Is Yelp Good or Bad for Your Small Business?

September 22, 2014 / Reading: 5 minutes

Online consumer reviews have a growing influence and platform like Yelp can have a major impact on your business’ reputation and ultimately, its bottom line. Unlike bigger and more established businesses who don’t necessarily rely as much on Yelp reviews, small businesses may live and die by them.

Whether you own a restaurant, a retail store or an auto repair shop, as a savvy business owner you need to pay close attention to your presence on online review outlets such as Yelp by making sure to check your listing on daily basis in order to gather feedback and maximize visibility.

But while Yelp is a great way to get your name out there and get discovered, it does pose some unexpected challenges, especially when it comes to managing the actual review piece. As a result, many businesses suffer from negative or even fake reviews provided by users. But does that mean that Yelp is hurting your business? We’ll list some facts so you can decide for your self.

Yelp users are ready to spend and buy

It is estimated that more than 138 million people use Yelp every month, most of whom are very likely to make a purchase shortly after finding a business on the site. In fact, over a third Yelp users will visit a searched business within 24 hours of searching Yelp and about 9 out of 10 said they make a purchase within a week.

Yelp generates substantial revenues for Small Businesses

A study drawing upon data from over 4,800 small businesses throughout the country has shown that Yelp has a positive impact on a business’s bottom line. In fact, results indicate that small businesses with a free business account saw their annual revenue increase by an average of $8,000, while Yelp advertisers benefit almost three times as much, generating over $23,000 in average annual revenues from Yelp. All of this is hardly surprising when you take the following figures into consideration:

  • Monthly unique visitors: 138 million
  • Number of Reviews: 61 million
  • Reviews posted every minute: 26,380
  • Growth of reviews (2013 to 2014): 44%
  • Largest income level on Yelp (US): $100k+

You can view the complete study by the Boston Consulting Group here.

Most reviews on yelp are positive

2 reviews out of 3 on Yelp are either 4 or 5 stars. With 1 Star representing only 13 percent. This goes to show that people leaving reviews for a business on yelp are more likely to have had a positive customer experience. Additionally, Yelp has stated that businesses are about 5 times more likely to receive 5 star reviews than a negative 1 star.

Yelp Business Reviews Breakdown - Fundivo

So that was for the advantages of using Yelp, now let’s look at the cons:

Many small businesses have complained about Yelp

While Yelp’s model is based on neutral and honest reviews, the FTC has disclosed that it has received over 2000 complaints (as of April 2014) from business owners about Yelp’s practices. As a matter of fact, a class action suit was filed by several small businesses that got together and challenge what they perceived as “economic extortion”, alleging that Yelp alters business ratings in exchange for money by forcing them to pay out big money in order to remove or hide negative reviews from the site.

Yelp has no obligation to display positive reviews

Yelp has consistently claimed it doesn’t manipulate reviews and that it separates the content and revenue side of the business, however, its automated filtering software has come under a lot of criticism for filtering out good reviews. And while many business owners have complained that Yelp deletes positive reviews from their listing in order to make them pay for advertising, a federal judge has ruled that Yelp is completely entitled to remove reviews as it sees fit, stating:

By withholding the benefit of these positive reviews, Yelp is withholding a benefit that Yelp makes possible and maintains. It has no obligation to do so, however.Judge Marsha S. Berzon

Yelp can be used to tarnish you business’ image

As we stated above, Yelp has an automated filter than can result in negative reviews being posted prominently on your page, which can lead to potential customers pass on what you’re offering. Because Yelp tends to assume that good reviews areare either false or solicited, you may run into the following two scenarios:

  • Your competitors can use Yelp to post false and negative reviews about your business.
  • Some Yelp reviewers try to score freebies or discounts from local merchants by threatening to post negative reviews.

Having said all that, negative reviews do help users trust them, as long as the good outweighs the bad. A listing with only 5 star reviews might make consumers a little suspicious of the quality of the reviews and also of your business as a whole.