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Comment by boomzilla | Hacker News Reader

The big problem with Yelp is how you make money off the reviews? Advertisement doesn't work well because people will just go to the best reviewed shops. Checkin discount, Groupon style, is too small a market, and a failed biz model anyway. So right now Yelp makes money by strong arm (yes, strong arm) restaurants into paying to remove bad reviews and/or rerank the reviews favorably.

Essentially, Yelp provides a lot of utility to the users, but can't make money off them. It provides leads for the shops, but it doesn't control the demand side. Its review data is scraped by Google, so the value of its data is diluted. I think Yelp is a failed business model by itself. The only reason I am not shorting it right now is I think someone will acquire the company soon. In the hands of a big company, it could act as a huge loss leader for other value added services.

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can you elaborate on "Advertisement doesn't work well because people will just go to the best reviewed shops". Why can't yelp just runs non-restaurant related ads, ie for samsung or something. As long as they have traffic, those ads will have views.

"As long as they have traffic, those ads will have views."

There may not be any traffic after they slap a giant Samsung ad on their site.

They actually just removed their so-called "brand advertising" (which is what you're describing), because it was a small percentage of their revenue stream. They claimed it wasn't worth pursuing because they make for a bad experience on mobile, which is where their traffic growth is (their web traffic is stagnating). It was definitely their highest-margin form of advertising, and part of why the company's stock is being punished.

It isn't clear to me that Yelp, as it exists today, can ever be profitable -- they need to hire expensive sales people to cold-call businesses to sell ads that run at CPM rates that are already incredibly high. Yet they can barely break even. It's not going to be pretty as their ad rates are forced to become market competitive.

Confirmed with several restaurant owners, Yelp cold calls businesses often to extort "subscription" charges and if the business refuses the search algorithm drops their ranking.

I've also noticed cases where legit looking reviewers have complained about their positive reviews being removed.

You didn't "confirm" this...you're parroting a rumor that originated with a bad East Bay Express article.

Yelp doesn't change search rankings based on advertising. Source: I worked there, on search. It isn't true.

What is the reason for the huge fluctuation in the search results from one week to the next for something like BBQ? As in one day a restaurant shows up on the first page, and a few days later it was buried 6 pages deep? This observation correlated with the business owners refusing to pay Yelp's cold call sales team has nothing to do with the article you mention.

Looking at the search results for pizza sorted by the "best match" algorithm is mind boggling.

"This observation correlated with the business owners refusing to pay Yelp's cold call sales team has nothing to do with the article you mention."

No, it doesn't. Setting aside the fact that you haven't actually done the analysis (so you couldn't find a correlation if you wanted to), it's an example of "people who want to believe in a conspiracy will find evidence for the conspiracy", with a nice helping of the post-hoc fallacy: Yelp has a huge army of sales people calling businesses every day. Rankings are also updated 24/7. It is inevitable that someone will be called, at random, right before they experience a ranking change.

A search as generic as "BBQ" or "pizza" is going to have a lot of variation, because people are constantly using those tokens in reviews, and they match across a huge number of businesses. I very sincerely doubt that there are 6-page differences in a business' ranking on a day-to-day basis, but if it does occur, it has nothing to do with their advertising status.

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