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Facebook Disrupting Again? Yelp Stock Tumbles on Facebook Entry into the Reviews Space

Sites include , . Published on December 19th, 2012. Written by Anthony West.

As tech disruptors go Facebook has had its fair share of input into the usurping of markets. One need only to look at the fortunes of MySpace to see what damage can be wrought by a company that disrupts an industry. But Facebook it seems is reaffirming its penchant for disrupting and with several planned announcements like a search engine, it is clear that competitors have to watch out and stay keen if they are to escape the clutches of disruption. Yelp hasn’t been so lucky.

“Nearby” has early casualty

Facebook has rolled out its online reviews and location service for users and immediately we are seeing an impact on competitors. Immediately on announcing “Nearby,” the name of the service, Yelp’s stock took a tumble and the company saw a 3.65% drop to trade as low as $18.50 per share.

So far things have settled down for Yelp’s stock but mumblings among analysts is that more might develop as the service gains a wider audience. Facebook we must remember has more than 1 billion users. Analysts also believe that other competitors should watch out and already many are saying Foursquare could be in the cross hairs.

Does the service pack a punch?

Ultimately only users will determine if Nearby does more to help locate and assess local restaurants and pubs but so far the mechanics of the new service seem sound. The Nearby feature of course has been a part of Facebook for some time but the latest revamp which was done by the talent acquired when Facebook bought Gowalla, has major improvements.

The new Nearby offers a revamped landing page and when a user opens up the app a sorted list of local businesses appear. In addition to a well curated list of businesses, Nearby now also provides major landmarks that Facebook believes will interest you based on your past tagging and location data. If you regularly visit Time Square and tag your photos, there’s a good chance that this specific location will stare you in the face when you open the Nearby app.

The app really comes into its own with the recommendations and star ratings that show up on the navigation screen. Much of these recommendations are powered by likes and the activities of friends and family, making them powerful tools for making a quick decision about where to eat, drink or go see a movie.

The threat here to Yelp and others is that Facebook’s own internal algorithm for sorting and filtering may be more robust and faster acting. They may also be more reliable and given recent events at Yelp (a court ordering one user to change a negative review for instance), users may feel that a recommendation on Facebook Nearby is a better one than one heavily regulated by the businesses themselves.

It’s very early days but if stocks are already tumbling on news of the service, things are bound to get more interesting as the weeks go by. Grab a front row seat; it should be quite a sight.

With free movies online and an expansion of free games online, facebook’s presence will continue to gather momentum.

Do you think Yelp has lost credibility among users? Share your thoughts with us below.

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