Andrew Zimmern once called it “a forum for uninformed morons.” But the forum is also raking in visitors — over 140 million of them each month, to be exact. And perhaps most importantly, it is worth — to quote a popular television commercial currently circulating on TV — a shipload of money. The Wall Street Journal reports that Yelp is working with investment bankers and has been in touch with potential buyers in recent weeks. The San Francisco-based company’s shares rose 16 percent after this initial report. Yelp, which launched its initial public offering in 2012, is valued at almost $3 billion and could fetch more than $3.5 billion in a sale. That’s billion with a B, folks.
There’s no denying the power of user-generated content in relation to restaurants. Type the name of an establishment into your favorite search engine and chances are its Yelp page will pop up right below its official website. Looked at idealistically, this outlet acts as a form of publicity for lesser-known venues, as well as for those in smaller markets. But these types of sites also present a bevy of possible perils for the very same businesses. Between negative reviews based on irrelevant information or personal vendettas, the potential for abuse via threats of bad reviews and murky regulations regarding the company’s ability to pay for and remove ratings, Yelp can quickly turn into a nightmare for its clients.
The bigger question here revolves around the future of user-based review sites. Consolidation of ownership among a few large-scale companies appears somewhat plausible, considering Google’s purchase of Zagat in 2011, Priceline Group’s acquisition of OpenTable last year and TripAdvisor’s purchase of five new restaurant sites over the past year. But can user-generated-content sites remain profitable and sustain success after being reformatted as part of these larger companies? Only time will tell, but many in the hospitality industry are certainly hoping not.
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