Does presence on Yelp help or hurt SMBs’ customer acquisition and operational success? A new study from the National Bureau of Economic Research answers this question in the affirmative. Specifically, it found that establishing a Yelp presence leads to SMB revenue boosts of 5-10% percent.
The study, led by scholars from Harvard, UC Berkeley, and Lehigh University, examined restaurants and bars in Texas. Its methodology was to determine causal effects by cross-referencing public-record tax filings for these businesses with corresponding and time-relevant data on their Yelp presence.
For example, the researchers factored in the timing of when businesses were added on Yelp and if there was any subsequent revenue delta. Though this is technically correlation, not causation, additional confidence was gained by comparing independent variables like other nearby bars & restaurants.
Cliff Notes
Diving Deeper into the study’s findings, we’ve extracted a few takeaways for Localogy Insider readers. Here are the Cliff Notes.
– The overall effect on revenue when businesses are added to Yelp ranged from 5 to 10 percent.
– The effect on revenue is dependent on how the business is added to Yelp (by customers, by Yelp, or by the business itself).
– When frequent Yelp contributors (“super adders”) add new businesses, revenues increase by 8.9 percent.
– Yelp-present SMBs’ common attributes include being more urban, in business longer, and larger than non-Yelp-present SMBs.
Meter Stick
Stepping back and extracting some meaning from the findings, it stands to reason that a Yelp presence boosts revenue and customer acquisition. Yelp has become such an authority and meter stick on SMB quality – especially bars and restaurants – that businesses have to be present or it’s bad for optics.
In that way, Yelp presence – whether reviews are good or bad – is a sort of mark of authenticity. If a business isn’t on Yelp when you go to research it by name (or category-based searches), it’s disregarded by most digitally-savvy consumers. No presence is almost worse than bad reviews.
On another level, there are second-order effects. For example, Yelp brings a degree of transparency that motivates businesses to be on their best behavior. In that sense, it’s a microscope that keeps businesses honest. This motivating factor can result in improved operations. That means revenue, not just reviews.
Lastly, it’s notable that “added on Yelp,” as phrased above, can mean SMBs’ active participation, or cases where Yelp users add them. So in addition to the above reasons for active Yelp presence, in some cases, they won’t have a choice. Now it’s clear that SMBs that lean into it will empirically do better.
