users. And 23 million is nothing to sneeze at, that’s a lot of people – but when you compare it to the active usership of Facebook, Twitter or Uber – it’s not a staggering number.

But Yelp’s active users are special – they’re highly interested and engaged by commerce, and the fact that they are reading a review makes at least a good prima facie case they are thinking about buying something.

“Our high purchase intent users are exactly what business owners are looking for, potential customers,” Stoppelman noted.

And Yelp just happens to be ready to make sure those businesses can connect with those motivated potential customers.

A Natural Context For Connection

Yelp’s goal for the remaining two quarters of the year is to build out its core advertising business and increase its number of users – standard fair.

This time around, however, Yelp’s CEO spent a bit more time pushing Yelp’s increasing role in pushing transactions.

“Total transaction volume grew almost 50% year-over-year in the second quarter, totaling nearly 6 million transactions and bookings via Yelp Eat24, Yelp Reservations and Yelp Platform.”

Yelp is now up to 100,000 merchants users can transact directly with through the platform – and going forward, through their recent partnership of Nowait, they’ve added another 4,000 restaurants.

Nowait is a variation on a mobile order ahead platform that allows businesses to manage their waitlists such that diners can add their names digitally in advance of arriving at a restaurant.

It works particularly well at family dining places where they don’t take reservations for parties under ten. Demand is especially found among parents who will leave a restaurant if the wait is more than 20 minutes.  The drive in the car could save them the wait. Nowait is additionally the type of service that plays perfectly with the kind of user Yelp already has – consumers who like to know what they’re getting in advance of getting there.  That consumer is definitely buying something – and probably the thing that most nicely dovetails with the consumer’s Type A personality.

There are an estimated 250,000 thousand fast casual restaurants in the United States – so the opportunity is large.  The app is currently free for consumers, but restaurants pay a monthly subscription fee of $60 to $200.  Yelp’s 23 million very actively engaged users just might make that subscription fee look a lot more tempting to some players.

Mobile food is big – and seemingly getting larger by the minute – and thus a hard place to make one’s mark.  But in that regard, Yelp does have a unique benefit – it’s already made its mark, and for some consumers it’s a standard they swear by.  If those consumers can be made to transact half as much as they complain about previous transactions – Yelp might be getting some great reviews of its own.

 

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