What’s the Right Business Model for a User-Generated Review Site?

This is my first blog post in quite some time. I’ve been noodling on an issue for the past few weeks and I thought I’d put it out there for folks to chew on. I want to start by saying this is not a problem that is new or unique to the web.

The Classic Directory Model

In a classic directory model (think Yellow Pages), there is no integration of editorial or review content – it’s largely if not exclusively a directory. You could allow businesses in your directory to pay for featured placement (larger listings, ads, bold text, etc) because the directory provider itself wasn’t creating a market for user reviews. If plumber A had a larger ad than plumber B, nobody thought that the directory or the users of that directory were providing some sort of endorsement for plumber A’s services – it’s just that plumber A was willing and able to pay for the privilege of being featured. With this basic structure, it’s pretty easy to run an advertiser-supported directory business and a profitable one at that.

The Classic (Print) Review Model

The other model that works is one where there is an explicit blending of content and reviews. Think of things like Zagat and Consumer Reports. In this world, the easiest way to maintain editorial freedom and integrity is to simply charge the end consumer for the privilege of accessing the content you’ve aggregated. It’s not rocket science – one way to maintain editorial freedom is to not rely on the folks who you review to pay your bills. In the print world, this model worked pretty well and there are a few examples of it working well online as well.

So What Works on the Web?

The approach that most web companies have taken makes it a lot trickier in my mind. Sites like Yelp and the bevy of vertical review sites that have emerged and really blended this model. With the directory nature of the web these sites both function as traditional directories that catalog the range of service providers available to meet your needs as well as providing user-generated reviews on the level of service provided. This makes the whole business model piece tricky. It’s tough to have a primarily editorial site that’s supported by advertisers – I think most users will smell the potential for conflict under this model. More importantly, I think most advertisers would expect some level of editorial consideration (removing bad reviews, featured placement, etc) in exchange for providing advertising or sponsorship support. All in all, having an advertiser-supported review site seems tricky at best.

So what about the other option? Well, most folks have eschewed the pay-for-access model on the web. The only folks who seem to have been willing to really embrace it are those who have offline businesses built around distributing pay-for-access content. Suffice it to say that most companies in the review space seem uninterested (as best I can tell) in putting up some sort of pay wall as part of the business model – it works against quickly growing the base of reviews and reviewers.

Advertising for Complementary Products – One way to get around the appearance of conflict by advertising the folks who are reviewed on a review site is to advertise complementary products or products that you think are likely to appeal to your demographic. This isn’t unique to review sites – pretty much any content-driven site has this as an opportunity. I’m not sure that review sites are particularly well situated to take advantage of this opportunity.

“Closing the Loop” / Lead Generation – At the end of the day, I’m of the mind that folks who come to review sites are looking for guidance as they try to make a decision. Similar to search advertising or classic lead gen, there ought to be an opportunity to allow users who are looking for something (a plumber, a lawyer, a restaurant, etc) to close the loop and for the referrer (the review site in this case) to get paid for the privilege.

The challenge for review sites, however, is that the participating businesses that are being reviewed didn’t necessarily ask to be reviewed and there isn’t any transactional relationship in place to facilitate lead generation. For example, if I find a restaurant on Yelp and decide to go there based on the reviews I read, there isn’t any way for Yelp to get credit for that. Nor would the restaurant necessarily want to go out of its way to build a relationship with Yelp – why pay for a good lead if you can get it for free?

Sticking with the Yelp example, however, I wonder if there isn’t a deal to be had between Yelp and OpenTable. It would make sense to allow users who find interesting restaurants on Yelp to book on OpenTable in an integrated way. Such an intermediate model only really works when you have someone like OpenTable or 1-800-DENTIST, or some other service aggregator who is in the booking / lead generation business.

At the end of the day, I don’t know what the right answer is but I welcome your thoughts if you have any you’d like to share.