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Most people don’t have a clue how Yelp makes money.
The Yelp platform is free and seems to be pretty valuable. So how are they doing it?
Well, in this review, I’m going to share exactly how this platform works.
I’ll also dive deep into their unique value proposition because little do most people know. Yelp is printing money!
Let’s begin.
What is Yelp?
Yelp is an American company that gets reviews from the public, which it publishes on its platform.
It is the brainchild of Russel Simmons and Jeremy Stoppelman.
The pair worked for Paypal before transitioning to the MRL Ventures business incubator. It was there that they birthed the idea for Yelp, in 2004.
The concept came to Stoppelman after he came down with the flu, and it took him a while to find a local doctor he could trust.
It then dawned on him that the ordeal would have been so much easier if the internet had a resource that could send trustworthy recommendations his way.
It took Stoppelman and Simmons a while to refine the idea. It was initially email-based and many of the investors they approached rejected it because of how complex it was.
Even though the system attracted the interest of the pair’s friends and family, they found that many of their users were primarily drawn to the ‘Real Reviews’ category.
They had no interest in the referral requests that came their way. Instead of sticking to their guns, Simmons and Stoppelman responded to these results by reworking their idea for Yelp.
Max Levchin, MRL Ventures’ founder, gave the pair their first $1 million
In the months that followed, they attracted even more investors.
This was in response to the growing number of users that were flocking to Yelp. By 2006, they had recorded a million visitors in a single month.
By 2010, the company’s revenues had climbed to $30 million.
They eventually extended their reach to Europe, opening websites that were geared towards users in places like the UK, France, Spain, and Germany.
This allowed their international traffic to skyrocket, turning Yelp into one of the most prominent review sites in the world.
Google and Yelp
Google attempted to buy Yelp at one point. The tech giant offered $500 million.
But the deal fell through. It was reported that Yahoo disrupted negotiations by making a $1 billion offer.
Google refused to match that figure.
Once disagreements within Yelp regarding the offers arose, negotiations fell apart.
Yelp’s relationship with Google soured in the years that followed, with the company accusing Google of altering its results in ways that worked against Yelp.
This did little to disrupt the platform’s success.
Yelp, which is based in San Francisco, California, has become a vital component of the business arena.
It is looked at as a tool that can either strengthen or weaken an organization’s presence in the marketplace by permitting users to submit reviews for the products and services they have utilized.
Questions about the integrity of Yelp reviews have been raised on more than one occasion over the years. Some critics have even went as far as suggesting that trolls could use the platform to attack businesses whose products and services they have never used.
However, surveys have shown that negative reviews on Yelp are few and far between, especially where businesses are concerned. Most corporations have ratings of at least three stars.
How Does Yelp Work?
At its core, Yelp is a platform that collects reviews.
If you visit their website, Yelp will customize its contents to match the locations and businesses in your area. The site’s biggest attractions are the consumer testimonials.
Many people visit Yelp because they want recommendations for everything from restaurants to hospitals.
The value of Yelp lies in the fact that people use its content to identify the businesses with whom they are willing to transact.
Anyone can open an account on the platform. It is a simple matter of providing your names and email address.
The additional data Yelp requests will depend on your location.
Once you become a Yelper, you can post as many reviews as you want.
Businesses have pages on the site. You can write a review by simply visiting a company’s page and clicking the ‘Write a Review’ option.
The site comes with a search tool that you can use to find the organizations that have piqued your interest.
Yelpers have the option of ending a review with a rating. The lowest rating is 1 star. The highest is 5 stars.
You can also provide additional details of the business you have reviewed such as whether or not they accept credit cards. These might seem like minor details, but are of value to someone looking to get unbiased opinions.
Over the years, the site has evolved to provide special features such as reminders for special events and resources for making reservations at hotels and restaurants.
For most people, Yelp is just another social media platform, no different from Facebook and Twitter.
People use it to discover new friends and groups who share their interests. They also use it to follow people whose preferences they trust.
This allows Yelpers to base their opinion on products and services on the perceptions of a small circle of reviewers. This is a part of their platform that some people like, while others have criticized it.
How Does Yelp Make Money?
Yelp has a whopping 142 million unique visitors every month. It is available in 15 different languages.
The company acts as a guide that points visitors in the direction of local businesses that can satisfy their needs.
While the Yelp platform is convenient, how in fact the platform makes money is quite the mystery to most people. After all, their traffic consists of individuals that are either reading or writing reviews.
Yelpers do not pay a subscription fee to join or maintain their membership.
The money Yelp makes comes from advertising.
Local businesses such as salons and retail stores pay Yelp so that it can feature them in prominent positions in the search results.
Advertisers do this because they want to grow their traffic and reach. Yelp helps them achieve this by pointing its members in their direction.
It is worth noting that Yelp does not encourage its members to write positive reviews about its advertisers, nor does it make any effort to bury negative reviews.
Yelpers are free to say whatever they want about any business they choose.
In addition to local advertising, Yelp also takes advantage of brand advertising. Their platform has banner and text ad space being used to promote local and international brands all over their site.
Can You Get Paid To Be a Yelp Reviewer?
Anyone can become a Yelp reviewer. This isn’t a paid position.
People do not make money from writing reviews. However, a certain segment of Yelp reviewers have gained considerable prominence over the years.
Yelp calls them Elite Reviewers.
The company is responsible for assigning this classification to ordinary reviewers. The classification isn’t permanent. Elite Reviewers have to be re-approved annually.
Yelp doesn’t use any particular criteria to determine whether or not a Yelper deserves elite status, or at least this is the claim it has made to the public.
However, the classification is highly sought after by Yelpers because of the perks which come with it.
Elite reviewers do not get paid to post reviews.
However, they are often courted by businesses, some even going as far as showering them with gifts such as free tickets to major events, in the hopes of encouraging them to write positive reviews about their products and services.
Elite reviewers matter to these companies because they have millions of followers, many of whom hang on their every word.
These reviewers can either push their followers towards a particular business or push them away.
Businesses recognize that Elite Reviewers have a lot of power and they want them to wield it on their behalf. Some organizations have been known to offer Elite Reviewers money for favorable reviews.
However, this is dangerous because Yelp’s policies prohibit Yelpers from writing reviews that have been biased by monetary gain.
The company won’t hesitate to strip Elite Reviewers of their status if it is revealed that their reviews were influenced by financial rewards.
Of course, this hasn’t stopped businesses from tempting Elite Reviewers with lucrative bribes.
Some service providers on the internet sell positive Yelp reviews from Elite Reviewers. But they try to hide this as best they can as this could destroy the reputations of the companies that have hired them to give fake reviews.
Why is Yelp Successful?
Yelp is definitely successful. Although this wasn’t the case in the beginning.
For many years, the company wasn’t profitable. But in 2019, Yelp’s revenue reached $1.014 billion, which is an incredible milestone.
The company’s success can be attributed to the networking effect. Some people write reviews on the platform because they want to express their opinions on products and services they have used.
Other people visit the site because they want to read those reviews to determine whether or not they should use these products and services. And once they use those products and services, more often than not, they feel compelled to write their own reviews.
This has allowed the depth of Yelp’s content to grow, turning the site into one of the most trustworthy sources of information on the internet.
Conclusion
The Yelp machine is a review powerhouse. They started off as just an idea. They have since gone on to generate over $1 billion in revenue.
The platform makes most of its money from advertising and selling ad space to brands. While people search their site for reviews, they discover what others are saying before deciding to interact with a business.
Yelp has taken the ball and ran with it in the information age. The Yelp business model is just another example of how information truly is currency.