{"id":4393,"date":"2017-03-19T13:36:28","date_gmt":"2017-03-19T17:36:28","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/tbd\/"},"modified":"2017-03-21T09:18:59","modified_gmt":"2017-03-21T13:18:59","slug":"yelp-eating-with-the-crowds","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/","title":{"rendered":"Yelp: Eating with the Crowds"},"content":{"rendered":"

Yelp has seen both the rising power and the declining stature of the crowd. The company famously started when two former PayPal employees had difficulty finding a doctor when one was down with the flu. Initially, the company was an email referral product, but due to lack of investor interest, pivoted to the review site that we know today.<\/p>\n

Value Creation<\/strong><\/p>\n

Yelp solves a very real problem \u2013 gathering reliable data on local businesses and restaurants. It\u2019s also seen some tremendous numbers and growth \u2013 as of December 2016, it has an average of 24M monthly mobile app users, 65M mobile web users, and 73M desktop unique visitors. Mobile traffic has seen a steady increase since 2012.<\/p>\n

Yelp provides value on both sides of the chain \u2013 users gain large amounts of firsthand information on businesses they are considering to visit, and local businesses can make a name for themselves \/ increase foot traffic by providing excellent products \/ value.<\/p>\n

Yelp also created an offers category whereby businesses can provide offers and incentives to Yelp users in order to attract new customers or returning business. This provides them with a new platform of user engagement and marketing and in turn, customers can be delighted by local exploration and the feeling of getting of a deal.<\/p>\n

Value Capture <\/strong><\/p>\n


\n<\/strong>While solving for a problem, the company ended up being one of the most significant contributors of the local economy ecosystem. It not only helped to create value around this space, but quickly learned how to capture it as well.<\/p>\n

Yelp makes money in 3 primary ways:<\/p>\n

    \n
  1. Sponsored search \u2013 local businesesses pay Yelp for traffic to either their Yelp page or website<\/li>\n
  2. Ads \u2013 monthly subscription packages are available to customers with a business account. This enables business to place banner andtet on any search related to their own category on Yelp pages (including competitive pages)<\/li>\n
  3. Offers \/ Deals \u2013 daily deals or local offers are provided to Yelp guests with Yelp taking a cut of the purchase.<\/li>\n<\/ol>\n

    Challenges <\/strong><\/p>\n

    Despite its success, Yelp faces many strategic challenges going forward:<\/p>\n

      \n
    1. Network effects \u2013 the company\u2019s value prop is very much dependent on network effects \u2013 people come to the site in order to consume a large amount of statistically significant data. If user contribution becomes antiquated or else less relevant, suddenly, value creation and value capture both take a beating. It\u2019s essential for Yelp to cultivate and incentivize its communities to participate in order to maintain its ecosystem and relevance<\/li>\n
    2. Credibility \u2013 there is potential for review fraud or else exaggeration. User fraud is monitored closely \u2013 if reviewers are friends with business owners on facebook, for example, their reviewed are automatically flagged. Similarly, if users are not engaged on Yelp but provide a comment for a business, the posts are flagged as potentially suspicious. Extreme reviews are also a problem \u2013 those who feel strongly about a certain business (one way or another) are more likely to post on Yelp than the average 3-star reviewer. This leads to a skewed distribution and potential less efficacy of reviews\n
        \n
      1. Yelp solves for this by developing credibility scores such as \u2018Yelp Elite,\u2019 awarded to certain members who consistently contribute to the community with strong and fair reviews<\/li>\n
      2. Besides this, it\u2019s very difficult to solve for extreme reviews. Yelp should focus on growing review base in order to maximize statistical significance of rating<\/li>\n<\/ol>\n<\/li>\n
      3. \u2018Expertizing\u2019 of industry \u2013 Super-niche players that claim expertise in local businesses can slowly encroach on Yelp\u2019s space. For example, Chowhound and Infatuation position themselves as \u201cexpert\u201d food review websites that avoid the problem of mass contribution. Expert-curated sites and apps can indeed pose a threat to the marketplace and crowdsourced reviews that Yelp has worked so hard to develop.<\/li>\n<\/ol>\n

        All in all, I believe that Yelp has accumulated enough early liquidity to be a relevant player for a long time. However, it\u2019s greatest asset is its user base and it must constantly innovate and engage in order to keep them loyal. Without the user base, the company falls into the chicken-egg issue of volume.<\/p>\n

        On a personal note, though I was once Yelp Eite and took my status very seriously (spent hours of my wild and precious life writing reviews, attending events, being \u201crelevant\u201d\u2026.hours I\u2019ll never get back\u2026.), I\u2019ve now switched over to Infatuation myself due to the true expertise and relatively less bias in analysis of high-end restaurants. Though this still provides Yelp with space for relevance (they have charted out local economies in an unmatched way), it does provide potential disruptions to the company\u2019s model.<\/p>\n","protected":false},"excerpt":{"rendered":"

        Yelp has helped create and grow the local business space. Can it remain a market leader in an increasingly specialized space?<\/p>\n","protected":false},"author":2784,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-4393","hck-submission","type-hck-submission","status-publish","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/managing-digital-crowds\/","yoast_head":"\nYelp: Eating with the Crowds - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Yelp: Eating with the Crowds - Digital Innovation and Transformation\" \/>\n<meta property=\"og:description\" content=\"Yelp has helped create and grow the local business space. Can it remain a market leader in an increasingly specialized space?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/\" \/>\n<meta property=\"og:site_name\" content=\"Digital Innovation and Transformation\" \/>\n<meta property=\"article:modified_time\" content=\"2017-03-21T13:18:59+00:00\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/yelp-eating-with-the-crowds\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/yelp-eating-with-the-crowds\\\/\",\"name\":\"Yelp: Eating with the Crowds - Digital Innovation and Transformation\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/#website\"},\"datePublished\":\"2017-03-19T17:36:28+00:00\",\"dateModified\":\"2017-03-21T13:18:59+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/yelp-eating-with-the-crowds\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/yelp-eating-with-the-crowds\\\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/yelp-eating-with-the-crowds\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Yelp: Eating with the Crowds\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/\",\"name\":\"Digital Innovation and Transformation\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-digit\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Yelp: Eating with the Crowds - Digital Innovation and Transformation","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/","og_locale":"en_US","og_type":"article","og_title":"Yelp: Eating with the Crowds - Digital Innovation and Transformation","og_description":"Yelp has helped create and grow the local business space. Can it remain a market leader in an increasingly specialized space?","og_url":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/","og_site_name":"Digital Innovation and Transformation","article_modified_time":"2017-03-21T13:18:59+00:00","twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/","url":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/","name":"Yelp: Eating with the Crowds - Digital Innovation and Transformation","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-digit\/#website"},"datePublished":"2017-03-19T17:36:28+00:00","dateModified":"2017-03-21T13:18:59+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yelp-eating-with-the-crowds\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-digit\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/"},{"@type":"ListItem","position":3,"name":"Yelp: Eating with the Crowds"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-digit\/#website","url":"https:\/\/d3.harvard.edu\/platform-digit\/","name":"Digital Innovation and Transformation","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-digit\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-digit\/wp-json\/wp\/v2\/hck-submission\/4393","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-digit\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-digit\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-digit\/wp-json\/wp\/v2\/users\/2784"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-digit\/wp-json\/wp\/v2\/comments?post=4393"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-digit\/wp-json\/wp\/v2\/hck-submission\/4393\/revisions"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-digit\/wp-json\/wp\/v2\/media?parent=4393"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-digit\/wp-json\/wp\/v2\/categories?post=4393"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}