Yelp IPO, A Good Thing or Bad Thing for Restaurants?

Several news outlets are reporting that Yelp may have an IPO (initial public offering). It is still unconfirmed by the company. But here is what we know. On the heels of Groupon cashing in through a successful IPO, Yelp has hired Goldman Sachs and Citigroup to guide them through the process. Yelp may soon be a publicly traded company.

Yelp is the king of online reviews, especially in regards to restaurants. The ratings and reviews on Yelp significantly influence customer dining decisions. Yet, their practices in the past have been not savory to many observers. Their claims of a near-perfect filter seems a little too good to be true as restaurants see reviews that are outrageously inaccurate appear on Yelp.

Will it Help or Hurt Restaurants?

If the IPO does affect Yelp, which it may not, it will be in favor of advertisers. Yelp doesn’t have a huge pool of advertisers like Google (everything searchable under the sun), so Yelp may act more favourably toward one of their main sources of revenue, restaurants. Google does what it wants because no one industry can really upset their business. Contrastingly, Yelp will have to answer to shareholders (just as much as their reviewers) who are interested in having reliable ad revenue.

A while back, Yelp seemed to realize from sales mistakes that the insinuation that ad revenue will affect reviews. But that does not mean the restaurants industry as a whole won’t be able to tip the balance in their favor.

A Chorus of Complaints

Many of the complaints are shared almost universally by restaurant owners. There the problem with Yelp isn’t the particular reviews but just how Yelp conducts business. Even some restaurants that advertise on Yelp feel this way.

Of course, this is all rumor and guesswork. Soon enough, we will get confirmation and gain access to the financial inner workings of Yelp. Still, it is not easy to predict what Yelp looks like down the road.