Forget Apple vs. Google; a Battle Brews Between Yelp and Foursquare

Last week, news surfaced that Foursquare was eyeing its fourth round of funding in as many years, marking the official, if not inevitable, beginning of what will become a fascinating rivalry between Yelp and Foursquare in the realm of social discovery. Yelp has a sizable head start, but the shift toward mobile — and the implicit importance of data and identity on devices — signals trouble for Yelp and an opportunity for Foursquare. Here’s why:

Search and Discovery Require Two Different Datasets
Apple’s debacle with maps revealed something that we often take for granted: local data means different things for different services. As it turns out, scaling a local dataset with the penetration and accuracy necessary to make a mapping service work requires a massive operation. The queries are largely transactional (find x location using y keywords) and superfluous content — say, Yelp reviews — do little to add value. In search, coverage is king and Apple didn’t have it.

But when it comes to discovery, Google’s dataset — and the centralized structure it has built to maintain it — is not necessarily relevant. Objective information about a business (like its hours of operation) can only go so far in helping a user make a decision. What’s more important is increased transparency for the points of interest (reviews, product information, etc.) as well as understanding connections between those places. This is where the Google-Apple parallel comes in. With the latter point, the links in a network, Yelp, and a host of content-driven discovery services, could really struggle. This is where Foursquare is poised to succeed.

Yelp fails to take advantage of the deeply personal and omnipresent reality of the mobile device, missing opportunities to capture the most important review of all: habit.

User-Generated Content Falls Short of the Value of ‘Habit’
Foursquare bears tend to ridicule the check-in as a passing fad, but the check-in did two critical things for the company. It provided a mechanism through which the company could build and maintain its own dataset, and more importantly, it served as both an opaque piece of content (“Oh look, my friend checked-in here, it must be good.”) as well as an actionable, and manipulable, piece of data that (unlike content) gains value as inventory scales.

Last week, Foursquare rolled out a new ratings system that draws on this data and the patterns within it to score businesses on a 1 to 10 scale. The ratings ingest users’ habits, rather than opinions, to determine the quality of a business, and in doing so make “the crowd” far more democratic. One disgruntled voice becomes far less important, and the ratings only accrue more value as folks check in more and more.

This hits on one of Yelp’s critical weaknesses. Yelp’s product — the review — is a print product scaled on the back of a web-driven, user-generated content model. The structure of the service fails to take advantage of the deeply personal and omnipresent reality of the mobile device, missing opportunities to capture the most important review of all: habit.

Identity, Which Reveals ‘Habit,’ Can’t Be Tacked On
Foursquare’s biggest asset, and the reason Yelp is open to disruption, is identity (as revealed through check-ins). Its social origins have made identity a key component of the service rather than a value-added option for power users as it is with Yelp. Identity allows Foursquare to constantly improve the service for users over time, making changing services more costly.

It also gives Foursquare access to information about the links in a network, rather than just the nodes. While Yelp and others provide transparency about a point of interest, Foursquare has the ability to give insight into how those points of interested are related, thanks to the habits of its users. For marketers, the power of habit — and the value in the ability to understand and manipulate it — cannot be understated.

As discovery takes over where search leaves off, Foursquare, or something like it, is poised to take a lead. Perhaps that’s justification enough for its prospective investors.

Steven Jacobs is deputy editor of Street Fight

  1. A poor man
    November 13, 2012

    To Jeremy Stoppelman, CEO of yelp:

    Have you heard the story of the three men in the lifeboat? They note particular areas in the boat that “belong” to each as they make their way on their journey, each hoping for land and safety.

    Each personalizes their area as best they can with seaweed, driftwood, and such using tools in a little kit in the lifeboat.

    One day, one of the men begins drilling in the floor of the boat. The other two, obviously alarmed, ask him what in the world he thinks he’s doing. He replies that it’s his section of the boat and he’s making his own modification. Of course, the other two point out that if he drills a hole in his section, the entire boat will sink!

    How often have you found yourself in that situation, where somebody else’s actions put you at risk?

    Obviously, if it’s something as clear cut as a hole in the bottom of a boat, we’d probably all speak up, but what about when somebody’s callousness, self-centeredness, or just plain obliviousness causes harm that’s not quite so clear.

