The Business of Yelp: How Does Yelp Make Money?
Yelp is a platform that connects people with businesses, featuring reviews, ratings, and photos submitted by users. However, the question remains, how does Yelp make money? This article aims to explore the different revenue streams that Yelp utilizes to generate income and provide solutions to the problem of how Yelp makes money.
Overview of Yelp’s Business Model
Before diving into the revenue streams, it’s important to understand Yelp’s primary business model. Yelp serves as a two-sided marketplace, providing value to both consumers and businesses. Consumers use Yelp to find and review businesses, while businesses use Yelp to reach out to customers and gain visibility. Yelp’s revenue streams stem from its ability to connect businesses with customers through various advertising models and transactions.
Advertising is Yelp’s primary revenue stream, accounting for the majority of its revenue. Yelp offers various advertising options to businesses, including sponsored listings, display ads, and video ads.
Sponsored listings appear in search results or on business pages, and businesses that pay for this advertising option show up at the top of the list. Display ads come in many forms, such as banners, sidebar or in-feed ads, and they appear on Yelp’s homepage and other pages. Video ads allow businesses to create engaging video content to showcase their products and services.
Advertising on Yelp is effective because advertisers can target specific demographics, locations, and search terms to reach their ideal customer. According to Yelp’s Q1 2021 earnings report, advertisers spent $206 million on Yelp advertising services during the quarter, accounting for 90% of Yelp’s overall revenue.
Yelp’s transaction-based revenue model generates income from customers that make reservations, deliveries, or bookings through the platform.
For instance, Yelp partners with restaurants to facilitate food delivery orders through the Yelp app. When a customer places an order on Yelp, the platform collects a commission fee from the restaurant. Similarly, for hotel bookings, Yelp partners with travel booking websites, such as TripAdvisor and Booking.com, to offer a seamless booking experience for customers. Yelp earns a commission or referral fee when users book via its platform.
Yelp Reservations is another revenue stream that allows businesses to streamline the booking and reservation process.
Restaurants can use Yelp Reservations to take reservations directly through the Yelp platform, without the need for a third-party booking software. Yelp earns a commission fee for each reservation made through the platform. Additionally, businesses using Yelp Reservations gain access to Yelp’s restaurant management tools, including analytics, and waitlist management features.
Yelp’s partnerships with other companies help to expand its revenue streams and enhance its offering to businesses and consumers.
For example, Yelp partners with Grubhub to offer food delivery services. When users order food through Yelp’s platform using Grubhub’s services, Yelp earns a commission fee. This partnership provides an expanded range of food delivery options for customers while increasing Yelp’s revenue stream.
Future of Yelp’s Revenue Model
As the COVID-19 pandemic has led to a significant shift in the restaurant industry towards takeout and delivery, Yelp will likely have to adapt its revenue model to serve the changing market. Yelp’s transactional-based revenue streams for delivery and reservations are vital to future growth potential, and potential new revenue streams may include offering premium subscriptions to businesses in return for enhanced features and expanded analytics.
In conclusion, Yelp’s business model is focused on providing value to both consumers and businesses through advertising, transactions, Yelp Reservations, and partnerships. The platform’s ability to leverage reviews and ratings from users creates highly-targeted advertising opportunities for businesses to attract new customers. If you’re a business or consumer looking to find and connect with new local businesses, Yelp still remains one of the best platforms to do so
There are many ways that Yelp makes money, and by utilizing a combination of advertising, transactions, and partnerships, Yelp provides value for both consumers and businesses. With the continued growth of the restaurant industry and increased demand for takeout and delivery, Yelp’s revenue streams hold even more potential for the future.