Decoding the new economy

Yelp’s problem with activists

Yelp and other online review sites have a problem when the Internet mob gets stirred up.

It’s been a bad couple of years for James Knight, a dentist in Fort Dodge, Iowa.

First his wife found some text messages he’d exchanged with Melissa, his attractive assistant who’d been with his practice for ten years.

Then James’ spouse demands Melissa is fired.

James then has what was no doubt a difficult conversation with Melissa’s husband explaining why she’s been sacked.

Then Melissa sues him for discrimination. He wins the case.

Melissa appeals to the state’s Supreme Court and loses there as well however the case now has national attention.

This attracts the ire of the Internet mob, who start posting bad reviews about James on Yelp despite most of them not even living in Fort Dodge, let alone using his service.

For Yelp, the rabble descending on James Knight’s review page is as much their problem as it is his.

Yelp is one of the leading customer review sites which are changing the way small business operates and getting “smashed on Yelp” isn’t good for one’s reputation.

Recently a builder also attracted the ire of the online lynch mob when he threatened to sue a customer over a poor Yelp review.

As consequence, his Yelp page was overwhelmed with negative reviews by people who’d never used his business. The service had to delete 65 of those reviews which clearly had nothing to do with the quality of service the builder provided.

The problem for Yelp, an other online review sites like Tripadvisor, is that for their sites to be trusted the reviews have to be reasonably accurate – self righteous internet mob skewing results is going to damage the service’s credibility as much as the targeted businesses.

What this means for Yelp is that the low cost online business model doesn’t work, for the site to be relevant and credible there has to be administrators checking reviews and dealing with these situations.

There’s also a lesson for all of us using the web – mindlessly joining online lynch mobs creates more damage than it fixes.

Picking on a mid-Western dentist because he appears to be a pussy whipped jerk isn’t really solving humanity’s problems – we can all find causes that are a better use of our time.

Scam 2.0

We’re about to see a new wave of business scams

Invoice scams are as old as business itself, no doubt opportunistic cavemen tried to scam other hunters over made up debts and Phoenician traders had to deal with suppliers claiming they’d delivered an extra few hundred Shekels of chickpeas.

Today we see these scams in all forms – imaginary invoices for web registrations, directory inclusions and local listings are just a few we’ve seen. As the web evolves, we’re seeing a new breed of tricks developing.

Online scams can range from things like letters from deposed African presidents promising riches through to aggressive sales folk promising services they can’t deliver. The latter are part of the new breed.

In 2009 Oakland’s East Bay Express alleged the review site Yelp’s sales teams were threatening business with bad reviews if they didn’t pay an advertiser fee. Four years later businesses are claiming this is still happening.

Regardless of the truth of these allegations with Yelp these distatesful sales tactics from online companies are becoming more widespread.

As social media services investors start demanding revenue to back their businesses and group buying sites reach the limits of their growth the sales teams of these organisations are desperately try to find new ways to meet higher targets.

Small and local businesses are the obvious targets of the sales teams, as the web 2.0 business model has trained consumers into expecting not to pay for online services.

Recently a fitness trainer told me how she was hounded into placing a group buying deal with one of the bigger sites; they convinced her that she should offer an 85% discount with the service taking the remaining 15%.

She provided the service for free.

Naturally the 85% off deal was successful, she was rushed off her feet and found herself working for nothing over the next month. Even had the cheap offer resulted in all the customers coming back, it would have taken her a year to recover her losses.

Clearly she should have known better and investigated how group buying sites work and the strategies for using them effectively, but she was subject to high pressure sales techniques that took advantage of her ignorance.

Many online businesses have been giving services away for free as they try to exploit the Silicon Valley greater fool business model. When the venture capital funds dry up they have to find to new ways of paying for their trendy offices with foosball tables and free organic staff meals.

This means more cold calls to business owners promising “marketing opportunities”, “getting to the top of Google” and “getting positive online reviews”.

Over time these sales calls will morph into fake negative reviews and bills for imaginary services rendered as these businesses attract desperate and unscrupulous operators.

