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Facebook Places: The Real Target Is Yelp

Most of the attention paid to Facebook Places, the new location feature that the social network launched on Thursday, has focused either on the privacy implications of the service or on the impact it could have on location-based startups such as Foursquare (which some have said they expect to be "crushed" by the new feature). Facebook's real focus with this launch, however, isn't individual users or even Foursquare: Instead, it sees Places as a way into the local business and local advertising markets, and the company with the target painted on its back is Yelp.

We're hearing that Facebook is pouring resources into pitching the Places feature as a tool for local businesses in dozens of markets, by approaching individual store owners and business people and selling them on the idea of setting up a Places page for their location. According to Facebook's description of the new feature, anyone can create a page for a place, but businesses can "claim" their page by responding to a phone call from a Facebook representative or by uploading some kind of official documentation that proves they have the right to that location.

Yelp, whose service is also based on giving businesses a place to view and respond to feedback from customers, has a similar claim process.Like Foursquare and Gowalla, Yelp was described Thursday as a "launch partner" for Facebook Places, presumably to show that the service isn't designed to compete with these other services but will be able to incorporate their check-ins and other information via the Facebook Places API.(Another location startup, Hot Potato, today officially confirmed earlier reports that it has been acquired by Facebook.)

Will Yelp Lose Its Lead?

By targeting local businesses and advertisers and trying to get them signed up for Places pages, Facebook is clearly going after Yelp's bread and butter. Yelp, which launched a "check-in" feature earlier this year in an attempt to compete with Foursquare and other location-based apps, recently said the company has more than 10 million reviews in its database and gets 30 million visitors a month.(Yelp also announced a deal earlier this year with Elevation Partners for up to $100 million in funding.) That definitely gives it a head start, but Facebook has more than 500 million users and is still growing.

Not only that, Facebook already has a relationship with businesses and advertisers: more than 1 million local businesses have already created Facebook pages (what used to be called "fan pages") for their companies, services, and brands, both to offer information to users or potential customers and to interact with those customers in a single place.That represents—to some extent, at least—a potentially captive market for the new Places feature, which adds location-specific functions to what was just a marketing channel (Facebook's advertising revenue is expected to reach $1.2 billion this year). Its guide for businesses says:

"Places creates a presence for your business's physical store locations—encouraging your customers to share that they've visited your business by 'checking in' to your Place. When your customer checks into your Place, these check-in stories can generate powerful, organic impressions in friends' News Feeds, extending your brand's reach to new customers."

Yelp isn't the only one threatened by Facebook's move. Google also has a Places service that is designed to appeal to small and midsize businesses. It was originally called Places Pages and allowed companies either to set up or to claim a page related to their business, but the search giant recently renamed it Google Places.According to the company, more than 4 million businesses have added their pages and information to the service.One of the features of Google's offering is that retailers in certain cities can request a free photo shoot for their business, and the search company will send a photographer to take snapshots of their location to be added to their Places page.

Whether Facebook can transfer some of its existing clout with businesses to a location-based one that appeals to advertisers and small to midsize businesses remains to be seen, but the social network is clearly betting on that to be a major contributor to its future growth.

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