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Lies, Damned Lies and Statistics

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I shouldn’t respond. I ought to allow this typically one-sided argument fade into the ether without further comment. But I just can’t. And it’s all because of one sentence:

Just what data do Realtors accept as valid?

Here’s the setup: read a news article that indicates that 90% of home buyers are not in the market for a home in the near future. Disregard how that figure relates to similar figures in past years. Mock those who dare to bring up such relevant data. And then deduce that is 90% of home buyers aren’t buying, 90% of real estate agents will be forced out of the business.

Wait … maybe Barry’s onto something after all.

Kansas City Royals Face Detroit With Six-Player Lineup

KANSAS CITY – After learning that seventy-five percent of Kansas City residents have no intention of going to a Royals game this season, the club released 19 players from its roster and played with just six players Friday night.

Carnival Cruise Lines Scuttles Fleet

MIAMI, Florida – In scenes reminiscent of the Andrea Doria, Carnival Cruise Lines scuttled all but one ship after learning that 99% of respondents to a nationwide poll said they would not be taking a cruise this year.

American Bar Association Sees Severe Decrease

… actually, forget that one. Some people might hope it’s real.

Barry knows he’s twisted the data to create an outlandish post. He has to know that he’s done it. He’ll defend it to his dying day because that helps generate traffic. And as some of the so-called “experts” preach, traffic’s the big dog.

I shouldn’t respond to what amounts to a publicity stunt. I really shouldn’t. But sometimes it feels like if you let some folks pee on enough trees, we all end up drenched in urine.

Picture courtesy of Neatorama

Jonathan Dalton is a Realtor with RE/MAX Desert Showcase in Peoria, Arizona and is the author of the All Phoenix Real Estate blog as well as a half-dozen neighborhood sites. His partner, Tobey, is a somewhat rotund beagle who sleeps 21 hours a day.

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30 Comments

30 Comments

  1. Bill Lublin

    April 25, 2008 at 10:00 pm

    Jonathan: You must be reading my mind – I was halfway through writing a post about two surveys I had recently read – One in which 60% of the public was not going to buy a house in the next year and anohter which stated that 60% ofthe people polled were going to buy with in the year (oddly enough the 60% who were not going to buy thought their houses were going to increase in value).
    I love the statistic that said that house values had gone down 8% in the last year – Good News in L.A. and Las Vegas – Not such good news in Philadelphia where prices have remained stable-
    All we can do is keep putting out the truth and cautioning others to check their sources and look at the total picture, not the buzz word stats that make headline –
    And by the way – sorry about the Royals 😉

  2. Trace

    April 25, 2008 at 10:05 pm

    You’ve missed a great opportunity to use his own data to make your case in an argument against the validity and relevance of his statements and logic, although I get your point.

    As a Lane Bailey writes in the comments of the original article, “In any given year, only about 12% of people have been looking to buy/sell a home. So, that means that in a given year, 88% of the population wasn’t in the market. So, if that has dropped from 12% to 10%, will 90% of the agents go away?”

    His own numbers would indicate a 17% reduction (% decrease in market participants) in the number of agents if you accept his argument that there is a point for point % match between buyers not in the market and unemployed agents…..

    The truth is that it is actually not possible to make such a correlation because his assertion is based on bad logic. His assertion doesn’t even take into consideration the most important piece of data which is how many agents there are in the marketplace……..if there are 10 million agents a higher percentage reduction in the work force will occur in a down market whereas if there are only 1000 agents, a much lower percentage will become unemployed in a downturn….

    The author also uses supply and demand as a blunt force weapon without any consideration for market cycles….. I might have politely suggested he read up on this (https://en.wikipedia.org/wiki/Business_cycle) , if I wasn’t acutely aware that the article was purely sensationalistic in nature. 🙂

  3. Jonathan Dalton

    April 26, 2008 at 9:26 am

    Bill – if the Royals did reduce their roster by 75%, would anyone notice? 🙂

    Trace – someone actually did the math in the comments, if I recall, but was dismissed with the above line about what data we consider valid. But since the argument is based on faulty logic, as you said, there was no reason to even go through the exercise again here.

  4. Barry Cunningham

    April 26, 2008 at 10:42 am

    Jonathan, while it may make some comfortable to discredit statistics, I have yet to see one, even one detractor offer up a single study, survey, poll or any data to the contrary…including now you.

    I spend a lot of time researching and talking to a lot of very reputable sources and data providers. If there is someone I need to talk to that has some data in counter to the data I used for this post, then by all means, pleas, provide it and I will talk to him or her.

    Absent any information to the contrary, Realtors who have a probelm with certain data are not offering up anything but opinion.