    Would you have the courage to speak up in that kind of a situation? I bet you would.

    You’re come across as the type of person who does not keep his opinions to himself. I think your intelligence and your strong-willed self-reliance are probably your two most prominent personality traits, and there’s no doubt that you’d address something that could hurt you or a loved one right away.

    Do you ever wonder if you might be the person holding the drill? I know there are plenty of times when I’m focused on something so much that the consequences of my behaviors to other people seem to be lost on me.

    Sometimes, it’s just a refusal to willing relinquish any rights of my own at all. It can be as simple as me not enjoying a meal as much as I should and complaining to management. I have no idea if I’ll be causing someone to lose his job, but I think it’s easy for us to put ourselves ahead of everyone else.

    What do you do when you catch yourself being the person with the drill? Do you respond by putting it down or do you insist on your rights and flood the boat?

    I think how we respond when we know we’re wrong probably says more about us than how we respond when somebody else is wrong.

    I realize that I’m rambling a bit, and I hope you’ll forgive the way I’m going all over the place. But the implications of acting on what we believe to be our rights, while simultaneously hurting other people just kind of hit me when I thought about the story.

    I think it’s good food for thought for anyone, though, and I hope that the story has a good and life-affirming impact on you as well.

  2. gary
    November 14, 2012

    I used to love Yelp.

    I remember when the Web 2.0 site meant that I could indulge my
    obsession with finding local gems. You know what I’m talking about…the
    type of place that you drive by every week and always wonder if it’s any
    good (it is). Crowdsourced reviews meant I could trust my neighbor to
    tell me what was good without ever having to actually talk to them.
    What? I’m shy.

    Then something happened, people became a__holes. Blame Food Network,
    Top Chef, or even American Idol. Going out to eat no longer meant
    checking out a new cuisine, culture, or neighborhood. Our newly formed
    Diners, Drive-Ins, and Dives culture means the masses expect every
    dining experience to be unique and mindblowing; we expect to be floored
    with delight and convulse with adoration. F___ local business if they
    don’t bend backwards for our hard-earned dollar…it’s a damn recession
    and we expect to be entertained.

    Somewhere along this process we forgot that these local businesses
    are what make up the concept of a community. A beer at our bar on a
    Thursday night, a slice of pizza with the softball team, dishing about
    crazy girlfriends at the barber shop these experiences are a cornerstone
    of what brings people together. Local businesses are owned by people
    just like you and they make a living by providing for the community
    around them.

    The problem is some people just don’t really give a Sh__. They don’t
    care that somebody owns a business that they pour their heart/soul into,
    and just how much it costs to run a business.

    Instead what they care about is that somebody gave them a funny look
    while they were waiting in line and that Rebecca Black’s Friday was
    playing on the radio. One-star.

    They go to a bar order a beer they’ve never tried and don’t like it. One-star. Well, the bartender was cute though…two-stars.

    The untold story of Yelp is that the business owner has no recourse
    against these types of reviews. Yelp will occasionally remove a
    falsified review, based on the subjective opinion of somebody working at
    Yelp HQ. Even owner comments that you see under a review must be
    approved by Yelp, and only in response to a false claim. Bottom-line:
    Yelp is not built to encourage fulfilling owner-customer relationships.
    Quite the opposite.

    In any case…that’s just my opinion. No, I’m not a local business
    owner. I’m just a guy who really loves the concept of neighborhoods and
    localism. But whatever, haters gonna hate right?

    1. Rodspeed
      November 14, 2012

      Hi Gary, couldn’t agree more. It is for exactly your type of thinking that the team at Pluto Mobile built “Pluto” app–a personal lifestyle compass that connects people to businesses in their communities.

      It would be awesome to have you sign up as a beta user by visiting:

      We would really appreciate any feedback that would help us continue to improve the platform!

    2. USA
      November 16, 2012

      Just wanted to thank you for writing this. It hits the nail RIGHT on the head. If anyone else is reading this, try a search for “Yelp extortion” and “Yelp cannot be trusted” and make your own informed, critical decision next time you think of Yelp and visit a local business.

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