The Canadian startup that could out-help Yelp

There was a story earlier this week that prison inmates in the U.S. are using the online recommendation service Yelp to rate their jail cells. Is this … useful? Funny? Cool?

Those three options appear next to every review that appears on Yelp, which are written by everyday people rather than professional critics. Clicking on one of the useful/funny/cool buttons is a way to offer a user-generated review of a user-generated review, which may sound a little meta for those who aren’t well versed in social media. The point is that Yelp may be the one of the best examples of an organization that thinks globally but truly acts locally, creating a platform whereby people who may never speak to their next-door neighbours consider the opinions about nearby restaurants, dentists or beauty parlours. Investors can’t seem to get enough of it.

Although the company posted a first-quarter loss on Wednesday, shares spiked more than 27 per cent and closed at an all-time high of $32.22 on Thursday, perhaps because many of Yelp’s other numbers looked so promising. For example, monthly visitors have risen 43 per cent since the same time last year, coupled with a 42 per cent increase in the number of reviews, to 39 million. This suggests a market that may be ripe for further competition. You have to wonder if there is an opportunity for a home-grown startup to emerge from within Canada to challenge Yelp and its competitors like UrbanSpoon and FindTheBest.com.

So far I’ve only seen two attempts at this. One is Yellow Pages Group, which acquired a food and drink recommendation service called Restaurantica about two years ago, and Sortable, which was founded in Waterloo.

While Yellow Pages Group is more broad-based and stems from a traditional player in local classified advertising, Sortable is more focused around consumer electronics like cameras and TV sets. Instead of user-generated reviews, it uses algorithms to sort through various features, prices and specifications to help users make the right choice. This is probably a better way of thinking about what Yelp and its ilk do. It’s not so much about showcasing various opinions through amateur ratings but helping people make decisions via online tools.

“Ultimately we think there is a huge market for companies that can aggregate all the available web data on a subject and tailor it to a user's personal preferences in an unbiased way,” says Christopher Reid, one of Sortable’s co-founders. “There are a lot of players doing that in specific niches but our focus is on big data and generic knowledge systems because it means we can be useful in any category.”

Reid sees Sortable competing more with the likes of Google than Yelp, though he notes that Google may be abandoning its status as a neutral, machine-based search engine by buying recommendation guide services like Zagat.

“Someone like Yelp just has giant dumps of text -- really unique and useful chunks of text but they really don't know the treasure they have. They can search and filter in a simple way with a few fields. That's not sufficient for the future of the web,” he says.

In Yelp’s earnings call, however, co-founder Jeremy Stoppelman said the important part is not so much how the information is analyzed but whether users act on it. Yelp’s users, he said, aren’t just reading reviews. “They're following through and making contact with businesses via check-ins, reservations, clicks to their website, phone calls and directions,” he said.

The space in which Yelp and Sortable play may come down to a war between data-driven and opinion-based decision-making. Or, much as the acquisition activity of Google and others suggests, it will be a mix of the two. That’s how our minds actually work, isn’t it? Yes, we want information that is useful. But it sometimes helps if it’s funny. And if it blends those things? That’s cool.