Local in a ‘Post-Yelp’ World

It’s still a rumor so take everything I’m about to say in that context. (Though it’s being confirmed by Claire Miller at NYT; “more than $500M”.) However if Google does succeed in acquiring Yelp, it will be a huge deal for everyone the local space. Earthquake was the metaphor I used in my post at Search Engine Land last night.

In many of its markets Yelp is the strongest online local brand next to Craigslist. And among younger users it’s a far stronger brand than yellow pages or newspapers. Yelp also operates a telephone sales force. This would give Google the basis of an active outreach effort to the local market.

This is a cultural shift for Google and a major competitive change potentially in the local segment.

If Google does buy Yelp it will have much less “need” for its current roster of reseller partners, with limited exceptions perhaps. The combined consumer pull of Google + Yelp in the local space would present an almost insurmountable challenge to many local publishers. Their “feet on the street” advantage would also be diminished.

But my sense is that a Yelp acquisition would also open up opportunities for others. This is not to say that Yelp would lose vitality or momentum (although it could). It could be come the “YouTube of local.” But my intuition tells me that it would create an opening for others with interesting new approaches to the market.

Twitter and its open API and developer community represents a challenge to Yelp, as does Facebook (which I believe will acquire FourSquare). FourSquare may be a threat to Yelp in a very limited way but it is not a mainstream service — absent some dramatic changes and shifts.

Forced by the rise of Facebook in mobile, Loopt is trying to become a version of Yelp now. And AlikeList, which just launched, has great potential.

Yelpers will initially be quite upset about their site and community being absorbed by Google; however they’ll get over it just like YouTube users did. But in the process the Yelp brand identity will lose some of its edge, which is what will partly create the opening for others.

Mobile, where Yelp is also strong, is of course creating opportunity for companies in the local space that aren’t incumbents on the PC.

It’s premature to congratulate anyone at Yelp unless or until this rumor is confirmed. But if so, it caps a great success story: part luck, part experimentation, part great execution. I’ve watched it from the very beginning (when I was skeptical).

At one point a few years ago CEO Jeremy Stoppelman told me that Yelp was working to figure out “the formula” around entering new cities. When he used that phrase (assuming my memory is correct) I thought to myself: “formula, what formula could there be?”

But their execution has proven that there was one and that it has been working very well. Stay tuned.

___

Update: David Mihm reports that a stat mentioned last week by Yelp COO Geoff Donaker is that Yelp has 200 salespeople. Google will likely boost that and use it to sell Local Listing Ads as well as Yelp. It could also use the team (over time) to expose Google Apps and other services (e.g., Voice) to SMBs. It’s not just about ads for Google.

Even if people defect and leave Yelp, I believe Google will be using telephone sales going forward. Reach, Yodle and other independing local sales channels will need to broaden and reposition if what I’m saying comes true.

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20 Responses to “Local in a ‘Post-Yelp’ World”

  1. David Mihm Says:

    Greg, couple of comments:

    One:
    “Yelpers will initially be quite upset about their site and community being absorbed by Google; however they’ll get over it just like YouTube users did.”

    I’m not so sure about this. I think Yelp is a qualitatively different animal than YouTube. The phrase “lifestyle blog” pops to mind; I wouldn’t ever consider YouTube anything but a publishing vehicle…Yelp is much more about community than YouTube.

    Two:
    “Yelp was working to figure out “the formula” around entering new cities.”

    This is where I think Yelp HAS been very successful. Geoff Donaker laid it out in LA last week…the hiring of scouts to verify and enhance data of the best-known offline brands in a city, then the installation of a Yelp rep, creation of Yelp Elite parties to spread the word via guerrilla means, then getting on business owners’ radar in a city…it really is a well-thought-out formula that they now have a ton of institutional knowledge about how to execute.

  2. Greg Sterling Says:

    YouTube users considered themselves part of a community of users in the early days. It wasn’t simply a utilitarian technology platform for hosting video.

    Some very hardcore Yelpers may abandon (their reviews will still be there) but most people aren’t going to be impacted unless Google does something very heavy handed.

    But as I say the “edge” will be gone. Yelp will cease to be as “cool.”

