Are Facebook and Yelp losing the support of small businesses?

By Stuart Wall, Guest Contributor , written on January 16, 2015

From The News Desk

Editor’s note: This is a guest post by Stuart Wall, founder and CEO of Signpost. The post went through Pando’s usual editorial process and Mr Wall was not paid for his work. 

Last month I struggled to help my sister remove an inaccurate Yelp listing. Her pottery business moved over a year ago, yet many would-be-customers are directed to her old address. Simple problem, right? Not quite. Yelp offered her little in the way of support: there’s no phone hotline, customer service requests disappear into internet ether, and Yelp’s message boards offer more dating advice than small business tips. My sister’s frustrations are increasingly echoed by Main Street businesses using Yelp and Facebook.

Facebook and Yelp are becoming less effective for small businesses to build an audience. Both firms acknowledge the importance of the $50B small business advertising market. Both have invested in small business-focused products and educational content. But Facebook and Yelp seem to prioritize shareholders and consumers ahead of small business users. Many small business users feel their core business offering isn’t working for them.

For small business users, customer relationships developed on Facebook and Yelp are rented, not owned.  Last November Facebook announced a policy that will prevent small businesses from reaching most of their followers unless they pay for advertising. Some small businesses felt like they’d be duped; after spending time and money to grow their Facebook following, they’ll no longer be able to connect with those same followers without additional investment. Dan Levy, Facebook’s head of Small Business, tried to comfort users, noting that he “feels a lot of empathy” for businesses who “are feeling the evolution”. Yelp offers free tools like reviews and messaging, but similarly controls touch points and contact information, preventing businesses from building relationships outside of Yelp. Powerful communication tools like image slideshows, videos and call-to-action buttons are limited to users who pay for Yelp advertising.

Facebook and Yelp also charge big fees for small business advertising. Yelp’s standard $300/mo advertising package drives only 1,000 banner ad impressions, which is over 100x the cost of ads on Google’s display network. According to Google, around 1 in 10,000 viewers of a banner ad will make a purchase. Yelp advertisers may be paying more than $1K for every walk-in-the-door customer. More recently Yelp introduced pay-per-click programs for select merchants, but requires businesses to spend a large part of their budget on the communication tools mentioned above. In 2013 Yelp hired the Boston Consulting Group to survey Yelp advertisers and prove that Yelp ads drive results. Unfortunately it’s impossible to validate BCG’s rosy analysis as Yelp can’t verify in-store purchases and BCG didn’t publish their methodology.

Facebook ads are much cheaper than Yelp. But the conversion is low. Facebook lacks purchase intent. Consumers rarely use the platform to search for a small business like they would on Google and Facebook doesn't allow advertisers to target their ads based on real-time searches. Therefore the number of Facebook users making a purchase after seeing a small business ad is low.

Finally, Facebook and Yelp provide limited control of business profiles. Yelp filters reviews they view as unhelpful. Filtered reviews aren’t displayed on a profile and aren't included in the business’s star rating. Business owners often complain that legitimate positive reviews are hidden while questionable negative ones surface. Yelp provides little recourse for businesses who feel they've received an unfair or biased review. Businesses are allowed to flag and respond to reviews, but they’re not able to remove them from their profile or star rating. Facebook reviews are easier to manage, but business owners must adapt to regular profile and policy changes.

Over the last four months, the head of Small Business at Facebook engaged small business users in town-hall-style meetings across the United States. Like the political town hall equivalent, many felt that Facebook’s effort was more form than substance. It was during these sessions that Facebook engineers designed an update that killed the value of followers for a small business page. In the short term, many small businesses feel like they have no choice but to use two of the largest, most well known platforms in their space. The YellowPages once enjoyed a similar advantage. Facebook and Yelp should take note: without the trust and support of small business users, they may be disrupted faster than their predecessors.

[illustration by Brad Jonas]