Goodbye Yelp

 - Not outside the US and Canada, it would seem

Along with announcing a 'surprise profit' Yelp told its investors that it would be pulling out of non-US markets, according to Forbes:

"However, Yelp has struggled to gain traction abroad, and on Wednesday [said] that it would scale back its international operations. Namely, it plans to drop its sales and marketing efforts outside the U.S. and Canada."

As regular readers will know, we monitor Yelp closely (as well as all the other significant independent review sites). So what has gone wrong?

We think - and we have thought this since day one - that Yelp's business model is fatally flawed:

• Yelp lacks visibility in search - in spite of Google's policy of 'treating independent review sites fairly' in search, Google's own reviews now dominate. When your potential customers search they see Google reviews. In most mobile searches - the overwhelming majority of searches these day - Yelp reviews are not returned at all
• Yelp's revenue model has always depended very heavily on selling premium listings in business areas where word-of-mouth predominates - fast food, for instance. If you want a pizza do you search or do you ask a friend? Or, probably more importantly still, do you already know where to find your favourite pizza? You might know you want a Pizza Express, you just need to google to find its location if you are not on home ground - and then you will see reviews, Google reviews
• The reviews - and reviewers. Yelp is built in its 'Elite squad' - overwhelmingly college age young people, who write the reviews. As a result Yelp's audience is self-defining - other college age young people. Now there's nothing wrong with appealing to college age consumers, until you realise that they only know about - and are potential consumers of - a very narrow range of businesses. You won't find many reviews of corporate lawyers or oncologists on Yelp. The kind of reviews you may not need every day, but also the kind of reviews consumers place a very high premium on when they do need them
• Once a 'frequent-use' business - fast food, local coffee shop - has established a reputation in its locality, does it need to pay every month to maintain it? Probably not - and almost certainly not hundreds of dollars a month!

On top of this, the constant drip of negative publicity surrounding Yelp's algorithm/review filter and sales policies have probably impacted more in markets where Yelp was not already established. Faced with a Yelp sales-pitch their potential clients didn't have to google far to see some pretty negative noise.

The final straw was probably the state of the UK economy: in the relatively buoyant south east and London, where Yelp has focused its sales efforts, it has to have been much more difficult to attract and retain quality salespeople when their pitch was not watertight.

Lessons

As we have been saying for some time: independent review sites, of whatever shape or size (Yelp is currently valued at nearly $3 billion - it's no minnow) will continue to offer significantly less value for businesses than Google-focused review strategies. Yelp pulling back to the USA simply reinforces this message. What businesses need are...

• moderated reviews on their own site (to prevent inaccurate reviews misleading potential customers and harming your business)
• Google reviews - that's where your potential customers are looking these days
• compliance with UK government regulations

For articles relating to Yelp:

Independent review sites - yesterday's answer

Google - hiding links to independent review sites

Yelp advertising in London - and their sales pitch

Yelp employs 100 in London