How Does Yelp Make Money? Yelp Business Model In A Nutshell

Yelp works as a sort of social network platform for reviews of local businesses. Yelp mostly makes money from advertising based on the cost-per-click where businesses can deliver targeted site-wide ads to users. It also makes money via transaction revenues (commissions on deals) and subscriptions (like Reservations and Waitlist). 

Origin Story

Yelp is an online review platform allowing consumers to evaluate a range of businesses, including restaurants, cafes, home repair services, and hotels.

The platform was established in 2004 by two former PayPal employees in Jeremy Stoppelman and Russel Simmons. With a meager $1 million in funding, Yelp originally intended to serve relevant business reviews to consumers living nearby.

As of March 2021, the platform still received more than  a hundred million unique monthly visits making it still among the a hundred most popular sites in the US.  Users can browse reviews, opening hours, location, price range, and other relevant business information. Many now consider Yelp a social media website where local businesses and users come together to form a vibrant and interactive online community.

Yelp revenue generation

Yelp derives much of its revenue through targeted advertisements in the same way that other social media sites such as Facebook, Twitter, and Pinterest do.

Advertising Revenues

As the company explains in its 10K:

We generate advertising revenue from the sale of our advertising products — including enhanced listing pages and performance and impression based advertising in search results and elsewhere on our platform — to businesses of all sizes, from single-location local businesses to multi-location national businesses. Advertising revenue also includes revenue generated from the resale of our advertising products by certain partners and monetization of remnant advertising inventory through third-party ad networks.

Businesses use Yelp advertisements to target consumers who live in their local area based on a cost-per-click (CPC) model. That is, Yelp charges each business a fee every time one of its ads is clicked on. These ads are targeted according to the industry the business operates in. For example, more lucrative businesses such as law firms pay a higher CPC amount than a restaurant. They can also be targeted according to the demographic of the consumer.

Profile pages can also be upgraded to offer targeted advertising. Yelp offers two options:

  1. Branded profiles – which include features such as enhanced call-to-action (CTA) buttons, a dedicated About section, video functionality, and photo slideshows.
  2. Enhanced profiles – offering all of the above plus the ability for a business to remove competitor ads.

Each of these profile options attracts a monthly subscription fee that is inversely proportional to ad spend. The more a business spends on Yelp advertising, the lower the fee.

Transaction Revenues

Yelp also makes money from commissions on transactions it facilitates for third parties. Note that transaction revenue comprises less than 10% of total revenue.

This revenue can be grouped into four main categories:

  1. Yelp Deals – encompassing prepaid vouchers consumers can use to shop at a particular business. Yelp receives a commission only once the voucher is redeemed.
  2. Gift certificates – which work in a similar way to Yelp Deal vouchers and are gifted to others.
  3. Grubhub and Eat24 integration – Yelp receives a commission for any food order on its platform facilitated by complementary platforms in Grubhub and Eat24.
  4. Yelp platform – consumers can buy a range of products or services on the Yelp platform through diverse partner integration. This allows Yelp to facilitate transactions and collect a fee across multiple devices.

Subscription Services And Other Revenues

Another chunk of revenues is generated through subscription services, including Yelp Reservations and Waitlist. 

Beyond that, Yelp also makes money via its Knowledge program, providing access to Yelp data for a licensing fee. 

Key takeaways

  • Yelp is an online review platform created to provide reviews for businesses close to the user searching for them.
  • Over 90% of Yelp revenue is generated by advertising based on the cost-per-click (CPC) model. Businesses can deliver targeted site-wide ads based on location and user demographics. Advertising is also offered on business profile pages, with Yelp charging fees according to the industry and level of ad spend.
  • Yelp also generates revenue as a result of facilitating transactions with vouchers, gift certificates, and complimentary local platforms. It also facilitates transactions through partner integration on the Yelp app and website.

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Related Business Model Types

Platform Business Model

A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.

Marketplace Business Model

A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Network Effects

A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Asymmetric Business Models

In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Wholesale Business Model

The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.


A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

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