Yelp Fact Sheet (The Good, Bad & Ugly)

Yelp Ratings

Finally! A Yelp Fact Sheet that’s both unbiased and useful. Find out the truth about Yelp, how Yelp helps businesses, and how Yelp hurts businesses.

This fact sheet demonstrates data and hard facts that lead to the following actionable conclusions:

Yelp is important for marketing & sales

How businesses drive marketing & sales results using Yelp

Yelp’s systematic biases hurt businesses

Yelp is important for marketing & sales

Factual evidence and stats show that Yelp is an important driver of marketing and sales success for small businesses in the United States.

Below this Yelp fact sheet highlights the statistics and evidence that show Yelp helps US small businesses compete against much bigger national chains for a consumer demographic with higher-than-average incomes and discretionary spending budgets.

Yelp users are a valuable demographic to sell to

Yelp users have a lot more income to spend than most, making them a valuable market to sell to.

Here are the stats and facts….

Over 74% of Yelp users in the US make more money than the median personal income in the US, which is just over $32,000.1,2

In fact, 50% of Yelp users in the US make more than 3 times the median US income!1,2

Here’s the income distribution for Yelp users according to their own corporate fact sheet:1

And here’s the median personal income in the United States:2

Yelp users span all ages, though they trend younger than average

Yelp is not just a platform for a younger demographic. In fact, Yelp users span all ages.

Still, when comparing the corporate Yelp fact sheet to US demographic data, the average Yelp user is more often between the ages of 18 to 34 (an age range with high discretionary income) and less often age 55 years or older (a more cost conscious demographic).1,3

Yelp helps small businesses compete against larger competitors

Yelp has “leveled the playing field” so that small businesses can now earn consumer trust without the big advertising budgets of big businesses.

Here are the conclusions from an in-depth Harvard Business School study:4

Small businesses get a much more significant revenue boost from higher star ratings than larger, nationally recognized businesses.

Small businesses have been gaining market share from larger, nationally recognized businesses since Yelp was introduced, as a direct result of Yelp helping small businesses compete more effectively against big businesses.

That’s because big businesses control their reputations mostly through big budgets in advertising and marketing, not through Yelp ratings. So big businesses have not benefited from Yelp as much as small businesses.

Yelp star ratings boost the reputation (and revenue) of small businesses without requiring the big budgets of big businesses.

How businesses drive marketing & sales results using Yelp

Factual evidence shows that small businesses experience a significant boost in revenue when they have a high number of stars in their average Yelp rating and a high quantity of Yelp reviews.

This Yelp fact sheet shows evidence below of the connection between Yelp’s star ratings, review quantity, and small business sales.

Your business needs 4.5 or 5 stars on Yelp just to be considered above average

For you to get more sales from Yelp, you need to beat your local competitors. And on average, that means that you need an average Yelp star rating of 4.5 or 5.0. For more advice on how to accomplish this goal, see our guide on how to get Yelp reviews.

An average Yelp rating of 4.0 stars or less is typically not competitive.

That’s because the average business on Yelp has a 4-star rating based on an overall average of 3.78 stars which get rounded up to the nearest half star for the overall average Yelp rating of 4.0 stars.1

Here’s the exact breakdown of star ratings based on the official Yelp fact sheet:1

Therefore, any business with fewer than 4.0 stars is below average, any business with exactly 4.0 stars is just “average,” and only businesses with 4.5 or 5.0 stars are above average and therefore competitive at attracting the lion’s share of sales.

Your business needs higher Yelp star ratings to drive more revenue

The fact is that Yelp’s average star rating directly impacts sales.

An extensive study by Harvard Business School found that a 1-star increase in Yelp rating can lead to a 5% to 9% increase in revenue.4

Another study by UC Berkeley economists found that a half-star rating increase on Yelp from 3.0 stars to 3.5 stars results in a 19% greater likelihood of restaurants filling all available seating capacity during peak dining times.5

So your local business’ average star rating is not just a “vanity metric.” It has a very real direct monetary impact on your sales and your bottom line.

