Yelp Business Model – How does Yelp make money

Have you ever heard about Yelp? If you’re someone who checks reviews about a company before you do business with them. Then you must have heard about this platform before. For those who have no idea about Yelp, don’t worry. It is a platform that connects users with businesses. Yelp publishes reviews about businesses. The most important thing about this platform is that all these reviews are crowdsourced. 

The users can search, find, book and review their local businesses. Making it easy for other users to find information about the company. Yelp has been in the market for a long time. This is one of the main reasons why people put their trust on this platform and find that the reviews will be true. 

First things first, Let’s know about the business model of this platform.

Yelp Business Model 

Yelp was founded back in 2004 by Jeremy Stoppelman and Russel Simmons. They were former Paypal employees. The idea behind starting Yelp was they wanted to create an email circle, where people can share reviews about businesses with their friends. Over the years, the reach of this review platform has expended.

It has been providing local businesses real word of mouth that could increase their sales and help them in reaching more people. Simply put, this is a social media platform where people can review businesses and help other users. From dentists to restaurants, every business is reviewed on this platform. 

Currently, Yelp is available in 32 countries. It is available as both a website and mobile application. Yelp was started by its founders with $1 million funding they received.

But now Yelp has 74 Million unique mobile app users, 28 million monthly average unique mobile application visitors and around 83 million unique desktop visitors. 

Although there are many review platforms available. There are only a few business review platforms. This is the reason more and more users are interested in using Yelp. Also, it is important to note that Yelp stands out from the crowd because of its crowdsourced reviews. If you think that is it then you’re wrong. Because it has expanded its business model by allowing users to make reservations, takeout/food delivery services. 

Now that you have understood about Yelp, it is time to understand its operating model. If you want to understand the business model this is important. 

As you already know Yelp is an online directory or social media platform where people can find businesses, book their services and review them. This platform mainly focuses on engaging with its users. Not only that it focuses on making users engage with other businesses and users too. First things first, the users have to create a profile, then add friends, chat in the forums and also visit offline Yelp events too. The users can also become part of the Yelp elite by posting high-quality pictures, detailed reviews and also following other prerequisites required by the elite.

But one thing that you must note is that this operating model mainly works around the local businesses. As you see compared to the multinational companies who spend a lot of time and money on advertising or promotions. The local businesses don’t have such means or capacity, so they stick to the word of mouth publicity to reach more and more people. This is where Yelp comes into the picture. They have created this platform so that they can help users find good local businesses.

Also, their reviews will help other users to decide whether or not they want to go with that particular business. The best part about Yelp is that apart from users the local businesses can also list their business to reach more customers. And it is absolutely free. Local businesses can build their profile. Once they build their profile, they can see and reply to the reviews. Not only that, but they can also get access to business analytics too. Cool, right? With the targeted advertisement on the platform, they can reach more and more targeted customers and improve their business.

Now that you have got insights on the operating model of Yelp. You must understand about the catalysts that help growing Yelp. 

Reviews are the reason behind the success of Yelp. Don’t you agree? More and more users are approaching this platform to check out the reviews before they choose a local business. It has definitely brought a revolutionary change within the review platforms because of including the booking/reservations of services. But Review remains the backbone of Yelp.

As you see, people are checking the review of this platform before choosing, because the reviews are from real customers who went to that particular business and got their services. So users put in more emphasis on these reviews as they are from their peers who have been customers. The interesting part is that people who read these reviews, return to the platform as the reviewer who will help other users. See this reviewing has in turn become a networking effect. 

Yelp has quickly caught up on the importance of it. This is the reason they have introduced the top reviewers known as Elite Squad.

Elite

Elite squads are people who more and more users trust on the platform. Yelp Elite are the recognised users of this platform. Becoming the Elite member of Yelp has its benefits. Yup, you heard it right. These recognised users receive amazing benefits from Yelp such as a badge on their profile page, invites for trying new businesses and elite events (exclusive). And lastly free gifts such as Lip-balm, T-shirts, etc. Wondering how you become an elite member of Yelp. Well, it is simple.

This platform recognises the active members based on their high-quality images, tips and Well-written detailed reviews of a business. This is not that they must follow other prerequisites along with having a detailed profile. Becoming an elite member is amazing. Don’t you agree?

In exchange for your detailed review, you will receive amazing benefits. Yelp Elite was launched back in 2006. And it is safe to say that because of this step the number of constructive, well-detailed reviews have increased on the platform. Elite Squad has the power to convince a user through their review. They have an important place on the platform as they contribute high-quality reviews to Yelp. 

How does Yelp make money?

As you have understood about the operating model of this platform. Now is the time to understand how it makes money? You’re curious to know how it makes money, right? Then what are you waiting for? Let’s jump right into the topic.

Yelp has based its success based on review features. But there are quite a few sources that bring in income to this platform. In 2016, this social media platform for reviews has made more than $713 Million. Shocking, right? One of the main sources of income for this platform is advertisements. Yup, you heard it right? Similar to other social media networks, Yelp also makes money through advertisements. But you must remember that it is one of the many sources. So with any further ado let’s discuss those revenue sources in this section. 