For businesses, this means it’s a time to be on guard by making sure any invoices received are properly checked before they are paid and any sales person’s claims are thoroughly checked out before you agree to go ahead with a service.

If you hear of dodgy dealing like what Yelp has been accused of, then try to get the promises in writing and complain to your state’s fair trading department or complain to business agencies. In Australia, the ACCC is the first point of call.

The dying Yelp of Sensis

Can a social review site save a fading directory company?

This story originally appeared on Technology Spectator

Fifteen years ago Sensis, the directories arm of Telstra, was untouchable. A listing in the Yellow and White Pages was essential for every business and Sensis’ monopoly was a true river of gold.

Sensis’ launch this week of an Australian partnership with the US based review site Yelp is Telstra’s desperate throw of the dice to survive in a market where its directories business has become irrelevant.

Attempts to stay relevent

There have been many attempts by Sensis to overcome this erosion of its core maket including purchasing an IT services business and unsuccessful forays into publishing and online search with Trading Post and CitySearch.

Probably Sensis’ lowest point was the squandered millions of dollars and years of management time wasted in trying to compete against Google after Telstra CEO Sol Trujilo made the sneering comment of “Google Schmoogle”.

Declining values

At the time of Trujillo’s comment in 2005 Sensis was valued at $10 billion as a stand alone company. After last week’s disappointing results that saw revenue drop 18 per cent for the year, the value of the division is an optimistic $5 billion.

Yelp itself is unlikely to help Sensis’ revenue woes. Despite filing for a $100 billion public offering, Yelp has never made a profit in its seven years of operation. Although licensing their service to failing directory companies around the world might prove to be a handy revenue stream.

That lack of profit – on North American revenues that are tiny compared to Sensis’ Australian cashflow – shows the fallacy in the social media business model that many of the popular online services are faced with.

Users of social media services like Yelp are looking for a community of trustworthy and relevant referrals. The directory sale model is based on displaying the biggest advertisers prominently, which is exactly what social media users don’t want.

Yelp also comes into a marketplace already crowded with competing, established services like Word Of Mouth Online, Eatability, and the faster moving social media platforms like Foursquare.

Competitors’ Missed Opportunities

In many ways Sensis has been lucky in that most of the competition has been from smaller upstarts while their bigger competitors haven’t capitalised on the market opportunities.

Google Places, the biggest competitor to the world’s Yellow Pages directories, is mired in bureaucracy and isn’t doing a good job in telling business its story while Facebook’s local search function isn’t getting much traction either.

Of the local Australian incumbents, ninemsn isn’t interested in local business with its international partner Microsoft not offering an Australian product and the local team preferring to deal with big spending advertising agencies, while Fairfax squandered its early advantage and eventually sold the CitySearch service to Sensis.

News Limited’s True Local is having limited success while it struggles with the transition from print to online. At News’ recent launch of its new digital platform, the company’s executives stated they expected journalists to develop a “digital mind”.

Lacking a Digital Mindset

That “digital mindset” is the key to the problem at companies like News Limited, Fairfax and Sensis. In a marketplace where customers, advertising and readers have moved online it requires management, not just the lower workers, to “think digital”.

Sensis’ key problem is its management structures – and more importantly its sales teams’ commissions and KPIs – which are still based around its traditional business models that will make selling services like Yelp difficult.

The phone directory business model is a product of the 1920s and in many ways Telstra and the other Yellow Pages franchisees around the world should be grateful it has lasted so long.

Whether the phone directories that have been so profitable for phone companies can make it to their one hundredth birthday is an open question. One thing is for sure, bolting on an unprofitable and late to market social media service isn’t the answer.

Comparing local review and search sites

How do the local search services compare?

With the Australian launch of local search and recommendation site Yelp, it’s worthwhile comparing the different sites to see how well they worked.

The sites work in different ways, some – like Sensis Yellow Pages and True Local – are online directories that search just the title and description of business.

