Recently, TechCrunch spotted something very interesting on a Facebook business page--a 5-star rating underneath the business name. This suggested that Facebook was preparing to rollout reviews for local businesses throughout its site, which would put it in direct competition with Yelp. Facebook already has a lead in its audience and the number of local listings it has. Watch today's Daily Brown Bag to learn what this could mean for business owners that rely on these ratings, and how it could impact online marketing as a whole.


Hello, and welcome to The Daily Brown Bag. Today we’re going to be talking about Facebook reviews and whether they’re going to be able to take on Yelp and Google. I’m Chad Hill, and I’m joined by Adam Stetzer.

Yeah, good morning, Chad. Welcome, everybody, to The Brown Bag. I think this is an interesting topic because Google and Yelp have really been the dominant players in the local review space, but Facebook’s got a very interesting opportunity, and I want to explore this a little bit, Chad. Facebook has been a great place for small and local businesses to connect with their communities on the grassroots level. It’s a great way for them to have strong social connections and to share information, and of course Facebook’s advertising accounts for 85% of their revenue. They are an advertising company, so similar to Google, it’s easy to forget because of the usage pattern of Facebook, because of the history of it being free, and because people think of it in terms of its functionality and not in terms of it’s business model, so that’s a lot like Google. But, the reality is that they’re an advertising company, and I think in this local space you and I probably agree that they’re behind Yelp and Google when it comes to local reviews, though it seems like they’re stepping up their game.

To get into the review arena, they’re trying to expand their reviewing system, and we’ve gone over some of these numbers before. They have significant reach. There are 699 million active daily users with 128 million of them being in the United States. This includes over 16 million local businesses that are active on Facebook, and local pages do get viewed-- 645 million views with 13 million comments each week. So, Facebook’s really well-positioned here in terms of how many users they have, how many businesses are in there, and in terms of the engagement that’s happening there. There are also over 1 million active advertisers globally probably dying for an opportunity to put more money and have more engagement locally in Facebook. So, I think there’s an interesting fight gearing up here. I’d be interested, Chad, in your thoughts on what we see Facebook doing and how we should digest that for our internet advertiser community?

Right. For those of you who are wondering what this really means to Facebook and where it is in Facebook, the reviews aren’t necessarily a new thing. They’ve been in Facebook a little while, but they were sort of buried. The big news here is that the review option is going to be in place in the user’s news feed and give them the ability to actually write a review, just like they would like a page, and then determine who they want to share that review with whether it’s friends or friends of friends. They’ll have that option, just like they would with other content created on Facebook. So, that’s on the user side. Adam, as you said, the reason Facebook is doing this is of course because they want more time on-site. They’ve got this big community of people who are sharing and creating all this content, and this is another opportunity to get more engagement on the site, more people sharing information, and then, of course, as you said, a great way to monetize it, because now you’ve got all this local data coming through, and we know there are millions of advertisers out there who are waiting for more local targeting options. So, these are really great things.

A couple things for small businesses are that this is another way to build brand awareness and to have a presence in the Facebook platforms, so it’s another good option for creating good reviews. The downside, of course, is that this is also another place that small businesses have to be watching and using to manage their reputations. We talked about this a couple weeks ago-- it’s getting harder and harder. A small business only has so much bandwidth, and as there are more places that people are creating content, it also means there are more places that people are expecting responses and expecting you to be managing those platforms, so there are definitely some big changes there. I think another thing this does is that it’s also a great way of overcoming some of the fake reviews that people complain about. We also talked a little about astroturfing, so because people typically are built into their social graphs in Facebook, this is a great way for Facebook to have real, authentic reviews that are actually created by your friends. Therefore, depending on your friend, you might trust them, you might not, but at least you know who is giving you the review. To wrap it up, I think basically that people are on Facebook socially, and this is a great place for Facebook to go.

You’ve got a fascinating number of points in there. The authenticity angle is really interesting. As you said, Chad, the understanding of the social graph, I mean, Facebook has that data better than anybody. I know Google wants to have it with Google Circles, but I don’t know how well that’s actually played out. Yelp I don’t think really understands that. And, we can’t forget that Twitter’s going to be showing up to this game pretty soon, you know, with their IPO. They’re turning that corner too, so they’re going to be wanting to get in on this in some way, but they really don’t emphasize social graph information because their delivery model is just so different with the platform being so different. So, there are a lot of very interesting points, and I think at the end of the day, and you covered this, Chad, when you were talking to the Washington Post the other day, small businesses can see this as another great opportunity or outlet or as another thing to manage that’s too confusing. So, I think that’s a great place to close on this.

We would like your comments. Do your customers or do you as a small business see this and go, “Excellent. I want another opportunity. This is a great play for me!” or do you see it as a headache and think, “Oh boy, another thing to keep track of that’s really difficult.”? We’d love to hear those stories. That wraps up our Brown Bag for today. We’re here every day and we’re hoping you’ll subscribe to our YouTube channel. We’ll see you back tomorrow.