[Advanced] Yelp Continues on Its Path of Success (3)

A Rare Genius
Yelp's sales force would be meaningless if the reviews weren't useful. Yelp initially limited critiques to a few hundred characters, but every month or so, Stoppelman would double the limit to try to keep up with the users' critical enthusiasm. Today, reviews max out at 5,001 characters and often include a comical level of detail. Yelp reviews may be plagued with frequent misspellings, overexuberance, and curious digressions, but they are generally accurate.

The company's genius is in taking these idiosyncratic assessments and making sense of them. Yelp's review algorithm gives each establishment an average star ranking and filters out shills and less experienced critics. "Typically, the push back about Yelp is, What does some college kid know about restaurants?" says Michael Luca, an economist at Harvard Business School. "People tend to assume that crowdsourced information is so erratic that it's impossible to extract meaningful signals from it. But that's not true."

Proving the Point
Luca has the data to prove it. In a recent study, he compared Yelp ratings of restaurants in Washington State with actual sales figures reported to the state's Department of Revenue. He found that a one-star improvement in a business's Yelp rating was associated with, on average, a revenue increase between 5% and 9%.

Stoppelman points out an interesting wrinkle in the study: Whereas independent restaurants received an outsize benefit from good Yelp reviews, chain restaurants appeared to be unaffected by their reviews, either good or bad. "That's something we theorized about early on," Stoppelman says, "We thought that the main reason somebody ends up at Starbucks is that they don't want to deal with the possibility that the independent coffee shop isn't any good. But with Yelp, you have that confidence."


critique n.
/krəˈti:k/
a detailed explanation of the problems of something such as a set of political ideas;
a careful judgment in which you give your opinion about the good and bad parts of something (such as a piece of writing or a work of art)  

plague v.
to cause constant or repeated trouble, illness, etc., for (someone or something)

digression n.
/daɪˈgrɛʃən/
digress v.
/daɪˈgrɛs/
to speak or write about something that is different from the main subject being discussed  

idiosyncratic n.
/ˌɪdijəˈsɪŋkrəsi/
an unusual way in which a particular person behaves or thinks

erratic adj.
/ɪˈrætɪk/
something that is erratic does not follow any pattern or plan but happens in a way that is not regular;
acting, moving, or changing in ways that are not expected or usual : not consistent or regular  

wrinkle n.
/ˈrɪŋkəl/
a surprising or unexpected occurrence in a story or series of events

theorize v.
/ˈθi:jəˌraɪz/
to think of or suggest ideas about what is possibly true or real : to form or suggest a theory about something


mms://203.69.69.81/studio/20130531ada4bd6f939d61c55a23085e80068c7887f.wma