Facebook Places: The Real Target Is Yelp

22 Comments

Most of the attention paid to Facebook Places, the new location feature that the social network launched on Thursday, has focused either on the privacy implications of the service, or on the impact that it could have on location-based startups such as Foursquare (which some have said they expect to be “crushed” by the new feature). But Facebook’s real focus with this launch isn’t individual users or even Foursquare: instead, it sees Places as a way into the local business and local advertising markets, and the company with the target painted on its back is Yelp.

We’re hearing that Facebook is pouring resources into pitching the Places feature as a tool for local businesses in dozens of markets, by approaching individual store-owners and business people and selling them on the idea of setting up a Places page for their location. According to Facebook’s description of the new feature, anyone can create a page for a place, but businesses can “claim” their page — by responding to a phone call from a Facebook representative, or by uploading some kind of official documentation that proves they have the right to that location.

Yelp, whose service is also based on giving businesses a place to view and respond to feedback from customers, has a similar claim process. Like Foursquare and Gowalla, Yelp was described Thursday as a “launch partner” for Facebook Places, presumably to show that the service isn’t designed to compete with these other services, but will be able to incorporate their check-ins and other information via the Facebook Places API (another location startup, Hot Potato, today officially confirmed earlier reports that it has been acquired by Facebook).

But by targeting local businesses and advertisers and trying to get them signed up for Places pages, Facebook is clearly going after Yelp’s bread and butter. The company, which launched a “check in” feature earlier this year in an attempt to compete with Foursquare and other location-based apps, recently said the company has over 10 million reviews in its database, and gets 30 million visitors a month (the company also announced a deal earlier this year with Elevation Partners for up to $100 million in funding). That definitely gives it a head start, but Facebook has more than 500 million users and is still growing.

Not only that, but Facebook already has a relationship with businesses and advertisers: Over a million local businesses have already created Facebook pages (what used to be called “fan pages”) for their companies and services and brands, both to offer information to users or potential customers and to interact with those customers in a single place. That represents — to some extent at least — a potentially captive market for the new Places feature, which adds location-specific functions to what was just a marketing channel (Facebook’s advertising revenues are expected to reach $1.2 billion this year). The company’s guide for businesses — which notes that in the future, businesses will be able to merge their existing pages and Places pages — says:

Places creates a presence for your business’s physical store locations- encouraging your customers to share that they’ve visited your business by “checking in” to your Place. When your customer checks into your Place, these check-in stories can generate powerful, organic impressions in friends’ News Feeds, extending your brand’s reach to new customers.

Yelp isn’t the only one threatened by Facebook’s move — Google (s goog) also has a Places service that is designed to appeal to small and medium-sized businesses. It was originally called Places Pages, and allowed companies to either set up or claim a page related to their business, but the search giant recently renamed it Google Places. According to the company, more than four million businesses have added their pages and information to the service. One of the features of Google’s offering is that retailers in certain cities can request a free photo shoot for their business, and the search company will send a photographer to take snapshots of their location to be added to their Places page.

Whether Facebook can transfer some of its existing clout with businesses to a location-based one that appeals to advertisers and small to medium-sized businesses remains to be seen, but the social network is clearly betting on that to be a major contributor to its future growth.

22 Comments

Tarik Sansal

There are many ways to approach local, most valid and viable but few will be transforming. It is difficult for a large company and brand such as facebook to execute a strategy around this niche. Existing players can co exist but new models around local and hyperlocal could aggregate users and audiences better. Established audiences and users are a benefit but can also require significant initiatives to educate their audiences to modify their original use (with great risks of them cannibalizing their traditional business). A new brand with a strong hyper local product could be better positioned to execute in this space.

Tarik Sansal
Romio

Hippy Hop

That is more likely be affected by FB Place. FourSquare CEO had already said that they will collaborate with FB place and that they will unlikely be affected by it. Can’t wait tosee what Yelp management has to say with this.

Dennis Mink

You are dead on. Facebook Places isn’t about competing with the check-in networks. It’s about owning the local advertising space. The real targets are Google and Yelp. And let’s not forget about the good old Yellow Pages. The revenue potential is massive and Facebook is ideally positioned to become the Yellow Pages of the 21st century. As for Google and Yelp, I expect they will be one company within 12 months. You can read more musings about Facebook Places at http://blog.footfeed.com

Brian S Hall

Really good analysis. Except, for one big think I think you missed: I think Facebook dosn’t have to bother targeting Yelp. Yelp has failed to achieve the scale and the user engagement they should have long since attained. If not Places, someone else would have taken them down.

kevin

Precisely, check-in is just a feature. The competition will be among Facebook Places, Google Places, and Yelp now. Apple, Twitter and Microsoft will probably join in soon.

If Facebook opens the opportunity for third-party developers to develop apps for the local business pages, this will be the next revenue growth for Facebook. What a great idea, apps for local businesses. We, developers would love to get ads and coupons from Facebook, Google, Apple and Microsoft, so that we can focus on producing apps that local businesses and consumers would pay or click on our ads.

Michal Ševčík

Cool, but here in Europe especially Czech Republic it’s not gonna be available for months. God if Facebook and Adobe would be working so hark just like Apple does.

lilywhite

Stop trying to protect Foursquare. The real target is any company that wants to extract revenue from local businesses.

Meg Sinclair

Good analysis. Haven’t heard this angle yet. Will be interesting to see how this develops over the coming weeks/months. Thanks Mathew!

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