Yelp's Secret Sauce and Local Advertising

I think the guys behind Yelp.com may onto something big. At a basic level, Yelp is a directory of reviews on local restaurants, shops, and other services. We've seen this before on Citysearch, Yahoo Local, and Judy's Book.

However, the difference here is that this site has a strong social networking thread that permeates the user experience. Think MySpace plus Judy's Book. I can create a profile (with pictures and other self-notables) to share my experiences, make my views known, and interact with other reviewers through comments and ratings. As a reviewer, I essentially become an authority/expert and I want to share this with other folks (leading to high value content). Morever, the UI does a good job of facilitating interactions between members. For example, my reviews can be rated as useful, funny, or cool AND users can even leave compliments, like "You're the best!" This keeps the member engaged and for some, they are delighted.

Here's the secret sauce: the output/content on local businesses is for the most part expressive, rich, personal, and valid. It's unique and real. You won't find this type of content on CitySearch or Yahoo Local. With this special content, you have the ability to garner a set of extremely engaged consumers .

Yelp now can sell these eyeballs to local advertisers (i.e. the local businesses the members are writing about). Local advertising has been the holy grail of online advertising but most companies have failed to gain any traction here. The Yelp model could prove to be an extremely effective channel to the small business owner.

In fact, Yelp HAS the goods (the detailed reviews) to pitch to the local dry cleaner or Thai restaurant. All they need now is to build a telesales force if they haven't already or partner with somebody who does.

Today, Yelp is sellling 1) enhanced listing information and 2) sponsored listings. Not surprising.

The key to scaling (getting more comprehensive and deeper) will be to continue to build a base of VERY influential and vocal reviewers in major cities across the U.S.

I will be watching closely to see what programs and incentives they use to grow this content.

I've recently jumped on the bandwagon myself. Check out my Yelp reviews HERE.