Yelp Deals launched in 2011. But not in Canada. It has taken Yelp 3 years to work out the kinks and be comfortable enough to launch this service to both Canadian merchants and Canadian consumers who use Yelp. Spring 2014 finally saw the arrival of Yelp Deals to this country and, in our opinion, both merchants and consumers will benefit….greatly.
Nielsen provided a survey that showed that over 80% of Yelp users search the site when they are ready to engage, spend money or take action of some sort. The ability for Merchants to now offer Deals to consumers searching and evaluating their place of business will provide more incentive for consumers to do business with that merchant immediately and provide yet another revenue flow for Yelp.
SOME OF OUR THOUGHTS
* SHARING/SOCIAL: Consumers visit Yelp to search for local businesses, to get reviews on those businesses and to share great businesses and experiences with others. The ability to now obtain an offer from a specific merchant a consumer reviews and even share that offer with the huge Yelp community is a benefit and feature simply not available at this scale with other Deal providers. Other Deal provider think their service is social simply because they have share buttons on their sites. Yelp, however, is built around the premise of being social. Sharing on Yelp is not an after thought, it is part of their product and a reason why their community is, well, a community. The sharing of deals and offers at local businesses that are top quality and well reviewed will do well on Yelp.
* POPULARITY: Yelp is popular. Consumers love using it, searching for places to visit, restaurants to eat at, reviews to read, etc. Although Yelp has not invested in marketing itself in Canada as much as we believe they should given the opportunity in the country, they are still one of the top 200 sites in the country and certainly one of the top sites for local reviews nationally. In the context of deals and offers, Yelp is more popular and has a more engaged online audience than any other deal provider in Canada. (notice we wrote online audience and not email audience). As more merchants add deals to their Yelp profiles, we believe that the Yelp community will engage with those offers and merchants at a quick pace, catapulting Yelp as one of the leading Local Deal providers in Canada.
* MOBILE: Yelp users are mobile users. There aren’t many mobile services in Canada with an abundant of local offers other than the apps from daily deal providers or daily deal aggregators. There is also the apps from the Yellow Pages, but Yelp can quickly become the leading Mobile provider of local offers in Canada once their deal inventory ramps up.
*INVENTORY OF DEALS: We anticipate that Yelp will have the most inventory of local deals available in Canada within 1-2 years if they are able to ramp up in Canada and get local merchants to use the deal feature. Why? Because it is self serve and with thousands and thousands of local merchants using Yelp in Canada we simply anticipate the largest inventory of local deals in the country. Case in point: If you look at US cities similar in population to Toronto, say Washington DC or Miami, you will notice that they have around 1000 DEALS being offered in each of those cities. If Yelp is able to replicate that in Toronto, and then add Montreal, Vancouver, Calgary, Edmonton, Ottawa, etc.. then the numbers will automatically make Yelp the largest provider of local offers in Canada….BY FAR! ………..BY FAR!! (it was worth writing it twice)
* REVENUE MODEL: Yelp is not offering the Deals feature to merchants for free mind you. Yelp will earn (charge) a 30% commission on every Deal sold through their site. Is that a reasonable commission? Is that comparable to what merchants are paying to Daily Deal Providers or other Marketing brokers. Well, the average commission charged to local merchants in Canada by deal providers is now around 35-40%. Now, Deal providers charge 35-40%, sometimes more, not just for posting an offer on their site. They actually push those offers to consumer emails or mobile apps. Some also include newspaper advertising with the campaign and each provider works with merchants to craft the best possible offer. All deals are also over 40% off, averaging between 50-60% off. The process is more involved that the “Do It Yourself” process of the Yelp deal. In comparison, Yelp charges 30% to any merchant who wants to post an offer. That offer is on the Merchants page, can be searched for online by service category, is pushed to the Yelp Mobile app but unsure if Yelp users receive anything by email promoting the offer. Because it is DIY, most merchants will opt for an offer/deal that is far lower than the 50-60% enjoyed on Daily Deal sites. Other marketing services that generate sales to local merchants, such as online Restaurant ordering services like Just Eat or similar, typically charge a marketing commission of between 10-20% and around 30% for higher end services. So back to the question of whether Yelp’s 30% is a reasonable commission for a DIY feature…that answer can only be answered by the merchants who use and benefit from the service. If they see results at 30%, then that commission is fine, if not, Yelp may determine that another level be more reasonable. We can say this though, Deal sites will have a much easier time convincing a merchant to offer 40% against Yelp’s 30% than if Yelp was at 20%.
Summary:
Give it time and Yelp will most certainly have the largest inventory of local offers in Canada. That is great for consumers in Canada and the merchants who wish to attract them. Once Yelp as enough inventory of deals to offer, there are several options they can leverage for further consumer distribution: Affiliate Marketing of those offers, API access to those offers by other publishers, etc. Bottom line is that the Canadian consumer is now far better off because Yelp has launched this feature in Canada and local Merchants can count on yet another effective way to market themselves to consumers.
Now, a little reminder and advice to Yelp executives and managers responsible for the Deals Program in Canada: Canada is NOT United States. What works in terms of commissions in the US does not necessarily work in Canada, especially when it comes to Deals, Offers and Coupons. We would suggest Yelp pay close attention to the 30% fee charged in Canada and compare adoption rates in Canada to those in similar US cities. Perhaps it is the right number, but simply because it works in a deal hyped and merchant heavy population like the United States does not mean it should be a similar experience in a more conservative deal/coupon culture country like Canada.
Looking forward to updating on Yelp’s successes in Canada with this program over the course of the year.
