Reviews at the popular crowd-sourcing site Yelp.com are having a
significant effect on the restaurant business, according to a study of
more than 3,500 Seattle restaurants from 2003 through October 2009.
Using data provided by the Seattle
Department of Revenue, the study found that a one-star increase in
Yelp's five-star rating scale was associated with a quarter-to-quarter
revenue rise of 5% to 9%. The researcher also examined restaurants whose
average ratings were within 0.1 star of each other, but which, for the
purposes of a summary rating, got rounded up and down by a half-star.
That comparison confirmed the power of the stars.
Yelp had little to no effect on the business of chain restaurants,
which rely more on branding for reputation. The revenue of chain
restaurants dropped in Seattle during the period studied, a decline that
may have been affected by Yelp, the researcher said.
"Reviews, Reputation and Revenue: The Case of Yelp.com," Michael Luca, Harvard Business School Working Paper (September)
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