INITIAL REPORT Susan Jennings Kantari, [email protected] Yelp Will Continue to Dominate Online Review Market Companies: ANGI, FB, GOOG, GRPN, IACI, OPEN, RLOC, TRIP, YELP, YHOO June 20, 2013 Research Question: Will a focus on mobile advertising, nontraditional review areas, and international expansion allow Yelp to continue its growth through the remainder of 2013 despite a rise in competition? Summary of Findings Silo Summaries 1) BUSINESSES USING YELP Yelp Inc. (YELP) will continue to post growth Yelp will continue to grow throughout the rest of 2013, according to the through the remainder of this year because it six of 10 sources who commented on the company’s future, and will faces little immediate competition in the growing remain the market’s dominant player, according to five. Six sources were market of online reviews. Google Inc. (GOOG) familiar with Yelp’s mobile app and use it to check reviews and analytics. poses the greatest threat to Yelp, but must Seven of the 10 sources said Yelp lacks a significant near-term threat. improve its updates and customer service. The remaining three said Google will be an issue, including one source who said Google already has taken some of Yelp’s share. Three sources Facebook Inc. (FB) lacks content. reported having difficulty in understanding Yelp’s review filtering Seventeen of 19 sources who commented on algorithms, but four others said the filter was reliable. Yelp could stand to Yelp’s future foresee growth for the company. improve its social engagement capabilities, to give business owners the One Yelp reviewer said growth will depend on the power to filter reviews, and to provide better customer service and a more transparent filtering system. Also, a better coupon system would be company’s international and mobile expansion. an easy revenue generator for businesses and Yelp alike. Yelp’s mobile platform received positive reviews from all but two sources who commented on its 2) COMPETING REVIEW SITES All five competitors believe Yelp’s growth will continue through the rest of app: One Yelp reviewer said the company’s the year. For the two sources who commented on Yelp’s mobile platform, website was easier to use, and an industry one said the app will spur the company’s growth while the second specialist preferred Facebook’s Graph Search. conceded that the app is better than their own. No competitors presents a near-term threat, but Google and Facebook (which will need more Yelp’s review filtering received complaints from content) could become problems down the road. Yelp stands out from its five business owners (including three who competitors through its easy-to-use interface and ample content. struggle to understand Yelp’s algorithm), as well Feedback on Yelp’s filtering system was mixed; three viewed it as as three competitors, six reviewers and two unreliable, one said it was not transparent, and the fifth deemed it as industry specialists, who described the filter as dependable. One source said Yelp needs a better way to validate unfair or inaccurate. reviewers. 3) REVIEWERS USING YELP Five of nine sources expect Yelp’s growth to continue, one source Yelp’s Competition Yelp’s believes growth will depend on the company’s mobile advertising and Growth international expansion, and three had no comment. Of the five sources Poses Near- Review for Rest who have used Yelp’s mobile app, only one gave a negative review. One Term Threat Filter of 2013 source said Yelp is in an industry leader thanks to its location-based Businesses Using discovery via GPS. Two-thirds of sources said Yelp has no immediate competitive threat. Two sources said Foursquare is gaining momentum. Yelp Yelp’s review filtering system is unfair, according to four sources, but two others believe reviews are largely accurate. Competing Sites 4) INDUSTRY SPECIALISTS Reviewers Using Yelp’s future is mixed among these three sources: One believe Yelp will Yelp continue to grow, one said it will grow during the next six months before feeling the pressure from competition, and the third believes Yelp’s Industry growth will be stymied by Facebook. Although two sources rated Yelp’s Specialists mobile app as good, one of the two again believes Facebook’s Graph Search is a threat. Two sources also believe Facebook and Google are close on Yelp’s heels, and two said accuracy issues in Yelp’s filter system remain. Yelp needs to resolve the issue of reviewers posting negative opinions in hopes of receiving free services, and it needs to focus more on the reviewer than the review. The third sees needed improvements in Yelp’s leadership. 