NYT on Yelp vs. Zagat

Randall Stross in the New York Times looks at the evolution of user-generated reviews online (they’re improving) and zeros in on and compares Yelp and Zagat in the restaurants segment. He prefers Yelp to Zagat (the original UGC publisher):

Access to Yelp’s ratings is free; Zagat online freely displays customer comments but reveals its ratings only to subscribers, who pay $4.95 for a 30-day subscription or $24.95 for a year. Even when Zagat provides averaged scores, it doesn’t link to the comments and ratings that a given reviewer has provided for other places, as Yelp does.

Two years ago, in August 2006, Yelp attracted about twice as many unique visitors as Zagat.com. Since then, Yelp’s traffic has expanded geometrically while Zagat’s has grown only a little. This July, Yelp drew 4.76 million unique visitors, compared with Zagat’s 384,000. (Zagat doesn’t disclose sales figures for printed guides, other than to say its New York City guide sold more than 650,000 copies last year.)

ZAGAT.COM’S owners have not been willing to utilize the Web’s unlimited space to cover far more establishments than its printed guide ever could. The print influence is also evident in the way Zagat’s ratings on the Web site are set only once a year, on the eve of the publication of the printed guide for a given city. Then the numbers sit, frozen, until the next year.

Zagat would argue that there’s more quality control and thus more value in being favorably reviewed by Zagat. That may be true but the culture is changing and the value of the Zagat brand (in the flagship restaurants category) is under pressure from the range of free, “pretty good” sites online. (Zagat is reportedly for sale.) When consumers can get “good enough” information from a free site there’s no incentive to pay for a subscription.

Consumer Reports has managed to do well with a subscription model, amid the UGC onslaught. (Angie’s List also told me subscriptions were up.) The difference there is that Consumer Reports and Angie’s List are consulted in categories that are more expensive and require more “consideration”: home improvement, consumer electronics, cars, appliances, and so on.

It’s a tougher fight in the restaurants category, where I’m not taking a huge financial risk on a restaurant I’ve never been to ($30-$70). Thus my inclination to pay for a Zagat subscription is less than it would be to pay for Consumer Reports to do research on stoves or cars.

A place where Zagat can regain some lost momentum is in mobile. Zagat, I’m sure, has an iPhone app in development (you can get the site on the iPhone today). The company otherwise has mobile apps (and changes an annual subscripton fee).

Yelp is about to release the next version of its iPhone app in the next week or two. It has a range of expanded features and capabilities.

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4 Responses to “NYT on Yelp vs. Zagat”

  1. Malcolm Lewis Says:

    Yelp is much better for consumers. But I wonder how much money Yelp makes…

  2. Greg Sterling Says:

    Not as much as Zagat I’ll bet.

  3. Anand Sanwal Says:

    Greg,

    Great post. I find Ms. Zagat’s “proof in the pudding” comment as well as her assertion that they choose not to be comprehensive on purpose completely inane. Zagat undoubtedly pioneered much of this space but past performance is no indication of how the future will go as many legacy players have seen.

    I hear Zagat is ultimately for sale so someone who can tap into their great brand and perhaps polish it up and make it current might do well with it. Otherwise, I feel their days are ultimately numbered with Yelp (and future offerings by others) coming to the forefront.

    Of course, the NYT didn’t cover CitySearch or Michelin Ratings (for good reason). Those are two other dinosaurs with hopelessly outdated business models.

    I look forward to reading more on your blog.

    In case you’re interested, I commented further about this article in my post “Zagat Shuts Down – Yelp Declared Winner” @ http://brilliont.com/blogs/id/2008/09/08/zagats-ceases-operations-yelp-declared-winner/.

    Regards,
    Anand

  4. Greg Sterling Says:

    It’s another example of a traditional publisher struggling to balance existing revenues and business model with the Internet’s free, ad supported model.

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