Yelp Business Model – How Do They Do It?
There is an online directory with immense number of visitors. This model is called the Yelp Business Model. With a vast following of 83 million of unique desktop visitors, 74 million unique mobile web visitors and an average of 28 million unique mobile application visitors per month, Yelp allows users to view lists of local businesses posted on the platform.
Furthermore, with the inclusion of reservation services and takeout/food delivery services, the company has expanded its business model.
The Business Model of Yelp
But the question is, how does Yelp make money? An insight into the business and its operating model would help answer the question.
What Actually Yelp Is and How It Operates?
Yelp was founded in 2014 by two former PayPal employees, Russel Simmons and Jeremy Stoppelman. Moreover, the $1 million funded project was designed with an aim of creating an ‘email circle’ that could allow exchange of business reviews among friends.
Presently, Yelp is the biggest forum, connecting people with the local businesses, where the users can search, find, book, and review the local businesses.
“Yelp has become a real word-of-mouth for everything; be it a restaurant, boutique, mechanic or even a dentist. In fact, the leading local guide, founded in July 2004, enjoys an immense presence all over the world.”
With its deep roots in 32 countries, it is available both in website and the mobile application forms.
How Does Yelp Business Model Operate?
How does the Yelp operate? Yelp, unlike other directories, is primarily focused on enhancing engagements with its users. It also helps users engage with others as well as the businesses.
The users on Yelp can create profile, add friends to chat in forums, and also visit offline Yelp events.
Hence, becoming a part of Elite squad is easy at Yelp. It simply requires posting high-quality photos, quality reviews and meeting other prerequisites.
The good news is, after getting listed on the operated model; you can use the platform for free.
What Does It Have For The Businesses?
The businesses at Yelp can create their own profiles, acquire access to business analytics, and also reply to the reviews.
Moreover, the model offers targeted achievements which helps the businesses lure more and more customers.
Reviews of Yelp
The growth of the Yelp Business Model depends on reviews.
“In the world, there are only two types of people: Yelp reviewers, non-Yelp reviewers”
Moreover, not only do the specific local businesses post reviews at Yelp, but, here you would find reviewers sharing their experiences more creatively than they would ever do at any website. In fact, the review feature is useful in creating a network effect.
The visitors, after obtaining the desired results, post reviews. Thus, the feature is useful in turning visitors into reviewers.
Identifying the importance of reviewers in its operation model, the company back in 2006, introduced a new squad of Elite members. These members are the top reviewers on the website.
The elite members are active members of the Yelp community, who are identified for maintaining a detailed profile, posting excellent reviews, sharing high-quality tips and meeting other pre-requisites.
The recognized users, in an exchange of the positive reviews and active participation receive:
- An invite to try out new businesses
- An invite to exclusive elite events
- Free gift (Lip Balm, T-shirts, etc)
- Profile page bearing a sparkly badge
How Yelp Business Model Generates Revenue?
Yelp generated nearly $713 million in 2016. They make money through advertisements.
Profile Enhancement & Targeted Advertisements
Pinterest, Twitter and Facebook and several other social media networks including Yelp use targeted advertisements to make money.
Furthermore, the local businesses via targeted advertisements are able to target local audience. The targeted advertisements are designed as per the industry of the business and the demographics of the users.
Thus, Yelp is a lucrative choice for the business for advertising purposes.
In fact, a study conducted by Neilson shows that 98% of the users had purchased from the business on the platform.
Yelp offers two premium model options for advertisements:
- Full-Service advertisements
- Self Service advertisements
Self Service Program
Yelp Self Service program offers various facilities to the businesses including free tools plus, profile enhancements options, and advertising solutions.
The program allows users to:
- Use various other tools
- Run targeted advertisements
Use of various premium tools
The businesses have a chance to do well at Yelp. The self-service program offers various premium tools including profile enhancements, deals and gift certificates, online ordering and Yelp reservations. Thus, with these tools, you can enjoy an edge over your competitors.
The restaurants which have signed up for the self-service program get a chance to avail premium services and reservation facilities. The program also covers all the software and hardware requirements.
Gift Certificates and Deals
At Yelp, businesses can lure their customers with deals and certificates. These deals and certificates are part of the program.
The profile enhancements tool allows businesses to take down advertisements of the competitor from their pages, add call to action buttons, and enhance their profiles by embedding the slideshows.
Online ordering is a premium feature which is available for free even to the non-users of the platform. This is a useful feature which helps Yelp to make money.
For each order placed at a business, Yelp charges credit card processing + 12.5% commission on the subtotal.
Run targeted advertisements
It is the key feature that helps to make money. Targeted advertisement allows businesses to pay for certain keywords and locations to rank better in search results.
These advertisements are also carried on the profiles of the competitors.
Full Service Program
It is a full-fledged program which covers all the services offered in self-service program. And, in addition, offers dedicated support, free tools, video production and hosting services.
Moreover, the dedicated support is useful to the businesses in maintaining the required technical support.
Furthermore, a professional videographer is at your disposal. They can help you to create a video for your Yelp business page.
All these services help the businesses to exhibit themselves and connect with the Yelp community.