Yelp, Foursquare and Word Of Mouth Online, are socially based and derive their searches on the content and number of community reviews. Their algorithms, the formulas to figure out what customers are looking for, are more complex than the basic online directories.

Most complex of all are the hybrid searches, notably Google Places and Facebook Places, that build local upon their search and social media data.

Each model has it’s own strengths and weaknesses which shows when we do a search. Due to time restrictions we only did two.

Looking for brunch in Neutral Bay, NSW

The first search was using what somebody might be expected to search for on a casual weekend or holiday morning. Neutral Bay and surrounding suburbs have plenty of cafes catering to the brunch crowd so it should be expected to return plenty of hits.

Yelp

The new contender only found one local result and the rest being on the other side of the Harbour Bridge, including one at Bondi Beach which may as well be in the Upper Amazon to the average Sydney North Shore dweller.

Interestingly, entering neighbouring suburbs changes the first two or three results to that suburb but the subsequent listings are the same remote locations as for the Neutral Bay query. This might indicate popularity with the current Yelp users or may be part of the package merchants get when they pay for a listing.

True Local

News Limited’s True Local disappointed one cafe in the district was identified and the number one result was in the city.

This poor results are probably due to the word “brunch” not appearing in the local cafes’ descriptions or titles, but this is a serious weakness for True Local, particularly in a district where they dominate the local news media.

Google Places

Surprisingly, Google Places returned an extremely poor result with no local businesses found.

Again, this is probably due to the failure of business owners to ensure keywords are entered in their business description and it illustrates how Google is allowing an opportunity to pass them by.

Facebook Places

Nothing. Nyet. Zip. No brunch for you.

Yahoo!7

Another poor result that has just scraped information off the web. It shows the weakness of the Yahoo! and Channel Seven joint venture which, like News Limited, is letting opportunities pass.

Bing/NineMSN

Probably the most disgraceful of the results, NineMSN returned two cafes for the whole of Sydney, a city of four million people.

The second result entailed, according to Bing’s directions, a 38km drive timed at an optimistic 23 minutes involving $9 in tolls and an illegal u-turn.

NineMSN’s performance shows just how irrelevant Microsoft has become in the online space and their Australian joint venture partner is more interested in selling big integrated campaigns to advertising agencies.

Given NineMSN and Bing are the default browser and search engine on nearly two million computers sold in Australia each year, not having a local business strategy is squandering a massive opportunity.

Citysearch/Sensis

Founded by Fairfax, Citysearch could have been a great success combining the assets and readership of Fairfax’s metropolitan and local newspapers coupled with their experienced sales teams selling advertising space and subscriptions. Good management could have done this.

Sadly Fairfax was being run by Professor Fred Hilmer and his army of power suited McKinsey consultants and Citysearch was eventually sold for a pittance to Sensis, who have allowed it to shrivel away as the zero result for our search shows.

Eatability

Eatability was a genuine surprise, returning no brunch establishments in the area. The only thought is that no cafe in the neighbourhood has the word “brunch” in their keywords. Still a very poor result.

Urbanspoon

The web version of Urbanspoon returned the most bizarre result, correctly finding one local cafe but misinterpreting the address as being in Bankstown on the other side of Sydney.

Urbanspoon’s iPhone app returned a far better range of results in surrounding suburbs although it only found one cafe actually in Neutral Bay which wasn’t the one incorrectly found on their web app, which didn’t appear at all.

Word of Mouth Online

Word Of Mouth Online delivered the best result of the web pages with two of the first three results being relevant. Of the other seven, they met the criteria of being within a 5km radius of the location which in Sydney can be a 12km drive.

The results would have been better with more local establishments but it appears the keyword “brunch” hasn’t been used by many of the WOMO reviewers.

Note: After the review I was contacted by the founder of WOMO, Fiona Adler, it appears some of the reviews have have been updated in the meantime. I’ve changed the results below, but the left the one above as it was correct at the time of the review.

Foursquare

Like Yelp, Foursquare relies heavily on users’ contributions and this shows in the flaky, almost useless results for our search terms on a web based search.

