
Yelp advertising is a rip-off for small advertisers - evo_9
http://venturebeat.com/2012/02/06/yelp-advertising-is-a-rip-off-for-small-advertisers/
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_sentient
As the owner of a small business, I can confirm that this happens purely as
the result of ignorance on the parts of business owners. I've been advertising
on Yelp using their cost per click program for about a year now, and was
paying about $3.50 per click up until a couple months ago.

I recently got a number of sales calls from reps that attempted to sell me on
their new impressions program. They wanted me to pay them $600 for 1000
monthly impressions. I quickly ran the numbers and figured that even if I
assumed a generous 5% click through rate, I would still be paying nearly 3.5
times more per click than I was with their PPC program. I would need to be
getting a CTR of 17% just to break even, which is highly unlikely. And that's
without considering the addition of an onerous 12 month contract, which I
didn't have to sign under their PPC program.

Their impressions program does come with an added benefit though, which is the
removal of competitors ads from your Yelp profile page. I'm sure this helps
overall conversion rates somewhat, but there is no way it has enough impact to
justify the massive increase in cost per click.

Ultimately though, my PPC ad impressions have gradually dropped off despite
maintaining the same ad budget with Yelp. This is because they give display
preference to business owners who have signed up for their impression-based
program. I can only assume that means they have managed to con enough ignorant
business owners into signing up.

I'm both vexed and pleased with this development. :)

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sedachv
I worked at Matchcraft, which has the best tools out there for buying ads for
local businesses and provides the software for a lot of Yellow Page/directory
sites. Most of their revenue comes from the directories, but originates from
small, local businesses. I got to know the "local business" business and the
players quite well, and this doesn't surprise me. We always tried to get the
best conversion rates for the small businesses, but the sales tactics of some
of the local listings companies are not in good faith and their customer churn
rates reflect that.

WRT reasons to not get into local, it's not that the big sites like Yelp and
Groupon are sucking their small business customers dry, it's that they can't
help it. The only way to reach these small businesses is with large sales
forces. The process just can't scale. "Local" is an absolutely horrible
business to be in and I doubt anyone will ever crack it (hasn't worked for the
past 15 years...). If you want to sell software to shops and restaurants, sell
to franchises.

You might say OpenTable is an exception and cracked "local", but it's not -
they effectively built their own franchise network of restaurants by giving
away turnkey reservation system terminals to restaurants.

~~~
stevenj
_The only way to reach these small businesses is with large sales forces. The
process just can't scale. "Local" is an absolutely horrible business to be in
and I doubt anyone will ever crack it (hasn't worked for the past 15
years...)._

What about Craigslist? It seems to have scaled some local small business needs
(e.g. jobs and housing).

I think local is tough because there just isn't a big market for many of the
things small businesses are trying to sell.

But as we've seen, if you heavily discount them, that changes things.

~~~
true_religion
Jobs and housing are different because people actively search for them. People
_need_ shelter, and _need_ income.

They need food too, but they don't necessary need to go to a restaurant---much
less a particular one of many in the same flavor variety. If you're trying to
sell something people don't have a stake in taking up, you need a sales team
because they won't search for you.

~~~
sedachv
That's a good explanation. Note how craigslist works for apartments and jobs
postings, but not events (nothing works for events, the other favorite "local"
startup idea).

The quintessential small business owner we had was the plumber. People _need_
plumbers and _search_ for them, but how do you get them into your directory? I
don't know how well craigslist works for plumbers, and I don't think we ever
considered craigslist as competition.

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wtvanhest
"Even as Groupon’s toughest critic, I can list scenarios in which it makes
sense to run a Groupon. I cannot think of any scenarios where I would advise
businesses to advertise on Yelp at these rates."

If I owned a small business I would want to ramp my customer base quickly
since I would have a variety of other expenses which would be killing me until
my revenue was high enough. (Fixed monthly costs like insurance, rent,
utilities etc.)

Yelp is a service I and many other people are using more and more to decide
where to eat, shop, even use the dentist.

Yelp is not charging for just an ad for a user, they are charging for an ad to
a Yelp user who has the ability to put a yelp review up which can help drive
business in the future.

It is important to get Yelp users to try your business so you can get those
stars so you can get more customers. No business owner is worried about
getting bad reviews since they naturally believe their service/food/etc. is
the best in the market so that isn't a factor either.

So, yes on a CPM basis this is a terrible deal, but on a CPM basis for a yelp
user the economics might look much differently.