Your business needs more Yelp reviews to make your star rating credible

As important as your average star rating is, you can’t rely solely on it to drive sales. You also need a high quantity of Yelp reviews to lend credibility to your high average star rating.

In fact, Yelp has a 20% greater impact on consumer buying decisions when a business has at least 50 reviews versus only 10 reviews.4

So to drive sales, make sure you get as many Yelp reviews as possible in addition to maintaining a 4.5 or 5.0 average star rating. For more information, see our article on how to get Yelp reviews.

Yelp’s systematic biases hurt businesses

There is plenty of evidence based on statistical studies and other facts showing that Yelp’s policies and algorithms create a significant bias in favor of negative reviews over positive reviews. Protect your business from this bias. Check out our article on the dangers of Yelp business reviews.

This Yelp fact sheet lays out the evidence and stats for Yelp’s biases and the specific landmines you should try to avoid for your own local business.

Yelp’s policies cause inaccurate reviews and star ratings

A study by Northwestern University found that Yelp’s “Don’t Ask” policy leads to a bias in Yelp reviews that causes reviews and star ratings to be inaccurate.6

That’s because new reviewers are socially influenced by past reviewers when they go directly to Yelp to write a review without being solicited by the business.

But when businesses violate Yelp’s “Don’t Ask” policy and proactively reach out to customers to solicit reviews via email, the bias is removed and the reviews and star ratings are more accurate.

Yelp’s policies attract more negative reviews than positive reviews

Yelp’s “Don’t Ask” policy causes businesses to get an average rating of 0.5 stars lower than they would get if all their customers wrote a review.6

That’s because unhappy customers are more likely to leave an unsolicited review than the average customer.

A Northwestern University study discovered this bias toward negative reviews by comparing Yelp ratings that resulted from “Web Reviews” vs. “Email Reviews.” The Web Reviews came from customers who were not asked by the business to write a review. The Email Reviews came from customers who were sent an email from the business asking if they would write a review.

Yelp filters out a huge number of reviews

Yelp has either filtered out or completely removed 29% of all Yelp reviews, according to Yelp’s own corporate fact sheet.1

Since Yelp has received 184 million reviews since inception, that means Yelp has filtered out over 40 million reviews and completely removed 12 million reviews.1

Yelp filters out positive reviews more than negative reviews

The Artificial Intelligence technology company, Quantified Communications, analyzed communication patterns to train their system on how to identify fake online reviews.

Then they applied their machine learning technology to Yelp reviews.

Here’s what they found:7

Yelp’s “not recommended” filter tends to filter out many authentic reviews and fails to filter out many fake reviews.

Filtered reviews have 33.8% more positive language than unfiltered reviews on Yelp, despite the fact that fake reviews tend to have more negative language than authentic reviews, suggesting that positive reviews get filtered far more frequently than negative reviews.

Yelp Review Management is the process of monitoring, responding to, and generating reviews on the business review website Yelp. The benefits of Yelp Review Management are two-fold. First, by monitoring Yelp for reviews about your business, you can stay on top of customer sentiment and take action to improve the customer experience. Second, by generating positive reviews on Yelp, you can improve your business’s online reputation and attract more customers.

 

Sources

  1. Yelp Factsheet (as of 2019)
  2. US Census Bureau data via St. Louis Fed (as of 2016)
  3. Henry J Kaiser Family Foundation (as of 2017)
  4. Harvard Business School Working Paper “Reviews, Reputation, and Revenue: The Case of Yelp.com” by Michael Luca (as of 2016)
  5. UC Berkeley’s Economic Journal (as of 2012)
  6. Northwestern University research paper “Understanding and Overcoming Biases in Customer Reviews” (as of 2016)
  7. Quantified Communications “The Yelp Review Filter is Broken”