US consumer reviews website Yelp operations

March 2, 2012 US consumer review website Yelp identified an IPO offering price of $15, higher than the previous 12-14-dollar issue will range. Yelp will be landing at the NYSE on March 2, with the ticker code "YELP", with a total of 7.15 million shares issued. According to the 15 dollar issue price, the Yelp financing amount is 107 million US dollars, and the market value will reach 898 million US dollars. Goldman Sachs is the main underwriter for the IPO, with Citigroup and Jefferies group as deputy underwriters.

On the eve of the listing of Yelp, we will comb through the history of development, operations and business models, financial conditions and market challenges.

I. Development history

The internet has just entered the years of the 2000, the UGC model began to rise. The Wikipedia, founded in 2001, led to the subsequent emergence of a group of 2.0-form companies, based on user-provided content, forming information reorganization and retrieval.

2003, the public comment network was born in Shanghai. Yelp started in San Francisco in 2004. And at this point, comments on the site in the United States is not new, the establishment of the more than 10-year citysearch at the time of the United States, the Internet reviews the boss position, but also a number of new comments on the site is also being explored.

But new Yelp began to develop rapidly in the San Francisco area. Compared to the traditional comment site, Yelp has changed: first, the real user comments, especially focus on the "handful" of interested users to attract. Create accounts, fill resumes, add friends, write comments, is the basic action of Yelp users, and second, through various forms of user interaction, and give outstanding users "reward." Such a pattern quickly distinguishes Yelp from the Citysearch, which values expert commentary and waits for anonymous user reviews.

Yelp established the San Francisco market in its first year and became the Entertainment guide for a new generation of internet workers, and the first group of users began to bring a lot of content to Yelp. To this day, the San Francisco Bay Area still accounts for 30% of all Yelp activity. The next major local markets were Los Angeles, Chicago and New York.

2010 years ago, Yelp was not expanding fast, adding more than 10 new markets a year. In 2010, Yelp accelerated its expansion. In 2010 and 2011, 22 new local markets were added. As of the end of 2011, Yelp has a total of 71 local markets, of which 25 are located outside the United States. , including Canada, France and Germany and other European countries and Australia.

and to participate in the review of business services, Yelp has expanded from simple catering to life services, including dentists, mechanics, plumbers and so on.

Specific comments on the share, catering and shopping accounted for the largest, each accounted for 23%. Secondly, the family services, beauty self-cultivation and entertainment accounted for 10%,9% and 8% respectively.

II. Operational Strategies

It can be said that Yelp since its inception, is a social characteristic of the internet companies. Browse Yelp Home and merchant pages with the most intuitive impressions: 1 The length of the comment is impressive; 2 The home page does not see any purchase activity entrance, instead is the line activity entrance occupies the important part; 3 The elite user is very eye-catching, the user through to the comment itself and reviews the author's "Praise" and "" The interaction is frequent,

As CEO Stoppelman said, "Yelp emphasizes the experience of the review itself, and it's more like a blog with a bit of fixed structure."

One of the most important ways to analyze Yelp's operational strategy is its social operations:

First look at how Yelp expands a new market: Before a new market is officially online, Yelp first builds local businesses ' personal home pages based on third party data, providing location information, reviews, photos, history, and more. When the official online, consumers can contribute their own comments, and add imperfect business information.

The question then is how to attract more consumers and local businesses. Yelp's strategy is to in every local market, hire a community manager (and, of course, locals), with the community manager in charge of raising Yelp's brand awareness, and developing local reviews of the author community, promoting the growth of the reviews by community development, and constantly attracting new users to contribute reviews.

The operation and training of the local community also includes comments on the style and wording, Yelp values the length of the comments and the description of the details, currently, the average length of Yelp all reviews is more than 100 words. If you are an app user, then you can sign in, send a photo, and publish a simple quick tip, but the comments are not allowed because Yelp believes that mobile terminals are not suitable for writing full quality reviews.

In addition to online operations, the comment community also exists offline.

As Yelp's slogan, Real arranges real review, Yelp encourages users to create their own social profiles, similar to a typical social networking site, Yelp will recommend its mailbox contacts to new users and suggest inviting other friends to join Yelp.

This kind of "real arranges" respected, also in the user's search process, when you search for a service, friends once comments will be recommended to you.

The user's personal home page records all of the comments that were written, Yelp friends, and the voting results (useful/interesting/cool) and praise tags (thanks/good pen/unusual/mark, etc.) accepted by these reviews.

By accumulating reviews, polls and accolades, Yelp's part reviews the author's development as an "elite user": With more friends, votes and accolades.

