Yelp’s dangerous power play into the delivery business

Yelp‘s $134 million acquisition of restaurant delivery site Eat24 is further proof that when it comes to revenue, local advertising rules—even at the expense of loyal, trusting customers.

Already a powerhouse in providing listings and reviews of local restaurants, the addition of a home food delivery service brings Yelp closer to customers and advertisers. With Q4 2014 net income of $32.7 million, the company has the cash to spend toward boosting earnings in the key area of local ad revenue (estimated at $12.1 billion for 2015). Offering eating establishments a package of targeted Yelp ad space and a partnership with Eat24 would be tough for competitors to match. Such deals also could result in lowering Eat24’s average take of 12.5 percent of its partners’ net delivery sales.

Good news for Yelp, its advertisers, and investors, but will customers be left with less trustworthy reviews?

Suffice it to say, Yelp has had more than its share of critics who question the company’s practices of managing its content. The company has been accused of extortion, improperly filtering reviewshiding the identity of reviewers, along with various sundry crimes and misdemeanors. Such infractions have done little to hurt Yelp from reaching more than 100 million users per month, but to what extent are consumers using the site solely as a directory, ignoring its supposedly well-vetted reviews which are a major competitive advantage against search engines..

Does Yelp even care as long as its overall traffic sits north of 100 million monthly hungry web citizens?

Once the interaction of Eat24 is complete, the result may be an increase in the number of sponsored listings (which resemble general search results) that come up with each inquiry. Less discerning Yelpers have a difficult time parsing sponsors from the more editorially responsible listings. Also, consider the plight of the digital ad rep who offers a lucrative package to a large local pizza chain that responds it would agree to a deal if Yelp somehow filtered out the harshest reviews. With more ad dollars and delivery deals at stake in the new Yelp-Eat24 combo platter, will the company, under pressure from investors, have the ability to turn down easy money if it were willing to bend the rules?

Yelp is in a dangerous position in its evolution as a leading Web destination. It needs to continue to grow the bottom line while maintaining (or better yet improving) its objectiveness as a trusted review site. As the company teeters on the edge of becoming more of a address/location directory than a valuable resource to discriminating diners, Yelp could easily become just another formerly pretty Web face. And along with that, billions of future ad dollars.

Illustration by Max Fleishman

Allen Weiner

Allen Weiner

Allen Weiner has been a market research analyst in the area of new media and technology since 1994. He’s worked as writer, publisher and newspaper executive. He is the co-founder and publisher of Kombucha Network and the former managing vice president of Gartner.