Digital

Yelp Has Changed Local Discovery Whether Business Owners Like It Or Not

Aug 04, 2014 6:00 am

Skift Take

Yelp killed Citysearch, made Zagat seem quaint, and helped kill guidebooks. Will it meet a challenger any time soon?

— Jason Clampet

Free Report: The State of Student Travel

Kathy Willens  / Associated Press

The logo of the online reviews website Yelp is shown in neon on a wall at the company's new Manhattan offices in New York. Kathy Willens / Associated Press


Yelp changed everything.

That’s chef-restaurateur Dennis Leary’s reaction when asked about the impact that Yelp — the user-review site celebrating its 10th anniversary this month — has had on San Francisco. Thad Vogler and Michael Chiarello have similar reactions — and in all likelihood, so would thousands of other chefs, servers and bartenders.

No local sector has been more affected by the rise of Yelp than restaurants and bars, the site’s most-reviewed categories. Yet while Yelp has been the target of restaurateurs’ well-documented angst and anger, there’s no doubt the San Francisco digital company has dramatically transformed the hospitality business.

Restaurateurs have overhauled their strategies for marketing, media coverage, online presence and staff management. But several new Yelp initiatives, including a Yelp-operated reservation system, mean that even more recalibrations are en route. In its first decade, the company has established a huge, cult-like following. According to its earnings report released Wednesday, it boasts 61 million user reviews and 138 million monthly visitors — nearly doubled from 2012.

That success has come with controversy. Yelp has also been the bane of many small-business owners who feel at the mercy of anonymous, amateur critics who assign ratings for every single thing, from the French Laundry to San Quentin State Prison (three stars). It has spurred myriad online diatribes and breathless media seminars. It also has been accused of extortion, defamation and poor ethics, both inside and outside the court of law. No charges have stuck.

City’s Zeitgeist: Food

The debate over Yelp is now, to a large degree, moot. It operates in 27 countries and has thrived in ways other user-review sites have not. And, perhaps more than any other tech company, Yelp has tapped into the city’s zeitgeist: food.

“Yelp is emblematic of the state of our industry,” said Vogler, who owns Bar Agricole and Trou Normand in San Francisco. The industry “has never been better. People are really interested in the food and beverage industry.”

Trou Normand is located on the ground floor of 140 New Montgomery, where Yelp’s headquarters takes up 15 floors.

“I’m a bartender that gets to be taken seriously as business owner. That would not have been the case 20 years ago.”

Yelp has shepherded in an era in which restaurants are trophies on a digital wall. Being the first to review a restaurant “earns” a Yelper a blue badge of online honor, and diners flock from hot spot to hot spot (and write about it online).

Though that fetishizing of the new and the shiny may come at the expense of attention to more established places, it has also allowed small, otherwise hidden restaurants to be discovered more easily. A 2011 Harvard study found that “Yelp causes demand to shift from chains to independent restaurants.”

In doing so, Yelp can act as a megaphone for the overall restaurant industry.

Ike Shehadeh opened his first San Francisco sandwich shop in 2001, only to close it soon thereafter. In 2007, he gave it another go and opened Ike’s Place in the Castro. This time, it caught on, buoyed by online resources like Yelp, where he advertised for 18 early months.

“It was literally the same exact sandwich as it is now,” said Shehadeh. “The Internet age allowed people to advertise for you.”

Now, Ike’s Place is the most-reviewed San Francisco restaurant on Yelp, with 6,207 reviews as of last week, easily beating out Brenda’s French Soul Food (5,208), Burma Superstar (4,894) and House of Prime Rib (4,200).

Shehadeh interacts with diners online via Yelp, Facebook, Twitter and even MySpace. He no longer pays for advertising anywhere, though he does occasionally cater Yelp holiday parties and similar company events.

For diners, Yelp has also become a modern version of the Yellow Pages, supplying basic information like hours and menus, and links to the restaurant’s website and online reservations, while for restaurateurs, it’s become a resource for customer behavior.

They can use what’s written to identify recurring problems, be it overpricing or oversalting, as well as to experiment with newer developments like online delivery, tracking mobile metrics and customer demographics.

Free Data About Business

“I look at Yelp as a management tool,” said Thomas Odermatt of Roli Roti, who likens it to free data about his business, which currently includes six food trucks across 40 Bay Area farmers’ markets.