Under this "incentive", the elite users contribute more to the site, according to a survey from Northeastern University, Yelp currently about 44% of the comments are from this part of the elite users. To maintain user interest and loyalty, the Community Manager also organizes activities regularly online.

With close social relationships and community support, Yelp's user loyalty is far greater than other reviews: According to the survey, only 4.8% of Citysearch users and 11.1% of Yahoo Local users contributed more than 6 of the number, while Yelp's number reached 65.8 %。

It can be said that, on the social point, Yelp and Citysearch These old reviews of the site is clearly distinguished: the traditional comment on the site does not highlight the identity of the comments, and Yelp efforts to let the comments become the protagonist of the community, and even celebrities.

III. business model

In a broad sense, Yelp can be viewed as a vertical community with local consumption as its theme. The vertical community, in addition to the production and reorganization of information in the segmentation area, because of closer proximity to the industry itself, so that users in the acquisition of information needs, but also the need to obtain services.

The business models, which are brought about by acquiring information demand and obtaining service demand, are: Media advertising mode (CPM) and similar agent partitioning mode (CPC/CPS). In general, the more vertical communities that are closer to the trading behavior, the easier it is to adopt the latter, for example, clothing, daily necessities, tourism (Ctrip), and trading behavior usually occurs online under the vertical community because of the distance from the transaction behavior, generally media advertising mode, such as housing (search room), car (easy car), catering (YELP) and so on. The following figure:

Yelp, the public comment more on the acquisition of services to obtain the needs of the main, the corresponding advertising revenue is its important source of revenue. However, the public comment on the profit model of the exploration, especially with the trade-linked model, go faster and sooner. Starting in 2007, the general public comments began to launch the overall marketing program to local businesses, including keyword search ads, electronic coupons, brand promotion, and so on, which the electronic coupons and later launched the Group Purchase service only a step, the 2010, the public comments formally cut into the group buying business, a year later, Group purchase income accounted for 40% of the total income of the public comments.

By contrast, Yelp's business model is closer to the media. According to the Yelp prospectus, Yelp's main revenue comes from local advertising, nationally branded advertising and other services including group buying services ("Yelp Deals"). At present, the overall marketing program for local merchants includes keyword advertising (CPM) hyperlink, homepage perfect, etc., this revenue long-term account for more than 70% revenue, another brand for the national brand display ads accounted for more than 20% of revenue.

In addition, Yelp's search for a profit model includes group buying services Yelp Deals (second half of 2010), earning revenue from Third-party ad agency platforms and sharing other partners. The Yelp deals billing model is similar to the group buying site, helping businesses to send discounted information in real time via websites, mobile phone customers, or email, and charge a certain agency fee (identified as revenue in the statement); The division of other partners includes cooperation with the online booking service website OpenTable and the Travel service website Orbitz. (See figure below)

At present, this transaction-related revenue shortfall of total revenue 10%. Recently, Yelp began to reduce the proportion of deals sent to users by mail, mainly on the page and the mobile side of the show.

(Yelp revenue Model analysis)

Iv. interpretation of operational data

1 international market development faster than the United States

After starting in San Francisco, Yelp has been slowly expanding for years, until 2010, when Yelp began to speed up market expansion. But the 71 local markets are still dominated by large and medium-sized cities, and at the beginning of 2011, international markets have been expanding faster than the United States.

But at present, Yelp does not have any revenue in the international market, the company plans to start in 2012 to build the international market sales team, while the 2012 related international market development costs will reach 15 million U.S. dollars.

The opening up of new markets is significant for future growth, and as a local market matures, revenue growth typically begins to fall, with 2011 's local advertising revenue rising 57% per cent year-on-year, a growth rate that has fallen from 92% in 2007-2008.

2 reviews the number of growth slowed

As of December 30, 2011, more than 24 million user-generated, local-business reviews on the Yelp platform were 64% higher than in 2010, with an average of 65 million independent visitors (UV) using Yelp, up 67% per month.

The number of reviews and UV still maintain a high rate of growth, but the growth has slowed markedly.

At the same time, it is worth mentioning the performance of Yelp at the mobile end. By the end of 2011, the average monthly Yelp mobile app was used in more than 5.7 million terminals, while mobile-end user search behavior accounted for 42% of the entire platform.

3 paid businesses accounted for 4%, of which 67% of the old customers

As at December 30, 2011, there were about 606,000 scheduled business locations (claimed business locations), which was 97% higher than in 2010 Q3, and 2011 Q4 during the quarter, the paid merchant account reached 24,000, accounting for 4% of the total merchant account, 109% higher than the same period in 2010.