~~~
goodweeds
The main reason to advertise on Yelp is extortion. If you don't pay Yelp their
extortion fees, they only allow a small number of reviews for your business,
and even worse, their algorithms pushes the negative reviews to the top. One
of my friends' businesses currently has 200 "filtered" reviews and 19 posted
reviews which in itself makes his business look incredibly shady (sure, he
runs a dispensary, so he might be shady, but that's besides the point).

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robryan
I think they can get away with this because to someone who is thinking about
ads in an offline way, outdoors and newspapers etc the language makes it sound
like your getting 3000 ads for example. When you think about it in terms
though that your newspaper ad, while beng one ad, was seen by thousands of
people.

~~~
jcnnghm
A Yelp impression is much more valuable than a newspaper impression. When
people see an ad on Yelp, they are generally looking for a place to eat right
now. They are trying to make a purchasing decision. When they see an ad in a
newspaper, it is generally incidental. In addition, newspaper CPM is based on
distribution, it's pretty likely that only a small percentage of those papers
are read cover to cover, and only a small percentage of those readers look at
any individual ad for more than a second. The last time I looked at newspaper
advertising, a 1/4 page for one day in a paper with a distribution of 40,000
was about $600. If you are advertising a restaurant, I think you'd be better
off giving the money to Yelp.

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hughesdan
Many of the comments I'm reading here assume a much higher level of ignorance
on the part of small business owners than is really the case. While it's true
the average SBO typically does not understand internet advertising, they do
understand ROI. They know how much they spend on various forms of advertising.
And they know if they're getting a good return because they see the impact the
next day in their cash register. And more importantly, they talk to their
customers to find out what's working. The irony is, with all the sophisticated
technological tracking we can implement with our startups, we often know less
about what forms of advertising is producing results than does a supposedly
unsophisticated restaurant owner. Ignoring Yelp's 'extortion tactics' for the
moment (I'm not qualified to comment on those accusations), I don't think they
could sustain premium prices for long if the ads were not yielding
commensurate results.

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int3rnaut
There was a great comment in the VB comments about how the ads are more
distinctly targeted--and that makes a lot of sense and is reason enough to pay
a bit more per CPM, but in no way should it be a 100x type situation that is
going on. Oddly enough, there was a post the other day featured on HN about
how not to get into "local" because of issues like Small Business Owners were
not likely to adopt-- I can't help but think part of the reason there is this
apathy at that level is because all of these titans of this industry are
sucking their early adopters dry with reckless cost demands.

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dude1231
Don't use Yelp advertising. The problem is that you pay this crazy rate, then
when you search for your business name (even verbatim), they throw an ad for
your competitor above the search result for your business. Way more effective
for a business to use Adwords and get like 100,000's impressions for the same
price. Also the staff at Yelp advertising don't know shiat. Throw them a
mildly technical question and they'll answer it like a politician.

~~~
antoncohen
> Way more effective for a business to use Adwords and get like 100,000's
> impressions for the same price.

I've never in my entire life picked to go to a local business based on
AdWords. When I want to find a local business, a restaurant, dentist, gym,
etc., I always go to Yelp. If the business isn't on Yelp I will never know
about them. The Yelp ads are highly targeted. If a business doesn't already
have a strong presence on Yelp, the best way to make me aware of their
business is to advertise on Yelp.

Maybe the article was written by someone who doesn't use Yelp. It mentions
that it's a negative that the Yelp ads link to the business's Yelp page. To me
that is a huge plus. If the ad linked to the business's website I would never
link on it. In general local business sites are pretty useless, the Yelp page
is generally much more useful for finding out about the business. Hours, phone
number, neighborhood, map, reviews, price range, dress code, that's all info I
want, and it's usually hard to find on business websites. If that info is
readily available I'm more likely to go there.

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matdwyer
The scary thing is that enough people blindly pay this rate. If they didn't,
they'd lower it to a more reasonable level...

~~~
18pfsmt
Last week I met with a friend of a friend that owns a commercial door
distribution and installation business. He's been in the business for 20
years, but is clueless about anything internet related. I went over his
monthly bills for advertising (all of it) and web hosting costs. Turns out, he
spends about $3,500 per month on hosting and advertising. Most of the
advertising is for DEX, and his site is a crappy little static site.

I don't think the average small business owner really understands the
internet, and I don't think the average HNer really understands small
business.

~~~
codenerdz
However expensive his hosting/advertisement is, I hope he is able to justify
it by attributing increase of sales/revenues from this expense.

------
valgaze
Rocky Agrawal is the same writer who masterfully took down Groupon's S-1 &
noticed something strange was happening with small coffee shops who ran
Groupons: [http://techcrunch.com/2011/06/09/groupon-single-worst-
decisi...](http://techcrunch.com/2011/06/09/groupon-single-worst-decision/)

