Yelp announced a new revenue estimator this week. The hope? That Yelp can now actually show you how much money they are generating for your business. Is it an exact science? No, but it's closer than anything that has existed before. Now it's no secret that Yelp has an impact on your business, but the big surprise - the average amount of revenue Yelp generates a small business - $8,000.
So what exactly is it and how does it work?
Let's start from the beginning. Yelp lets consumers write reviews about local businesses, which means they create a profile for each business. It is free as a business owner to claim your businesses Yelp profile. Through this profile, Yelp is able to collect all kinds of data. How many customers visited your profile page, how many called your business directly from their app, how many customers checked-in or bought a "check-in offer," etc., etc. Yelp uses these types of data to generate what it calls "leads". Then, using a recent study by The Boston Consulting Group outlining the average estimated spend per customer in your particular business category they can calculate a revenue estimate.
By multiplying the leads by the estimated spend they are able to calculate how much revenue has been generated for your business directly from their service. And no you don't have to use their average estimated customer spend, you can fill this in yourself with what you already know is your average check price.
Sounds pretty easy, right? Think again. In order for this to be successful, they need to be able to pull data from millions of sources, so it definitely doesn't hurt that they are now boasting 100 million unique visitors to their website every single month.
When I first posted the original article I read (from TechCrunch) on Twitter, the first response I received was "finally @Yelp's getting it!". That's a great statement. They've built a great product that has been gobbled up by consumers, but businesses have been left bruised, beaten, and feeling neglected along the way because they haven't had time to understand it. Well it looks like Yelp is putting businesses in the foreground now (and they should, after all they are a B2B company) and are starting to provide tools to help business owners understand the power they have the ability to harness.
Don't get me wrong, Yelp has built plenty of tools for business owners before, such as the ability to respond publicly and privately to consumers, but at the end of the day their failure came from lack of teaching business owners how to do this. Plus it's one more thing on the already overloaded daily to-do list. Instead, they just called them and tried to sell advertising. This doesn't make you very happy as a business owner. But I'll tell you what does make you happy, along with this report of the revenue estimator has come the average revenue generated from advertising on Yelp. And if you thought $8,000 sounded great, how about an average revenue generated from advertising of $23,000? With an average yearly spend of $4,200. That was enough to make me Yelp! I'll let you do the math.