According to the prospectus, of the 23,700 paid businesses as of December 31, 2011, 15,800 of them, or 67%, were old customers (who had bought local advertising programs in the previous 12 months).

V. Interpretation of financial data

1 revenue to maintain high growth losses

Yelp's revenue has risen sharply in recent 5 years, with a compound growth rate of 155% per cent, with revenues reaching $83.28 million in 2011 and 74.5% per cent year-on-year, but losses continue to magnify in recent years.

Most of Yelp's revenue comes from local advertising, which has been growing steadily over the past two years as a result of local advertising.

Nationwide brand advertising over the past 2011 years, the growth rate has been significantly reduced. While other services are currently contributing less revenue, the pace of change is erratic.

2 Costs & Costs

The main reason for the continued loss of Yelp is the high operating costs, especially the marketing costs, which are still rising.

Since 2010, the cost of Yelp marketing has increased markedly, reaching $54.54 million in 2011 last year, up 60.8% per cent year-on-year.

Yelp's marketing costs are comprised of employee salaries, benefits, options compensation (SBC), travel expenses, and incentive compensation for employees of the marketing team, as well as conventional market spending such as brand building. Yelp noted that the company's "community manager" team was solely responsible for local community extension and branding as it did not have any marketing costs involved in gaining access to websites and mobile apps.

The Yelp prospectus also disclosed plans to invest more in marketing in the future to further expand the U.S. and global markets. Yelp plans to spend about 15 million dollars in 2012, most of which are used to hire salespeople in global markets.

Vi. Questioning & Risk

1. High-priced Yellow Pages advertising company?

Yelp on the eve of the IPO, about its most enthusiastic discussion mo over this "Yelp extortion small merchant" (Super Chain) article, 600 dollar price CPM advertising fee is considered to be ruthless extortion of local businesses, prices far higher than the general price of CPM advertising. At the same time, the authors argue that the 600-dollar CPM Price is a staggering figure even relative to Faceobook and Google.

It must be noted, however, that Facebook pushes ads only for users ' interest, rather than Facebook,yelp's apparent consumer behavior, which is less effective than the advertising effect of the Yelp user's active search before consumption.

The business model of Yelp, the main source of income for CPM, seems to be a more important issue than the debate over whether advertising prices are too high. Although the search service was started at the end of 2010, and OpenTable started business with the meal-booking website, it is still a small percentage of revenue based on transactions. At the same time, the group buying service Yelp deals in the United States is not smooth, the company readjust the sales team, and plans to reduce the way mail is pushed, but instead of the focus of the purchase service to the Web and app.

2. Can the mobile end earn revenue?

Referring to Yelp's planning at the mobile end, the public reviews CEO Zhang's comments: Yelp's advantage is only online information, not the opportunity to buy, in addition, Yelp on the phone is also hit by Foursquare, "These two opportunities, Yelp did not seize." It also determines that its future growth will be squeezed by Groupon and Foursquare. ”

As with most Internet companies, Yelp's source of traffic began to shift to the mobile end. The Yelp mobile app was launched in 2008 and, as of 2011q4, the mobile app was used on an average of more than 5.7 million independent mobile terminals per month, which is close to its monthly UV calculated (Q4 monthly UV 66 million).

At the moment, the Yelp mobile end has no ads, and only Yelp Deals a revenue method and therefore has no significant revenue. and future profit opportunities, only in group buying services Yelp deals see a glimmer of dawn.

3. Google: Partnership or competition

In the prospectus, Yelp made it clear that traffic relies heavily on the import of search engines, and that if Yelp's search results do not rank as a priority in free results when a user searches for a local merchant or service, the flow of traffic will likely drop significantly.

Of these, Google imports more than half of its total traffic. And Google is also promoting its own comments on products Google Place,yelp has previously been responsible for Google Crawler to the Yelp merchant information and comments on the pan to their places page.

In the prospectus, Yelp said that Google had removed the Yelp link from some merchant information search results and started promoting its own local comment products.

That could be fatal to Yelp. In an interview with TechCrunch, when asked about how much the company would be affected by the removal of Yelp from Google's search results, CEO Stopman said, "about 75% of visitors come directly or indirectly from Google's search." Of these, about 50% of the visitors eventually found us through Google search, while the other 25% were opening our pages via Google's search keyword ' Yelp ' ... It can be said that if Google's search results do not have the relevant information about Yelp, the impact on the company will be devastating.

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