“You get a pretty good snapshot of your market. I can sit in Hayward and have a glance at it, and I kind of know what my little secret shoppers are telling me. It’s basically polling them.”

Yelp has changed the way new restaurants wade into the market. Whereas professional critics typically wait a month before visiting a new restaurant, Yelpers flood in on day one, if not earlier. Getting off to good reviews can help launch a business, while a rough start can bury one.

Anderson Pugash checked Yelp daily when he opened Palm House in Cow Hollow in May.

“You have a brand-new menu that the public hasn’t tasted before, and you need to understand what your consumers like and don’t like. It’s a source for objective feedback, most of the time,” he said.

One way to foster buzz — and those all-important positive early reviews — is to host preopening parties for Yelpers. Of course, not all business owners can afford to open the doors for a dedicated Yelp event, and others view it as a pay-to-play situation: Make nice with Yelp, or risk alienation.

Yelp’s San Francisco Community Manager Abby Schwarz points out that Yelp makes the deal clear with restaurants: “(Restaurants) provide the services with the understanding that (the parties are) marketing.”

Yelp does ask its users to reveal when they’ve received freebies, but this still leaves restaurateurs in a tough position.

“It’s like OpenTable,” said Dennis Lee of Namu Gaji, who declines to host Yelp events but acknowledges that there is no escaping Yelp’s ripple effects. A business can’t opt out of being listed on the site.

“You have to do it, which is strange and weird about the world we live in now. There are corporations that are part of the fabric of what we do.”

Another of those corporations is OpenTable, which got its start in San Francisco and now virtually monopolizes online reservations around the country. Between charging restaurants monthly dues, installation fees and individual reservation fees, it is expensive — especially for independent restaurants that operate on small margins. But if a restaurant opts out of OpenTable, it all but disappears from online reservation searches.

In an effort to challenge OpenTable, Yelp acquired SeatMe, a smaller San Francisco online reservation service, in July 2013 for a reported $12.7 million. Since Yelp’s acquisition, the number of restaurants using SeatMe has tripled to 600.

Through the transition, Yelp has continued to feature OpenTable reservations on its restaurant pages, but many restaurateurs wonder if the Yelp-backed reservation system can do what so many counterparts have not: disrupt the OpenTable domination.

“They’ve aggregated a huge mass of Yelpers, and you need something to break through the ice. Great technology is great, but you need a population,” said Michael Chiarello, pointing out that Yelp has that army.

Chiarello says that he pays roughly $4,500 a month for OpenTable at Coqueta; add in his other restaurant, Bottega in Yountville, and he pays around $100,000 a year for online reservations. SeatMe has a flat rate of $99 per month; there are no cover fees or commitment fees. It’s a dramatic difference.

Loló and offshoot Loló Cevicheria recently made the switch from OpenTable to SeatMe. One reason, said chef-partner Jorge Martinez, was that his OpenTable bill at Loló, where he can serve more than 400 diners on a busy Saturday, was around $2,000 a month. Another, he said, is that the iPad-based system is more convenient than OpenTable’s bulky monitors.

Jenny Schwarz, the owner of Oakland’s Hopscotch, has been using SeatMe since her restaurant opened two years ago. She says the transition to Yelp has been fairly seamless.

“As most restaurants feel, I’m not the hugest proponent of Yelp,” she said. “But I hope that it breaks the OpenTable stronghold. It needs to be a fair market.”

If the rise of Yelp continues, expect to see it physically manifested at the table, too. Mike Ghaffary, Yelp’s vice president of business development, envisions ways to embed the Yelp experience even more deeply into the dining experience, blurring the lines between online and offline with video features, customizable meals and integrated usage between owner and user. Whether that prediction is a utopia or dystopia, San Francisco will be ground zero.

“There’s something very Northern California (about) the apparatus of Yelp,” said Trou Normand’s Vogler, pointing out how New York and Paris restaurants have a fraction of the reviews of their San Francisco counterparts.

“We don’t like to say things face-to-face. I don’t think it’s an accident that in this culture climate, Yelp really works.”

Leary, who owns the recently opened Natoma Cabana and other places, agreed.

“It’s a strange subculture,” he said. “Or maybe, it is the culture.”

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