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Yelp’s Realization: Brand Ads Don’t Resonate With Intent-Driven Audiences Looking For SMBs

Closely’s Perry Evans applauds the local guide platform’s ad strategy shift, in choosing an AdWords-like model over ‘premium branding.’

yelp real reviews body 2The shift of Yelp’s user base from desktop reviews and searches to the local guide’s app has been accelerating for the past year. In addition, 11-year-old Yelp has been under pressure from myriad sources including a documentary attacking the positioning of its reviews and stepped up challenges from Facebook, Google and others seeking to tap local SMB marketing dollars.

In an effort to prove to its investors that Yelp can fend off these encroachments, Jeremy Stoppelman, the company’s CEO and co-founder, told analysts during last week’s Q2 earnings call that the local guide would completely abandon brand advertising in favor of performance-based — primarily cost-per-click — and native formats. Doing so would also spare Yelp from vain attempts to fight the downward force on ad pricing that is often exerted by programmatic ad sales systems, something Stoppelman had inveighed against before.

The Branding Argument

The shift from branding to performance flies in the face of a decade of online ad industry leaders imploring that the interactive marketplace find a way to embrace the kind of “premium” sales — i.e., expensive, better looking, affinity-based — that capture the attention of consumers during primetime TV and in glossy magazines.

But brand advertising doesn’t suit every interactive publisher, says Perry Evans, CEO of Denver-based Closely, which operates SMB digital marketing and social media monitoring app Perch.

For Evans, Yelp is strictly an “intent-driven” site. Users go there to find something specific, particularly a small business service. So this shift to formats that address that focus— and away from general ads meant to divert Yelp visitors’ attention and intention — is more likely to produce the revenue that investors are looking for.

Yelp's Jeremy Stoppelman
Yelp’s Jeremy Stoppelman

Programmatic Can Be Problematic

“Shifting completely away from brand-driven, programmatic ad models is something I applaud,” Evans said. “Yelp has an opportunity in front of them, because it can provide a low-noise, high-signal experience for a user that’s on a shopping path when they’re in their application or on their site.”

In Evans’ view, programmatic does a fine job of highlighting the for advertisers, the value that a consumer has when they’re visiting a site with a basic content focus, such as sports news or fashion. But programmatic is not so great at enhancing the value of a shopping experience — which is why most Yelpers use its site and apps.

The Value Of Intent

“If you’re shopping for a chiropractor, being retargeted with an ad for lawnmowers that you may have looked at elsewhere detracts from the value of the shopping experience that the Yelp user wants,” Evans said. “Also, a chiropractor is just as likely to put really high value in closing a transaction with that consumer, but the inventory tends not to be part of the programmatic ecosystem. These kinds of programmatic placements are done with the wrong logic.”

Yelp began to double down on a “premium listing” ad product strategy about three years ago. That gambit, as Evans described it, had its vestiges in the Yellow Pages’ large page placements.

The idea was to appeal to small businesses that were used to that model, where they agree to pay more to have their brand stand out from other listings in a way that emphasizes everything from their logo to their location. But flipping through the pages of a huge print directory with pages of tiny type is vastly different from putting a search query in a smartphone app. Those kinds of display units actually end up being the very distraction consumers are there to avoid.

“I get the logic for doing it that way, and that gave Yelp a baseline of high revenue per month across a relatively small sliver of advertisers,” Evans said. “But there’s a much bigger long tail opportunity to attract many more advertisers that Yelp has perfectly pristine inventory for.”

Closely's Perry Evans
Closely’s Perry Evans

A Page From AdWords’ Playbook

What Evans means by that is Yelp’s users are in a highly intent-to-buy mode. Looking for a cleaner strategy, Evans said Yelp should create opportunities for businesses to buy its inventory the same way they buy Google AdWords, by creating campaigns that match specific categories that a user is searching for.

“That inventory can be very acceptable to a much larger interested base of local advertisers,” Evans said. “That’s the logical progression of Yelp’s ad model. By offering both high-placement, native, contextual advertising, and more opportunity that sends a user down the transaction model.

“So when a Yelp user is searching for a chiropractor, one of the smartest things a chiropractor whose business is listed on the site can do is put their available inventory on Yelp’s platform and place a booking for a first appointment in front of that user. That kind of an ad buy can be tightly linked to the lifetime value of a new customer for that chiropractor. That’s way more interesting than an optimized lawn mower ad served just because that user happened to be on Home Depot’s site looking at lawn mowers recently.”

About The Author
David Kaplan David Kaplan @davidakaplan

A New York City-based journalist for over 20 years, David Kaplan is managing editor of GeoMarketing.com. A former editor and reporter at AdExchanger, paidContent, Adweek and MediaPost.