Why is yelp not in South Africa?

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Why is yelp not in South Africa?

Hi! Thank you for contacting Wonder for your request. You mentioned that you were interested in knowing why Yelp is not in South Africa. I’ve scoured the web to find resources that would be useful to you and summarized what I found below. Based on what I could find, information on Yelp’s plans on expanding to South Africa appears unavailable. However, I was able to gather some information on Yelp's current expansion plans, business challenges/barriers they face, competitors, and their process of building their business network. I will start with a general overview of Yelp and address each of the points I mentioned above. I hope the information I found for you will be useful.

Yelp Overview

According to an analysis by Trefis, “Yelp is a local business search, review and recommendation service that allows consumers to access ratings and read reviews about local hotels, restaurants, salons, dentists and mechanics on their website Yelp.com. These businesses are reviewed and rated by contributors".

Yelp now has more than 71 million reviews of local businesses in several markets, including the United States, Canada, UK, Ireland, France, Germany, Austria, The Netherlands, Spain, Italy, Switzerland, Belgium, Australia, Sweden, Denmark, Norway, Finland, Singapore, Poland, Turkey, New Zealand, the Czech Republic, Brazil, Portugal, Mexico, Japan, Argentina and Chile [See Article 2]. The company currently offers information on more than 2 million businesses in the markets it operates in.

The Trefis report also notes that “Yelp generates revenue mainly from local business advertising, display advertising and from additional services like Yelp deals, and deals with reservation services like OpenTable. It competes primarily with other online business review services like Google Places, Yahoo Local, Angie's List, Judy's Book, MerchantCircle, Citysearch, Insider Pages, CityLocal, Gumtree, and TripAdvisor; display advertising players like Google, Yahoo, Facebook and AOL; and daily deal sites like Groupon and LivingSocial".

Yelps Expansion

According to Forbes, in 2014 Yelp focused its expansion on Europe and Latin America. In 2015, it shifted its focus to expanding its services to the ASEAN (Association for SouthEast Asian Nations) markets, where it initially launched operations in Taiwan and later to Malaysia. Analysts predict Yelp will further be expanding its services, but as to whether they have South Africa in its plans, could not be reliably determined with the available data.

Yelp’s Business Challenges/Barriers to Entry

In general, the research I found noted different challenges to Yelp’s business and expansion plans.

One source notes that “Yelp's business model involves establishing its brand with consumers before monetizing the process with advertising revenue. Therefore​, their expansion plans to other countries involve investing capital without realizing an immediate return. Although this strategy works well for engaging consumers, it doesn't generate the returns that stockholders demand (see Article 3)". Forbes also notes that “Yelp continues to invest heavily in sales & marketing and product development for its new markets, which will likely affect the company’s short-term​ profitability”. Sales and marketing expenses consume about 60 percent of Yelp's revenue.

According to Yelp CEO, Jeremy Stoppelman, Yelp "generally works with PR agencies on a project basis. If they launch in a new country they, "need to rely on agencies for local media knowledge and contacts". The “primary stumbling block for Yelp is its business model of engaging consumers first without monetizing its services (Article 3)”. This would likely be a similar challenge for the South African market, should Yelp expand there.

Other general business challenges for Yelp include:
1. A “war with Google”, which caused a decline in website traffic for Yelp

2. Merchants have complained that Yelp extorts them to buying advertising by publishing negative reviews about their business

3. Facebook could create a places app and market reviews, which could impact on Yelp's position in hospitality reviews

4. Yelp has been slow to monetize its mobile app

5. Google Booking Direct, which allows instant booking for hotel rooms directly from Google's search interface, could be a game-changer in the hospitality industry and could be a concern to hospitality companies like Yelp (See Article 3 for more details).

Internally, Yelp CEO, Jeremy Stoppelman, notes that Yelp’s biggest challenge is “educating people on best practices for engaging with online reviews”. It is something his team is “constantly focused on...as they give consumers more power through information and transform the local business marketing landscape to one where consumer opinion is extremely influential and accessible and businesses can no longer control their reputations simply by spending money on more ads.”

Aggregating a Network of Local Businesses and Yelp’s Competitors

One author notes that "Yelp’s core strategy involves building communities from scratch, which is difficult to do. These communities go around visiting places, writing reviews and filling in Yelp’s place database. Yelp’s data generation is, at its core, a social product, which suffer from cold-start problems. Yelp’s strategy to solve the cold-start problem has been to focus on a strategy called Local Network Saturation, which is all about slow, methodical expansion instead of rapid growth, which Yelp has been successful at (See Article 4)".

However, the author goes on to note why the Yelp model doesn’t do as well in other markets. The South African market, in particular, is one market where Yelp competitor, Zomato, dominates. Some reasons for this include:

1. Early mover advantage: Zomato had already captured the mind-share and market-share before Yelp could build its community in these countries.

2. Yelp’s cultural disadvantage: Understanding the cultural nuances of the community is part of building successful communities. Adapting techniques that worked well for Yelp in English-speaking, western countries might not work well for other cultures, which makes it difficult for Yelp to expand to other countries.

3. ​Market-specific offerings: Zomato offers features tailored for specific markets. This is connected to the previous point about understanding the culture of the markets you want to be successful in (See Article 4 for more details).

As for other possible competitors specifically in South Africa that offer similar services to Yelp, the only source I could find was a blog post which noted the following services: Eat Out, Dining Out, Food 24, GumTree, and OLX with no detailed information available ​on how they compare to Yelp. I’ve included links to these services below.

Overall, it appears that Yelp is not (yet) in South Africa due to some of the challenges they face with their business model, expansion plans, and marketing strategies, and the competition they face with dominant players, like Zomato.

I hope this overview on Yelp is useful to you. You can find more details on the links I have selected for you below, with additional information on Yelp predictions and trends. If there is something more you would like to know, please feel free to send another request and we will be happy to help you​. Thank you for using Wonder!

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