The best way Yelp can monetize their business

In response to the question posted : http://jessebockstedt.wordpress.com/

Yelp certainly faces a challenge.  The dense competitive landscape, particularly now in 2011, and relatively low customer switching costs means that Yelp must work hard to differentiate itself.  I do not believe that charging users, even in a fremium type model, will work to increase revenue since their primary competition (google, yahoo, citysearch) do not utilize such models.  Because of the low switching costs, many users would likely migrate to competitor sites.  However I do believe that increased local sales forces could lead to increased revenue.  From my own revue of several sites including Yelp, Google Hotpot, and Yahoo local, very little local advertising appears for most search results.  As a user myself, I think it would be nice if some links to coupons or other incentives showed up with my search results. 

Yelp should be able to increase their advertising revenue with local establishments by stressing the search and click through statistics for the given business type.  Yelp can also point out the fringe benefits businesses get of direct access to compliments and complaints.  In addition, Yelp should be able to leverage their vast database of business ratings, click through statistics (for genres and specific establishments), and users to create other possible revenue streams.  Entrepreneurs and larger scale investors might value the data yelp has built over the years and yelp could possibly monetize consulting services or direct access to statistics.

Regarding Google Hotpot, as with all things Google, Yelp should be very afraid.  Google's gargantuan user base automatically gains access to all of Google's free apps as soon as the app becomes available.  Given many yelp users are likely Google users as well, Google has an immediate tendril into Yelp's customer base.  As noted above, switching costs are very low for users in this space so Yelp needs to bolster its differentiation over Google's alternative service. 

Another more drastic step for the company at this time would be to look to sell to or merge with another firm.  Their business model is quickly becoming a small piece of what many other sites do.  Many of those sites like google, facebook, and yahoo have many more revenue streams and could even take hostile competitive steps at a loss to dwindle Yelp's market share.  It may be time for the company "join em" since it's going to be tough to "beat em."