Sunday, April 3, 2011

The Yelp platform success

"The key to Yelp's success is that it is a reliable, user-friendly local information service that reflects the passion of its users."(from this BBC article)

Platforms are a tough business. Above all, they suffer from a chicken and egg problem. Let's take a video game console as a platform that connects gamers and game developers. If you do not have enough gamers which have the console, why would the game developers put in time, effort and money into developing games for that platform. And if you do not have enough games available, why would anyone buy the console.

They key to success in platforms is getting pricing right i.e., figuring out which side to subsidize, and how. This is why Microsoft and Sony sell their consoles lower than the cost to manufacture and distribute these systems, and then make up profit on fees from developers., and other social platforms face a similar but different challenge. Initially there were prices. Both businesses and reviewers are online for free. But what use would a review site be without reviews? Yelp solved this problem by building social mechanisms for good work. A key part of this is the user profile page that highlights the behaviors that Yelp is trying to encourage. A related post can be found here.

Why the sudden interest in Yelp? I am working on a platform business idea, and so was looking for inspiration. Wish me luck!


  1. Wishing you lots of luck!

  2. how is yelp a platform? it's a product but cannot be leveraged by 3rd party devs and others as a platform.

  3. Anonymous 2 - when I meant platform, I actually meant a marketplace. Wrong choice of wording on my part