Profile Enhancements & Targeted Advertisements

One of the major sources of income for social media platforms such as Facebook, Instagram is Targeted advertisements. They use the data and help businesses in reaching their targeted audience through advertisements. Yelp is no different compared to these companies. It also makes major revenue from targeted advertisements only. Yelp has a lot of data that will help local businesses. Yup, you heard it right. With that data they can reach their local audience. Yelp targets the advertisements based on the industry of that particular business and their user demographics.

With these advertisements, they can reach more customers and improve their business. This is the reason why Yelp has shrines for many local businesses. Spending money will not bring businesses to their targeted customers, spending it in the right place will. And Yelp is the right place. Wondering how true this statement is?

The statistics will answer you. According to the review, around 98% of people have done with businesses they found on this platform.

And the best part is that 90% of these users have done business with them within the first week of visiting the platform. Now you understand why more and more businesses are advertising on this platform. Yelp is offering two different premium models for their advertising services. They are

Self-service advertisements

Full-service advertisements

These service programs truly have extra benefits compared to the free plan. Let’s check them out.

Self-service advertisements

This plan provides the businesses with profile enhancements along, advertising solutions along with the free tools. With this plan, the businesses can run the following list of services. 

  • Run targeted advertisements
  • Gift certificates and deals
  • Yelp reservations
  • Profile Enhancements
  • Online ordering

Let’s discuss each of these in detail now

Running Targeted Advertisements

As you have already read above, targeted advertisements are a major part of this platform. It is their major source of income for Yelp. As you see with Self-service plans they can run targeted advertisements and reach more people. It is not an exaggeration to say that this is the best revenue earning a feature on Yelp. With this feature, businesses can target certain locations and keywords. They can place their advertisements on top of the search results. They can also place their advertisements on their competitors profile.

Gift Certificates and Deals 

This is one of the premium tools that you can use to reach more people and take your business to the new heights and perform better than your competition. When businesses choose the self-service plan. The business can attract a more targeted audience with the help of deals and gift certificates. And with Self-service plan, they can easily do that. But for every deal made, Yelp charges 30% of the amount paid. In the case of gift certificates, they charge 10% of the gift certificate. As you can see this is also one of the sources of revenue to Yelp. 

Online Ordering 

Online ordering is also another source of income to Yelp. This is a feature that is available for both premium and free plan users. But the businesses must know that they will have to pay 12.5% commission on the subtotal along with the credit card processing fee for every order they get. 

Yelp Reservations 

Similar to Gift certificates, Yelp reservations is also one of the premium tools that businesses can get access to when they choose the self-service plan. With this premium tool, the restaurants can offer the reservation option on their profile. Yup, you heard it right. This way the users can make a reservation once they read the review. Instant results for the restaurants. Yelp will provide the restaurants with all the hardware and software requirements they have relating to this. But the restaurants must pay a small sum ( monthly fee) to Yelp. The cost for this is around $249/month. As you can see this is another source of revenue for Yelp. 

Profile Enhancements

This cool is one killer premium tool that businesses will get with their Self-service plan. With profile enhancement, the businesses can get more than gift certificates, deals and reservations. The businesses with this tool can add a call to action buttons and slide shows to their profile. Also, they can remove competitors ads from displaying on their profile. The best feature, right?

Full-Service Program 

Now that you have understood about the services businesses will receive with the Self Service Program. It is time for the Full-Service Program. This plan provides businesses with free tools plus self-service plan tools along with additional services such as upgraded business features, Yelp ads and dedicated support. 

So all the businesses that subscribe to this plan will get these below-mentioned services. 

Self Service Program tools 

If businesses choose this plan they will get all the services that come with a self-service plan. That is not it, they will also receive all the free tools too. You can check out above for all the services that businesses get when they choose the self-service program. Some of the services are reservations, profile enhancements, etc.

Video production and Hosting 

This is the additional service that businesses will get when they choose a full-service plan. The businesses can get a professional video of their business taken. The videographer is sent to the businesses by Yelp. This professional video will be used on the business page of Yelp. Which will give users a better look into your business.

Dedicated support from Yelp 

When you choose this plan you can get dedicated support from the Yelp team. It is always important to have support to help business in case of unexpected situations. With this plan, the business will receive that support they’re looking for. The team will always be present to help them in case of unexpected events.

Wrapping up 

Yelp has been in the business for a long time and has helped a lot of businesses to reach their targeted audience. It is a platform where people leave honest reviews about a particular business. This review is not only helping other users, it is also helping businesses as more and more people are finding their business through this app. The users can not only search and find local businesses, they can also make reservations or order online. Which is amazing, right?

It is one of the main reasons why this platform has seen tremendous success. New businesses are growing and reaching more targeted customers and the users are spending their money on a business that provides them with what they’re looking for i.e., quality service. Hope you have understood about the business model and how Yelp makes money. In case you want to know more about such business models then check out other articles in Zeen

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