Knowing What Business You're In Includes Knowing Who Your Most Important Customers Are
from the three-sided-market dept
One of the themes we've emphasized here at Techdirt is that it's essential to know what market you're in. We've mostly talked about that in terms of knowing when to give away infinite resources in order to sell expensive resources. But another key component is recognizing where the value of your business comes from. For example, one of the keys to Google's success has been their recognition that even though their revenue comes from advertisers, their real value is their users, and so they've focused on keeping users happy. Google knows that as long as they have a lot of users, the advertisers will come to them, but if they drive away users they may not come back. The Bits blog has an even more striking example of the same principle: Bits says that Yelp, the restaurant review site, is succeeding because they recognize that the key to success for their market was to cater to a subset of their users -- their volunteer reviewers. If they have good reviews, users will come to them, and if they have users, the advertisers will come. So they've focused on making reviewing an easy and rewarding experience. The site has focused on building community among the reviewers themselves, adding social-networking functionality so reviewers can connect with each other and follow each others reviews, and even hosting social functions where the most prolific reviewers can meet face to face. Yelp is also careful to shield reviewers from irate restaurant owners: a business owner is allowed to send a reviewer one message, but if he doesn't get a response he's not allowed to contact the reviewer again.
One way to look at this is as a multi-sided market. Traditional media outlets, for example, operate in a two-sided market, where they trade content for eyeballs, and then sell the eyeballs to an advertiser. Yelp's business model is similar, except that they exist in a three-sided market. First, they have to make the site appealing enough to reviewers that they'll write a lot of reviews. Then they use the reviews to attract eyeballs, which they finally sell to advertisers. All three of these are "customers" in some sense, but because the reviewers are what ultimately attracts everyone else to the site, they're ultimately the most important to the site's long-term success. Although Yelp certainly has its share of critics, the basic strategy of catering to reviewers seems like the right one for a review-oriented site.