Recently a bankruptcy lawyer sued Yelp in a small claims court in San Diego, winning $2700.
The McMillan Law Group sued the corporation after an advertising deal was not fulfilled. Julian McMIllan says that they initially decided to enter the deal because Yelp had recently become a good source of new clients for the law firm. The McMillan Law Group would pay Yelp a fee of $540 per month, and in return should have received 1,200 ad impressions monthly. McMillan says that this was not so.
He claims Yelp did not deliver the promised number of impressions. This led the firm to cancel the contract and ask for a return of funds. Yelp’s representative, Bradley Bohensky, says that McMillan misunderstood how Yelp’s impressions are measured, and that Yelp over delivered the amount of ad impressions it had promised in the contract.
The Problem With Yelp
The fact that Yelp is asking customers for $600 per 1,000 impressions is surprising in itself, considering most online advertising is sold at 60 cents per thousand impressions (CPM).
Yelp’s rates are as follows:
The lowest rates ($367 CPM) are still 10 times the rate of a Superbowl ad. And to add to the cost, Yelp requires customers commit for 12 months for these rates. So even if a customer chose the cheapest option, they are still out $3,600 with a possibility of not even receiving a single lead. Ouch.
Yelp’s customers often don’t understand the business model, or how the contract works. Local advertisers account for 70% of Yelp’s revenue, something that the company claims can help convert consumers and boast a highly targeted audience. However, local searches within Yelp offer some varying problems such as nearby searches that aren’t really nearby, leaving ratings on listed ads and wrong category listings. Some searches that are relevant and useful still aren’t worth the $600 CPM Yelp charges. These listings leave local searches fragmented, and prove that while Yelp feels they delivered the impressions, they may have delivered them in a category that makes no sense to the searcher or to the business.
The case will still be taken to a higher court on Yelp’s appeal, however the judge presiding over the initial suit described Yelp’s contract as, “The modern-day version of the mafia going to stores and saying, ‘You wanna not be bothered?'”