1 1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com Yelp Inc. Background Yelp, which averages 86 million users per month, recently reported earnings that exceeded expectations. Its 1Q13 revenue increased by 68% year to year, boosted by local and mobile advertising business. Sources for Blueshift Research’s May 31 Whisper said Yelp launched display ads on mobile phones and improved the effectiveness of its app on Apple’s iOS platform. Sources added that it was aggressively expanding its reviews beyond restaurants and entertainment and to include doctors, dentists, landscapers, painters, auto mechanics, golf courses and schools. Yelp also was making a considerable investment in its international expansion, with plans to have this business segment go from 6%, to 30% to 40% of total revenue. Yelp faces increasing competition from Facebook, whose Graph Search service allows users to scroll through their network of friends to find recommendations. Yelp also must contend with continuing accusations that it downgrades reviews and ratings for small businesses that refuse to pay for advertising. CURRENT RESEARCH In this next study, Blueshift Research assessed whether Yelp will be able to hold its dominant market position and continue to grow its popularity in the face of competition from Google, Facebook and numerous startups. We employed our pattern mining approach to establish five independent silos, comprising 27 primary sources and three relevant secondary sources focused on Yelp’s new Nearby tab, a possible traffic increase related to Apple’s updated map app, and Yelp’s potential as an acquisition target: 1) Businesses using Yelp (10) 2) Competing review sites (5) 3) Reviewers using Yelp (9) 4) Industry specialists (3) 5) Secondary sources (3) Next Steps Blueshift will monitor Yelp’s efforts to make its filtering system more transparent and trusted by businesses and reviewers. We also will follow Yelp’s ability to integrate social media into its website and apps, as well as to expand its international presence. Finally, we will check on Facebook’s Graph Search and its effects on the industry. Silos 1) BUSINESSES USING YELP Yelp will continue to grow throughout the rest of 2013, according to the six of 10 sources who commented on the company’s future, and will remain the market’s dominant player, according to five. Six sources were familiar with Yelp’s mobile app and use it to check reviews and analytics. Seven of the 10 sources said Yelp lacks a significant near-term threat. The remaining three said Google will be an issue, including one source who said Google already has taken some of Yelp’s share. Three sources reported having difficulty in understanding Yelp’s review filtering algorithms, but four others said the filter was reliable. Yelp could stand to improve its social engagement capabilities, to give business owners the power to filter reviews, and to provide better customer service and a more transparent filtering system. Also, a better coupon system would be an easy revenue generator for businesses and Yelp alike. 2 1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com Yelp Inc. KEY SILO FINDINGS Growth - 6 of 10 sources expect Yelp to continue to grow; 4 had no comment on growth. - 5 of 6 who expect growth view Yelp as the dominant player in the marketplace; the remaining source sees a market need for Yelp’s services. Mobile Platform - 6 sources find Yelp’s app beneficial to their business, 3 sources are unfamiliar with the app, and 1 had no comment. - Business owners use the app to review analytics, check reviews and check the number of views by customers. Competition - 7 sources view no significant competitive threat to Yelp. 1 source said Yelp is dominant but that Google has gained share in the last six months. 1 source said Yelp is used more than competitors but is not necessarily better. 1 had no comment. - Google is Yelp’s closest competitor, but 1 source said Google has a long way to go in customer service to catch up. Yelp’s Review Filter - Reliability of Yelp’s reviews is an issue for five business owners, including three who struggle to understand Yelp’s algorithms. - Business owners also struggle with the experience of one poor review spoiling the lot. - 4 sources were positive on the review filtering system; 1 reported having the ability to filter out poor reviews, and 3 believe most reviews are reliable. Aspects That Yelp Needs to Improve - Yelp needs to facilitate social engagement, have a system to correct “inaccurate reviews,” enable preissued discount codes, and offer better customer service and a more transparent filtering system. 1. Marketing manager for a large manufacturer of food products Yelp has been a positive venue for this large corporation, which advertises in various markets. Yelp’s user base and usability are superior to its rivals’. Google is an up-and-coming threat, particularly with the acquisition of Zagat. Overall, Yelp’s reviews are reliable, true and accurate, but are more statistically significant if an establishment has more than 30 published reviews.