Yelp Winds Down Reliance on Display Ad Revenue

In an effort to improve the user experience and focus on mobile Yelp is reducing the number of display ads on its site. Users primarily access the site via the mobile web or the app so they are directing most of their attention to optimizing user experience via mobile. Given the nature of their business and the importance of a user friendly mobile experience it seems like a smart move. They are able to use native advertising effectively in a way that is beneficial both for users and clients. The better user experience on the app also reduces reliance on google and helps them compete with Google in the restaurant search space as customers increasingly use the app to search for restaurants rather than traditional search engines. The better user experience encourage customers to use Yelp as a search engine which should result in the ability to grow revenue via higher prices while winding down display ad real estate on its site.

How apps and social media are changing the restaurant industry

It’s all down to mobiles, apps and social media and restaurants are faced with a new wave of reviewers sitting right there in their restaurant every single day of the week. Add in the fact that improved Internet connections and an increasing amount of restaurants, cafes and bars now offer free WiFi and consumers are sharing all sorts of things on their mobiles to their social networks. What is important for restaurants to realize is that this sharing is not always going to be to one particular network, meaning that unlike the old days where they could reply to every review or fix it with a free bottle of wine, every consumer could now be reviewing their main course in real time and sharing it with thousands of people on multiple platforms. The best way to fend off bad reviews is of course to cook amazing food and provide superb service and the upside is that restaurants doing that will benefit from massively powerful word of mouth like never before but the challenges remain…Ten years ago the restaurant industry was simple. Once every couple of months a food critic would come along and you would cook your best food and await the review in the newspaper with baited breath. Then restaurant review sites came along and changed all that. Anybody could leave a review but they were mostly biased and for the most part the system didn’t work that well. Now things have changed completely.

Traditional Social Network Apps

Most people share their experiences both good and bad from restaurants in a very ad hoc basis on traditional social networks. Load up Twitter or Facebook and it wont be long before you see somebody either sharing a photo of their lunch or a mini review of the restaurant they are sitting in. Although many venues will have their own Facebook page most of the conversation will happen away from that page on users’ own profiles. The important thing to remember here is that users trust their friend’s reccomendations more than anything so a good or bad review on these sites could instantly shape the opinions of hundreds of people. I’ve seen people say certain things on Twitter for example that has made me instantly boycott that restaurant.

Photo Sharing Apps

People love sharing photos of food. There is a certain amount of “Hey look at the delicious food I’m eating and you are missing out on” and also that food photographs especially well. Add in the fact that most people in a restaurant will now have a high powered camera on their phone and people are getting snap happy every time they go out. Log on to the likes of Instagram and you will instantly see a huge range of food dishes from all the people you follow. When done correctly these can act as little advertisements for your restaurant but yet again the restaurant will probably have no idea who or when photos are being taken so the only real advice here would be to make the food as presentable as possible at all times.

Location Aware Social Review Sites

It wasn’t not that long ago that people used to have their meal and wait until they got home to leave a review once they had time to let it all digest. Now with apps like Yelp and Foursquare people can leave reviews in real time from within your restaurant. Serve up a lousy starter and somebody could have left a review with a picture before the waiter has even cleared the plates. With more and more apps allowing you to tag reviews to specific locations this is going to become an increasingly important channel as consumers trust their peer’s reviews more than anything.

Food Specific Apps

These apps are for more hard core foodies but are starting to be used as a way to discover new places to eat. Foodspotting is a great example.

A Billion Restaurant Reviewers

Restaurants used to wait with baited breath for the well known local restaurant reviewer to turn up and there used to be a handful of them per country who would influence the opinions of many via magazines and newspapers. The world has changed and now anybody with a blog, Tumblr, Facebook account or Yelp app is a restaurant reviewer and the pressure is always on. Their audience might not be as big as a traditional restaurant reviewer’s but with billions of people carrying around smart phones within the next couple of years restaurant reviewers will be everywhere. For the end consumer this will only be a good thing. The cream will rise to the top and instead of restaurants producing their very best food for VIPs and restaurant reviewers they will have to be on their guard every single second of every day. Once again technology is bringing a whole new level of transparency to the world and that can only be a good thing.

Divide and Conquer

Yelp has already garnered attention on this blog, such as Balazs' post noting that they reached 32 million unique users and the incredible success of their iPhone application. And Yelp keeps on adding new features. The highest-profile recent addition might be their OpenTable integration. This is something that I, along with many other users, have been wanting for a while. It just makes so much sense: you look at a restaurant in Yelp, you make a reservation, done. It is perfect.

But this should be taken even further. Why does OpenTable need its own review system? If they already cooperate with Yelp, they should just integrate Yelp reviews on OpenTable. And why does Yelp have to compete with Foursquare by providing the opportunity to check-in in the Yelp app? It would make much more sense to cooperate with Foursquare and automatically pull in check-ins as they happen. This would be a cooperation both companies could profit from: after all, Foursquare could get access to one of the best location databases.

This comes down to a company's fundamental business approach: do I cooperate to achieve the best user experience or do I aggressively move into other companies' business? Luckily, Yelp has now shown that it can also do the former, even if it has already tried the latter.