blog-post2: the power of yelp on small businesses (popularity and network effects)
https://www.climatepro.com/blog/small-business-insights-the-undeniable-power-yelp
This article describes the power of yelp on small and upcoming businesses. Oftentimes as a new company, customer reviews can either make or break a company. The article begins with the logistics and background information of yelp. Including when it was created and by who; in 2004 by Jeremy Stoppelman and Russel Simmons. It detailed the vast amount of users that yelp has, documenting that 26,000 reviews are posted every minute, and that 98% of yelp users have made a purchase at a business they found on yelp. It is evident that Yelp plays a huge role in the market of business, especially new ones.
Specifically, within the paper they discussed the power of the distribution population. This distribution popularity plays a huge role in markets especially those whose imbalances in popularity can be driven by reviews. For example a small business, your goal is to increase your popularity in a positive way. To do this you hope to gain multiple positive yelp reviews. For example, oftentimes many small businesses ask customers to give them a “good rating”. When in class we talked about the concept of popularity and marketing to the tail, and how selling these niche items in this case (the restaurant’s service) becomes much easier if you amass an audience online. In this case, the online audience being yelp users. We also discussed the power of recommendation, as this drives people to the items in the tail. Because many people innately follow the “rich get richer” dynamic, popularity tends to make people imitate each other’s decisions. In this case if someone goes on yelp and sees a restaurant with various good ratings they are more likely to choose this restaurant over one with one or two good reviews. They are more incentivized to use a high and frequently rated restaurant because of how much other people are using it, drawing on positive network effects. This factor in the decisions of choosing a place to eat, makes it hard sometimes for small new businesses to get customers, especially if they are within the close vicinity of a high-rated well known restaurant, creating a difficult atmosphere for new business owners.