As Yelp’s strength grew, so did that of its members. Recognizing its dependency on its members, Yelp created what it called the Elite Squad. The Elite Squad is a way of rewarding “the most passionate Yelpers” by throwing special parties and giving out other perks to encourage these members to contribute more and with more passion.
Businesses that wanted to keep elite members happy went to great lengths to do so. However, this led to a sense of entitlement among some Yelpers. Some elite members even chose to use their reviews to bully businesses into giving them what they wanted.
Many businesses were frustrated by this, raising claims of questionable behavior by Yelp. Some businesses have even sought litigation against Yelp, claiming the company’s practices amounted to extortion. Small policy changes to protect the company were made but the concerns of business owners largely remained neglected.
Yelp Vs. the World
In March of 2012, Yelp began trading as a public company on the New York Stock Exchange. Since that time the company’s results have been decidedly mixed. The company significantly beat market expectations for its projected revenue. It also claimed a 60 percent increase in reviews written and a 50 percent increase in its membership.
While that all sounds well and good, those numbers can’t hide the fact that the company lost nearly $10 million dollars in the first quarter alone. While the company has yet to turn a profit, it has announced plans to focus on hyper-local targeted advertising as a revenue stream — a space already crowded by Google, Facebook and others.
Google has further threatened Yelp’s potential by purchasing restaurant review company Zagat. Integrating Zagat reviews with Google’s other apps and services, the average restaurant customer no longer has the need to visit Yelp’s listings. In addition, the core purpose of Yelp’s business model has found itself challenged by the ubiquity of social media sharing in general.
Duke of Nothing
As Foursquare started to gain in popularity, Yelp quickly recognized it as a potential competitor. In response, the company opted to copy much of Foursquare’s functionality. It did this by rolling out a check-in system complete with a leaderboard and the ability to become the “Duke” of different venues; an obvious imitation of Foursquare’s “Mayorships.” This drew ire from Foursquare’s founder, but the site’s social features remain fairly limited.
Ironically, Yelp — a company built on user-generated content — may have failed to capitalize on the power of social media. Foursquare, on the other hand, has seen social media as a vibrant opportunity and has leapfrogged ahead of Yelp in many respects.
For example, Foursquare is strategically leveraging its database of check-ins and social relationships. Last year it launched a recommendation engine to help members choose places that may interest them. Why would potential customers waste time looking for places on Yelp when Foursquare can tell them, in real-time, what they would like?
From the perspective of a business owner, Yelp’s influence has also waned because of Twitter. If a customer is unhappy and tweets about it, Twitter’s search features give businesses an easy way to reach out directly and fix the situation. Why wait for a bad Yelp review to be posted if you can combat the problem before it’s ever written? This gives you and your customers one less reason to even consider visiting Yelp.
Despite Yelp’s growth numbers it would seem that the service’s relevance and influence is waning. Social media offers you, and your customers, more efficient and direct ways to stay in touch. While we don’t suggest completely ignoring Yelp (responding to negative reviews constructively is still critical) your time might be more effectively spent monitoring social media services like Twitter and Facebook instead. Your customers, and your bottom line, will thank you.
John Morrison: John is a freelance photographer, writer, and traveler based out of Chicago. He is a graduate of the Pratt Institute with a BA in Visual Communications. Before joining Sprout, John previously worked for Apple Inc. as a lead creative and business associate. He likes old Polaroid cameras, New York style pizza, and typing in the third person. Connect with him on Twitter: @localcelebrity