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    WHY I BELIEVE YELP IS DOOMED TO FAIL12 months ago

    So I wrote a status update on Facebook yesterday that basically said that I believe Yelp would be out of business in 24 months. The furor started immediately, but not surprisingly, most people agreed with me, and countless stories of “they removed my positive reviews when I didn’t pay them to advertise” were posted in the comments.

    The post is here, and I encourage you to read the comments.

    To the point though, I thought it might be a good idea to summarize my points from FB in a more thought-out post, so here we go.

    By “out of business” I mean this: The “untrusted/unverified reviews as a viable business model” will die within 24 months. Someone commented on my page (and wisely, I might add) that MySpace and others that tend to not be thought of anymore are still alive, but either languishing, or not important anymore. So is Yelp going to be “out of business” OK, probably not literally (word used correctly) the way I wrote it. But will their model of making money on reviews be gone? Yes. What’s probably going to happen? Someone (Facebook, Google, even Amazon in a dual purchase of OpenTable, perhaps?) will purchase them for the users, and then migrate over to either FB Places or Google Maps.

    Why is the Yelp “reviews as revenue” model flawed? Two key reasons, as far as I can tell.

    We’ve already arrived at a trust economy. Let’s face it – The Stone Age didn’t end because of a lack of stone. It ended because something better came along. Strangers primarily make up Yelp’s reviews. Strangers we don’t know, people with whom we have nothing in common. That was fine when the ability to mass-communicate with people we trust, people within our network, people with whom we have some connection, whether personal or through a friend, didn't exist. We relied on movie reviewers to tell us what to see, restaurant critics to tell us what to eat, and book critics to tell us what to read. That concept is gone. We don't rely on strangers to tell us what to do anymore. Instead, we look at these reviews, and have to take them with several grains of salt:

    1. Grain 1: They could be biased.
    2. Grain 2: They could be paid
    3. Grain 3: They could be a marketing firm hired to “write reviews under countless user names.”
    4. They could be positive reviews about the one thing that you may find negative. (A fishing and scuba resort may get awesome reviews from a fisherman. Not so helpful to you if you’re a scuba diver.)
    5. They could be customers posting good reviews only to get a discount on their next purchase. (Seriously?!)
    A business model that allows anyone to review, at any time, with no structure or background is a flawed model. There’s no reason for me to trust anyone I don’t know. It’s the INTERNET, for the love of God. Why should I?

    You want to know who we DO trust? People we KNOW, and the people who know them. Where do we find those people? In our network, as friends, and friends of friends. Facebook and Google know this, and are quickly moving towards this model. If I log into Google Maps and find a restaurant, if anyone in my network (or extended network) has reviewed it, that’s what’s going to show up. If I’m friends with Mark, and Mark’s friend Michelle reviewed a restaurant, I have a web of trust there. Michelle, to Mark, to me. If I find out Michelle is a shill for the restaurant, that reflects badly on Mark, my friend. That’s the active policing that invokes trust, and that’s so profoundly missing on Yelp.

    We trust who we know. As our lives become more “network based,” our levels of trust will rise with the people in our networks with whom we share commonalities, and as important, the friends of those people. (That eliminates the argument of "Oh, I only have 100 friends and I'm going to Prague and need a restaurant there. " 100 friends equals 100,000 friends of friends. One of them knows Prague. I guarantee it.) A company in which I’m an investor, Knod.es, is a perfect example: I can use Knod.es to find who in my network is talking about specific, specific things, granularly drilled down to the finest point. Tell me this isn’t trustworthy. If I want to buy a camera, am I going to read reviews, or find four professional photographers within my network (again, friends and friends of friends) who talk about the cameras they use, and go from there? Trust is grown and relied upon more when the people have a direct connection to us.

    The second reason I believe Yelp is doomed? More and more stories are popping up every single day about how completely biased they actually are. Want positive reviews? Pay them. This isn’t me talking. This is thousands of businesses who have gotten a few good reviews, then been contacted by Yelp to advertise. When they don’t, those reviews mysteriously disappear, only to be replaced by negatives.

    That’s not unbiased reviews from people you trust. That’s a company playing a form of extortion on their customers, and as we’ve seen in the past (Groupon, anyone?) That never lasts.

    For what it’s worth, it’s this kind of thinking that’s exactly the reason I formed Shankman|Honig, a consultancy that focuses on customer service. As we move into the conversation economy, the trust economy, it’s customer service that will propel your company into the stratosphere. Not Yelp reviews, but amazing experiences that will be told by your friends – people you trust – and who you’ll believe. In the end, you’ll give your business to companies who people you trust have recommended – not random no-namers.

    What’s the future? Trust. Yelp has simply never had it.

     

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