Yelp Offers Local Businesses New “Revenue Estimate” Tool

Today must be the day of ROI calculators. Google just introduced one for mobile, and Yelp, last night, debuted its “revenue estimator” for small businesses. The tool is free to all businesses that have claimed their Yelp profiles.

The Yelp revenue estimator is the same for advertisers and non-advertisers. In the future, Yelp might add some additional features for advertisers, but that remains to be determined. Right now, the company just wants to see how businesses react to and use it.

The tool is relatively simple, it multiplies customer leads in a given month by an average revenue-per-customer figure. There are default values for the latter drawn from a Boston Consulting Group study, which surveyed small businesses on the average value of customer spend in many dozens of verticals. Business owners can also input their own average customer spend data in the tool.

I spoke with Yelp and asked how the company was defining a “lead.” Yelp told me that a broad array of actions are bundled into that definition: click to the business website, menu lookups, maps/directions lookups, calls, check-ins, photo uploads, deals sold, open table reservations.

In the case of calls-as-leads, Yelp only counts calls from its mobile app. It doesn’t capture or count calls generated from Yelp’s PC website because it’s not using tracking numbers.

Yelp said that it originally considered weighting the various actions and lead types differently, but decided that would create too much complexity for small business owners. The company also told me that in fewer than 5 percent of cases, users do take or conduct multiple actions (e.g., call and get directions) so there isn’t double-counting of leads.

Those businesses that start using the tool and then go on to become advertisers will be able to see the “before and after” view of whether advertising on Yelp is delivering more leads.

People are likely to take one of two views of this. One is that Yelp is providing a valuable tool to business owners free of charge. A more “cynical” view is that this is a self-serving initiative to combat criticism or questions about Yelp’s value. Regardless of Yelp’s motivation, there is value for business owners.

The only criticism I would raise is that all of the actions Yelp is measuring or reporting aren’t the same. For example, an Open Table reservation or deal sold isn’t the same as a menu lookup or click through to a website.