Yelp is an online review platform where users can review various businesses. Since its inception, Yelp has become a household name in the US. The company also operates several other businesses. Yelp started its operations through its website. Over the years, it has also expanded its platform to mobile platforms, including Android and iOS.
What is Yelp?
Yelp started its operations under Jeremy Stoppelman and Russel Simmons. They were both alumni of the University of Illinois, where they graduated with a Computer Science degree. Furthermore, they also had experience working as software engineers in PayPal. During their time at PayPal, the founders learned a significant amount. On top of that, they also became involved in PayPal’s management through prominent positions.
In 2003, the founders left PayPal after it went under eBay acquisition. Simmons started his new business venture. Stoppelman, on the other hand, chose to pursue MBA at Harvard. One year later, they met up again and contacted one of PayPal’s co-founders, Max Levchin. The latter had launched a startup incubator, which helped the founders find a platform for Yelp. Through their contact, the founders received $1 million from Levchin.
The idea for Yelp came from Yellow Pages. However, it came more specifically from when one of the founders couldn’t find productive search results online. These needs helped the founders come up with the idea to capture users’ opinions of a given service. At the time, no other platforms offered similar products or services. Therefore, their idea was unique and had significant scope for growth. And, thus, began their work on Yelp.
The founders started coming up with a basic idea for the Yelp platform. In 2004, the founders finally launched the initial version for their work. While they received some attention, they did not have enough awareness to attract visitors. The platform ran into several issues. Essentially, it didn’t have the users and readers to generate content. Therefore, it couldn’t provide the service the founders had sought to provide.
However, that did not phase the founders. Instead, they got back to the drawing board and started thinking of solutions. They tried to analyze user patterns and came up with some ideas for fixing the platform. Consequently, they revamped the platform and made it accessible and easy to use. In 2005, they relaunched the website and started seeing the results.
By 2006, Yelp’s website reached over 1.5 million visitors each month. Furthermore, its success allowed the founders to generate funds from various investors. Since then, Yelp has become a household name and found its way into pop culture. Over the years, the company has introduced several features to its platform. Furthermore, Yelp has used its success to expand its business into several other ventures.
How does Yelp work?
Yelp works in different ways for many users. Users can search the Yelp platform through its website. On top of that, they can also use it through one of its official apps on iOS or Android. The company lists various businesses based on type and results. It allows users to filter those listings by geography, price ranges, features, outdoor seating, delivery services, etc. Essentially, it provides a local search engine for businesses.
However, Yelp does not stop at listing businesses. Its primary feature comes through users writing reviews on its platform. Before doing so, though, they must know how to use the Yelp platform. Users can write a review for any business. However, they must search for its name through the search feature on Yelp. Once they find the related page, they can click on the Write a Review button to provide their opinions.
Yelp also allows users to rate their experience with a business in five stars. This rating system is the essence of the Yelp platform. Similarly, it requires users to write a Yelp review, which other users can use to judge the business. On top of that, users can also read other reviews for those businesses on the right side. Once users write their reviews, they can attach an image to it. However, this feature is optional.
Users can then post their reviews on the platform using the Post Review button. A similar process applies to users posting their reviews through the apps. However, some additional features may be available there that users can’t access through the website. Users can also add a business on Yelp if they can’t find it through the search feature. This feature allows business owners to list their businesses on the Yelp platform.
What is the Yelp business model?
Primarily, Yelp uses an e-commerce business model. The company uses the internet to provide its services to a range of users. Its primary users include businesses and customers. Usually, the former play a trivial or no role in the Yelp business model. However, they are still essential to it. On the other hand, customers are the primary contributors to this business model.
Yelp also uses a C2C business model. In this model, the company connects customers and consumers. However, the line between these parties is usually not clear. In most cases, the customers include businesses listed on the platform. However, it may also consist of other users writing reviews. Consumers, on the other hand, are the users using those reviews.
The best way to describe the Yelp business model is to know how it works. As mentioned above, the platform depends on users writing reviews. Readers use those reviews to base their decisions on specific businesses. In this regard, Yelp uses a user-generated content business model. The company relies on its users to write content, which will generate views for its website. Similarly, it uses an aggregator business model.
Yelp also uses an advertising business model. Under this model, the company uses ads to earn from its users. Since Yelp operates a platform and does not involve transactions, this is the most reliable business model. Yelp has used advertising to make money for a long time. The company continues using the advertising business model as its primary income source to date.
How does Yelp make money?
The primary source of revenue for Yelp is its income from advertising. However, the company has expanded its operations not to rely on a single income stream. Yelp also makes money from subscriptions and transaction deals. Furthermore, it also sells secondary services, where it can earn income. Overall, its platform is essential to making money. An explanation of each of these sources is below.
Advertising
Yelp makes over 90% of its revenues through advertising income. The company recognizes it hosts substantial traffic through its website. Thus, it uses a cost-per-click model to make money from advertisers. Consequently, Yelp makes money every time a customer clicks on an ad. However, the ad revenues may differ based on various factors.
Subscriptions
Yelp offers upgraded profiles, which come with two premium packages. These include branded and enhanced profiles. In exchange, Yelp charges a monthly subscription fee to provide access to these profiles. Each of these profiles comes with some benefits. The branded profile costs lower than the enhanced version. On top of that, they also come with other features, including verified licenses.
Transactions
Yelp charges commissions on transactions facilitated for other partners. The company includes Yelp Deals, gift certificates, Eat24 and its own platform under this model. Consequently, Yelp makes money for every transaction processed for these partners. Like other sources, these transactions come at varied rates. Yelp has not disclosed the rates it charges from its partners.
Other services
Apart from the above, Yelp also offers software solutions to businesses. On top of that, it includes subscriptions, licensing payments and revenue from different partnerships. Under this category, the company makes a significant amount of money from Yelp Reservations and its products. Similarly, it offers Yelp Knowledge which can provide access to revenue streams.
Conclusion
Yelp has become a household name in the US for its platform. Essentially, it allows users to post reviews about local businesses, which others can read. Yelp uses its platform and website to make money from different sources. The company uses user-generated content and an aggregator business model at its core. However, Yelp has expanded its operations to include various revenue streams.
