Online reviews can boost revenue at local businesses, but quantifying how much those companies are making thanks to their Web presence can be tricky, an analyst says.
Review site Yelp says local restaurants and other small businesses can expect to add at least $8,000 to their annual revenue by managing the free pages it offers. And businesses that advertised on Yelp can earn an additional $23,000 per year thanks to those ads, according to Yelp, citing a Boston Consulting Group study that Yelp partially funded.
But it's hard to put a firm number to the value of Web presence and online advertising since visits to brick and mortar restaurants and businesses happen offline, according to Tom White, a media and telecom analyst at Macquarie Capital.
"It's very difficult for Yelp or the local merchant to measure that uplift and basically tie that back to the advertising," White said. "So this study was an attempt by Yelp's part to try and convince local businesses the value of advertising on the Web."
Star ratings on Yelp also have an impact on small businesses, according to a Harvard Business School study. According to that study, when a business's star rating improves by one star, its revenue increases by 5.4 percent. That study's estimates attempt include the influence of fake reviews that business owners may post while posing as a patron, but measuring those reviews isn't an exact science either, according to the study.
While Yelp's influence on other businesses is hard to quantify, one thing is clear: Yelp's own revenue will continue to grow as its site covers more cities, White said.
--Macquarie owns Yelp shares.
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