Should We Pass A Law To Stop Yelp From Harming Chain Restaurants?

from the the-internet-enables-niches dept

We keep hearing stories about how "the internet is killing music" or "the internet is killing newspapers," which inevitably seem to suggest that "something must be done," and often that "something" involves the government getting involved. Of course, if you look at the details, you realize that the internet isn't killing music or journalism at all. In many ways it's just changing both and enabling new means of creation, distribution, promotion and sales. But, people like to interpret the struggles of one part of an industry, and pretend that represents the wider industry -- and then insist something must be done.

But, of course, one part of an industry becoming obsolete due to technology and market changes is the natural path of disruption, and not a cause for concern. Just to highlight this point, it's worth pointing to a Washington Post article with the title, How Yelp is killing chain restaurants. It refers to a study (pdf) that looked into the impact of Yelp reviews on restaurants. Among its many findings was that the market share of big chain restaurants appears to have declined.

When you think about it, this is not surprising at all. Part of the reason why chains are successful is because they offer familiarity, which allows potential diners to trust that the food they'll get at them will be of a certain quality. If you're unsure where to go, and want to minimize the risk, you are more likely to just hit up a big brand you're familiar with. But Yelp changes the equation. Now you can get an approximation of trust in a restaurant you've never heard of. It's not perfect, but it certainly decreases the risk, and thus increases the likelihood that you'll try a smaller alternative. At the same time, there's little that Yelp is likely to do to increase the attractiveness of a chain restaurant.

Of course, there's a wider parallel to other industries as well. We've heard some fears that the internet creates too many "winner takes all" situations, with a single dominant player, but the reality often seems quite different. It creates the ability to build a multitude of niches, because information decreases the risk of trying someone new or different. So rather than relying on a major record label to spoon-feed you the next big hit, you can find more niche music that you like. Rather than relying on the mainstream press for your news coverage, you can seek out alternative viewpoints. The rise of the internet and the ability to share information means that things are less likely to consolidate into single large players, because the reasons for such large entities often is undermined by more widespread information.

Filed Under: chain restaurants, protectionism
Companies: yelp