![]() In Black-majority neighborhoods, poorly rated establishments grow at roughly the same low rate as highly rated establishments-and both perform worse than poorly rated businesses in neighborhoods which are less than 1% Black. Source: Author analysis of merged data from Yelp and National Establishment Time-Series (NETS) Database and 2017 American Community Survey estimates. High Yelp ratings are defined as 4.0 and higher. Note: Low Yelp ratings are defined as below 4.0. Locating in a Black-majority neighborhood eliminates the advantage of being a highly rated business Providing high-quality customer service and products does not result in financial rewards in Black neighborhoods to the same extent as in other neighborhoods. This effect persists after controlling for other neighborhood characteristics such as the level of education of residents, total income in the ZIP code, average commute times to work, and the age of the housing stock. Location in Black-majority neighborhoods eliminates the benefit of being a highly rated establishment. ![]() In Black-majority neighborhoods, 7% growth was the norm for both highly rated and poorly rated businesses. In non-Black-majority neighborhoods, businesses with high Yelp ratings grew, on average, between 8.5% and 9% between 20, and poorly rated businesses grew significantly less (between 5% and 7.5%). Source: Author analysis of merged data from Yelp and National Establishment Time-Series (NETS) Database. Groupings of Yelp reviews represent quintiles. Note: Businesses with a single Yelp review were removed from the sample before analysis. Source: Author analysis of merged data from Yelp and National Establishment Time-Series (NETS) Database.īusinesses with more Yelp ratings experience faster revenue growth Yelp sample of businesses in ZIP codes across 86 metro areas, 2016–2019 This compares to growth of just 6.2% for businesses with fewer than four stars.īusinesses with higher Yelp ratings enjoy faster revenue growth Moreover, we find that for every 10 reviews a business receives, it experiences an additional 2 percentage points of revenue growth on average, regardless of the quality of the reviews.īusinesses with four to five stars on Yelp experienced an average growth rate of 8.8% from 2016 to 2019. But it’s fair to say that the company’s executives, employees and investors are probably pretty happy with how things have gone so far.We estimate that a one-star increase in Yelp reviews predicts an increase in revenue growth of 1 to 2 percentage points over a three-year period. Of course, today is just the first step in Yelp’s new life as a publicly traded company - it’ll be interesting to see how things shake out in the weeks and months ahead. The fact that Zynga was solidly profitable at the time of its IPO while Yelp is still operating in the red just goes to show how unpredictable the stock market can really be, and how many things are at play when the market is determining a company’s value. It’s a warmer reception than we’ve seen with some other recent web IPOs: Shares of Zynga, for example, dipped below the IPO price within the first minutes of its stock market debut back in December. Yelp shares traded at strong prices all day, hitting a high of $26 per share and never falling below its $22 opening price. The restaurant review site was received exceptionally well by Wall Street during its first day as a publicly traded company, closing at a price of $24.58 per share, up a full 63 percent from its $15 IPO price.
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