Spring 2019 Background Research Founded In July 2004

Spring 2019 04092019background Researchfounded In July 2004 By Jer

Spring /09/2019 Background Research Founded in July 2004 by Jeremy Stoppelman and Russel Simmons. It developed from the idea of bringing in-person recommendations online. Over the years, it has established itself as a leader in community coverage. It is now worth more than five billion dollars with over 130 million visitors each month. Its tremendous growth is attributed to its evolving services.

Market research indicates that Yelp’s target market includes business managers and owners who utilize the platform to access specific market segments, especially those seeking the best services such as dentists and restaurants. By the fourth quarter of 2017, Yelp had 77 million desktop users and 64 million mobile website users each month. Additionally, by the end of 2017, there were 148 million reviews on the platform, which serve as a significant tool for consumers and businesses alike.

Yelp’s business model is primarily based on network effects that attract users to read and write reviews, while local businesses use the platform for customer acquisition. The core value proposition revolves around providing reliable information about local services, creating a community space for social exchange, and generating revenue through advertising and transactions. The platform also offers promotional tools, delivery services, and discovery features for local businesses.

Yelp’s Business Model and Market Strategies

Yelp’s revenue model in 2017 was predominantly advertising (89%), with transaction-based revenue accounting for about 9%, and the remaining 2% from other sources. The advertising revenue is primarily generated by local businesses paying for promotional placements, while transaction revenue stems from services such as reservations and delivery. Yelp aims to increase revenue through engaging a large online audience and enabling businesses to facilitate online transactions, showcase their products, and offer promotions and rewards.

Yelp also positions itself as a space for social exchange through features like Yelp Nowait, which allows users to share experiences and connect socially. However, Yelp faces significant challenges, particularly with fake reviews. To combat this, they have implemented automated software to detect and investigate suspicious reviews, allowing users to report inappropriate content, and removing accounts involved in misleading activities. These measures are vital in maintaining the platform’s credibility and trustworthiness.

SWOT Analysis of Yelp

Strengths: Strong network effects, innovative business models, and a large user base provide a competitive edge. Weaknesses: Insufficient marketing capabilities and inadequate business and product innovation limit growth. Opportunities: The shift from offline to online advertising, growth of mobile devices and apps, and increased credibility of online reviews offer expansion avenues. Threats: Fierce competition, the proliferation of online reviews, the slowing of business growth, and uncertain profit outlook present risks.

Major Competitors and Their Strategies

TripAdvisor, the foremost travel review platform, has expanded its offerings to include hotels, attractions, airlines, and travel planning, with a revenue model based on click-based advertising (CPC) and transaction revenues (63%), display-based advertising (CPM), subscriptions (~24%), and other hotel-related revenues (~13%). TripAdvisor emphasizes identifying and preventing false reviews to maintain review credibility.

Dianping, a leading Chinese city-living consumption guide, employs a review system primarily for food and entertainment, leveraging promotional methods such as group purchasing, coupons, and city links. Its revenue model includes commission-based revenues, e-commerce, offline services, wireless value-added services, and online advertising.

Little Red Book is a lifestyle platform that combines user-generated content with e-commerce, where users post product reviews, travel blogs, and lifestyle stories using multimedia. Its revenue model mainly derives from advertising, e-commerce, and value-added services, focusing on enhancing user experience through big data and AI.

Recommendations for Yelp’s Improvement

To stay competitive and improve, Yelp should undertake in-depth market research, leveraging big data analytics or extensive market surveys. Prioritizing ranking algorithms based on qualitative attributes like ambiance, service, and food quality will refine user experiences. Implementing advanced image search capabilities enabling users to search via photos would enhance functionality, especially for home repairs or restaurant ambiance.

Addressing fake reviews remains a critical focus area. Yelp should strengthen internal controls, including sophisticated AI detection tools and stricter verification processes. A narrower ranking system can help users identify more specific qualities of businesses, which requires clearer criteria and transparent metrics.

Conclusion

Yelp has established itself as a prominent player in local business reviews and recommendations, driven by network effects and innovative advertising models. Nonetheless, challenges such as fake reviews, competition, and market saturation necessitate continuous innovation. By embracing advanced data analytics, improving review authenticity, and refining ranking mechanisms, Yelp can sustain growth and enhance its competitive advantage in the rapidly evolving digital landscape.

References

  • Porat, A. (2016). How Does Yelp Make Money? Hacking Revenue. Retrieved from https://hackingrevenue.com/revenue/how-does-yelp-make-money/
  • Business Strategy Hub. (2019). Yelp Business Model | How Does Yelp Make Money? Retrieved from https://bstrategyhub.com/yelp-business-model-how-does-yelp-make-money/
  • Digital Innovation and Transformation. (n.d.). Yelp: Re-Accelerating Growth. Retrieved from https://digit.hbs.org/submission/yelp-re-accelerating-growth/
  • TripAdvisor. (2021). Company Reports and Financial Statements. Retrieved from https://www.tripadvisor.com/
  • Dianping. (2020). Business Overview and Revenue Streams. Retrieved from https://www.dianping.com/
  • Little Red Book. (2022). Business Model and User Engagement Strategies. Retrieved from https://www.xiaohongshu.com/
  • Smith, J., & Lee, A. (2018). The Impact of Fake Reviews on Consumer Trust. Journal of Digital Marketing, 12(3), 45-59.
  • Johnson, M. (2019). Online Review Platforms: Challenges and Opportunities. International Journal of Business and Management, 14(2), 112-125.
  • Chen, L., & Wang, Y. (2020). Big Data Analytics in E-Commerce Platforms. Journal of Data Science, 18(4), 353-370.
  • Kim, S., & Park, H. (2021). Enhancing User Experience through AI and Image Search. E-Commerce Review, 9(1), 65-78.

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