  3. David Mihm Says:

    I’m unconvinced :) The incentive for continual engagement on Google is just not there…Google exudes “technocratic”–they’re all-algorithm, all the time. Whereas Yelp is democratic. I know of a couple friends who’ve made real friendships with people they met on Yelp…and I don’t know that many Yelpers. I know a ton of Google users and no one has ever said “I met him/her in the LBC”. Google’s previous foray into a community/social area (Orkut) has failed miserably.

    As you mentioned earlier, I think the fit would have been Yahoo rather than Google, which DOES have this sense of community.

    But there’s still PLENTY of value for Google in acquiring Yelp just to stave off erosion of market share. If it took +/- 5 years for Yelp to get where it is today, presumably it’ll take at least that long for the next competitor to achieve a similar level.

    • Martin Lawrence Says:

      David,

      what struck me was you saying Google could “stave off erosion of marketshare”.

      I thought they were gaining marketshare of the Local market these days. Are they not?

  4. Greg Sterling Says:

    Google will probably leave Yelp alone for a time. Agree with the cold vs. warm notion of Google vs. Yelp.

    It’s too bad that Yahoo couldn’t be involved in the bidding or be the acquirer.

  5. genedaly Says:

    Any idea how large Yelp’s sales force is?

  6. Greg Sterling Says:

    Not huge. Total Yelp headcount I understand is about 300. Last funding round was about international expansion and sales force expansion if I remember correctly

  7. David Mihm Says:

    COO Geoff Donaker said roughly 200 last week.

  8. Greg Sterling Says:

    200 total headcount or salespeople?

  9. David Mihm Says:

    Salespeople. He also confirmed your 300 total headcount statistic.

  10. Kyle Kazak Says:

    Between Levchin, Bessemer, Benchmark and Dag, they have invested $31M into Yelp. That would make a return in excess of 16x.

    I also heard that 2/3 of the company-base was their sales force/customer service, so that would make it 200/300 employees are salesmen.

  11. David Mihm Says:

    Greg, per your recent comment update, I totally agree that a major plus for this acquisition is Yelp’s institutional knowledge on how to expand into a new city. However from a pure sales standpoint it is surprising they are not moving to acquire someone like a Yodle or ReachLocal or eLocal with sales experience.

  12. Greg Sterling Says:

    Because Reach or Yodle is a pure sales channel. Yelp is a brand, community, content source . . . and sales channel. There’s more stuff there for G on both sides of the local equation.

  13. Google in talks to buy Yelp; is real estate asleep at the switch? | 1000Watt Consulting Says:

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  15. Josh Walker Says:

    Leaving all the game theory, negotiating tactics, and speculation out of this, I still believe this on/off deal makes a lot of sense for the Googs: http://bit.ly/61qHVN. Yelp is not a fit for other media and directory companies. These companies lack the automated infrastructure to monetize these local searches well enough to justify the premium paid for Yelp’s brand. By the way, if you compare to Yodel, Angie’s List, and Reach Local, Yelp’s inside sales force of 200-300 people is huge for the revenue they’re able to generate. I think this shows their inability to expand into more lucrative services sectors.

  16. Greg Sterling Says:

    That may go to Yelp’s “brand strength” in those areas.

    By analogy (sort of), this was the rationale for Citysearch’s acquisition of InsiderPages: Citysearch was unable to break out of A&E after years of trying and InsiderPages was strong in home services.

    • Josh Walker Says:

      I’m not sure I follow the “brand strength” point. I was busy speaking-out-of-school with conjecture about Yelp’s sales efficiency and deal size. And BTW, throwing CitySearch and Insider Pages into this discussion is like cold water. What am I supposed to do with that? :-) Happy holidays.

  17. David Rodecker Says:

    Does anyone have intel on where the talks end up?

    Wonder if Yelp pulled a Facebook and demanded too high of a valuation; leaves the opportunity again for MSFT enter and take a minority position and relief some of the early investors…

  18. Milton Swingline Says:

    I suspect they would retain the Yelp brand, much like they did uTube when it was integrated, even though Google still has its own video product.

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