Foursquare’s iPhone app was far more efficient, identifying a range of good venues in the area which were ranked according to friends’ recommendations.

Sensis/Yellow Pages

Again, “no brunch for you.” It’s almost scandalous that Yellow Pages has no entries at all for “brunch” for an inner Sydney suburb.

Redoing the search

Clearly the term “brunch” is problematic in all the services, so as a check here’s the relevant first page results for other search terms on each of the services;

Service	Café Neutral Bay	Breakfast Neutral Bay	Lunch Neutral Bay
Yelp	7/10	2/10	7/10
True Local	9/30	0/30	0/30
Google Place	10/10	0/10	10/10
Yahoo!7		not relevant
Bing/MSN	3/10	0/10	0/10
Citysearch	6/10	3/6	4/4
Eatability	40/50	8/8	23/31
Urban spoon	3/3	0/0	0/0
foursquare	3/20	1/20	1/20
WOMO	8/10	2/10	5/10
Sensis	7/10	0/10	0/10

As we found with the earlier search, Yelp was somewhat inconsistent and no doubt the social aspects will see it improve as more users come on board, the results are highly dependent on the terms used by reviewers and this will affect the search results.

True Local’s score was surprisingly bad, the search for “cafe” found 12 places but three are long closed. “Breakfast” listed B&B accomodation and “lunch” found outlets in the city and Eastern Suburbs.

Google Places also disappointed on “breakfast”, picking up some B&B establishments along with some city cafes. This is almost certainly due to keywords missing in descriptions.

Yahoo!7 doesn’t get a rating as all it does is scrape other sites and often refers you to other search services. They are just going through the motions.

Microsoft and NineMSN’s service again failed dismally; the “cafe” result was poor, “breakfast” looked for B&Bs and “lunch” amazingly didn’t find a thing in Neutral Bay.

Citysearch’s results for “cafe” found nine places, three of which are long closed which indicates the lack of maintenance their database receives. Encouragingly, Citysearch was one of the best performers for lunch and dinner, albeit only on four and six places found.

Eatability had by far the most impressive number of results, however a large proportion of the places have closed and are not flagged as such. This probably indicates a lack of maintenance by the owners.

WOMO was good and like Yelp their results are highly dependent on the words used by reviewers, so key words could be missed simply because reviewers didn’t use them.

Sensis performed well on “cafes” except that three of the ten listed were closed. The lack of results on “breakfast” and “lunch” is due to no places having those words in their name.

Conclusions

This comparison is not scientific, being based on a narrow search and small sample size, but there’s a few things we can take away from the experiment.

Search is still young

Right now, search is still a crude tool.

From the results, we can see that the keywords used by reviewers and businesses matter. If the public are looking for “brunch” and that isn’t on your cafe’s website and online listings, then you won’t appear.

Over time that will change as the web and search engines get smarter but right now search is still at a basic stage in its development.

You have to be there

Customers are using these tools to find what they need and if a business isn’t listed, then they can’t be found. Setting up a profile and getting some favourable reviews is important.

The business who are being pro-active are the ones who are succeeding.

There’s a lot of opportunity

It’s no surprise that older organisations like Fairfax, Sensis and Microsoft are failing to understand local search. What is suprising is how poorly the newer players like Google and Facebook are doing.

This opens up a lot of opportunity for services like Yelp and Foursquare in adding value to the data already available through services like Google, Facebook and Sensis.

Yelp’s tie up with Sensis makes a lot of sense from the US company’s point of view; they get to ride on Sensis’ sales team, maybe some licensing fees and – most importantly – they can access the richest, albeit not always accurate, database of Australian businesses.

For small, local business there’s a lot of opportunity as well. By getting online and registered on these services, it’s possible to become more visible and improve your competitive position.

The market’s young and there’s a lot of potential for disruptive players. It will be interesting to see how incumbents deal with the threat.

Tag: Yelp

The dying Yelp of Sensis

Attempts to stay relevent

Declining values

Competitors’ Missed Opportunities

Lacking a Digital Mindset

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