    By the way..many who did not want to believe the numbers have asserted that it was my data? It’s quite telling that CNN Money and the AP / AOL Finance, quite reputable sources indeed, were not questioned in any comment or response.

    As I told Lane, if you do not believe the numbers, and you have contrary data feel free to give them a call and maybe they will accept your info and issue a retraction.

    Funny, the main point of the article was the irrefutable data regarding supply and demand which was the main point of the article.

    It’s easy to write posts, and make claims, and deny, it’s a typical response.

    Was our article designed to drive traffic? Duh, of course it is, why else would anybody write. It amazes me when people wonder aloud if that is a reason behind an article. Ask major media organizations if their articles are designed to drive traffic or subscriptions. You’ll get a resounding yes.

    We are not fabricating anything and would never do that, but we write many articles from many different points of view always based in fact. Our readership and listenershipo which is growing in leaps and bounds validates this for us…so we must be doing something right.

    I applaud you for continuing this discussion and opposing viewpoints are always welcome. I also enjoy your blog quite a bit and we would like to have you on the show on one of our “Blogging Thursday” editions.

    Keep up the good work and as always your opinions are greatly valued…even if they are dissenting in nature.

  5. Glenn fm Naples

    April 26, 2008 at 1:54 pm

    I agree and read the same article as Barry, however, I do dislike global statements. Real estate is still has local demand and supply. Yes, the inventory of available is quite excessive, however, it does vary according to location and areas within a particular location.

    As real estate agents we still need to be mindful of trends that we see via our local MLS’s and be able to interprete that data for the buyer or seller.

  6. Jonathan Dalton

    April 26, 2008 at 3:57 pm

    Barry, I’m not disputing the data. I’m disputing your conclusions regarding 90% of agents falling out of the business because 90% of homebuyers aren’t buying. I believe that conclusion is based on faulty logic and the end result, aided by a sensationalistic headline, is a failing argument.

    Also to clarify, I don’t write for traffic. If I did this post would be on my main blog. Those days are behind me. Traffic is nice but it needs to be focused traffic – traffic by those who actually intend to buy or sell homes in the Phoenix area and possibly use my services. A high Technorati rank or a high rank on BlogTopSites fueled by using the main name in the news in a given week is useless to me.

    Supply and demand is another story altogether, which is why I’ve tracked absorption rate on my blog since July 2006. Inventory numbers to my mind are useless without knowing what the demand may be.

    If you’d written about supply and demand I probably would have applauded. But it was the turn to the sensational in a blatant traffic grab that caused me take issue.

    Thank you for the compliment of following me and I’ll take you up on that invitation in the future.

  7. Barry Cunningham

    April 26, 2008 at 4:14 pm

    Aaaah..therin lies the problem Jonathan..I never made any such conclusion. You did.

    The title of the post is as follows:

    “If 90% of the Buyers Go Away Will 90% Of Realtors Go Away As Well?”

    As you can clearly see, that was a question posed to readers. I left that open for the reader and commenter to answer. No where in the article, not once, do I conclude that 90% of agents will go away. Re-read if you think otherwise.

    Too many people, (i.e. Realtors) become incensed when reading headlines and fail to actually read through the content. I can always tell dependingupon the response via email or commentary.

    As for the style of writing, our brokerage related site is completely different than the radio show site. The real estate sales site is COMPLETELY as you say, for “those who actually intend to buy or sell homes in” our area.

    The radio show blog is specifically to discuss real estate related issues on a global scale and is written for a mass audience. It is SPECIFICALLY non-local and like any media organization is written to attract the widest audience possible for obvious reasons.

    I look forward to continued discussion with you and your input is most assuredly valued.

  8. Jonathan Dalton

    April 26, 2008 at 6:45 pm

    A guy walked into psychiatrist, Barry, and the doctor pulls out the cardboard cards for a Rorschach Test.

    “What do you see, Mr. Jones,” the doctor asks. “Two people having sex,” replied Mr. Jones. The doctor wrote down the response and held up the second card.

    “What do you see, Mr. Jones,” the doctor asks. “Two people having sex,” replied Mr. Jones. The doctor wrote down the response and held up the third card.

    “What do you see, Mr. Jones,” the doctor asks. “Two people having sex,” replied Mr. Jones.

    “Mr. Jones,” said the doctor, “it appears you’re obsessed with sex.”

    “Why do you say that,” said Mr. Jones. “You’re the one with the dirty pictures?

    If you didn’t say it, you absolutely implied it. Please don’t pretend otherwise …

  9. Jonathan Dalton

    April 26, 2008 at 6:46 pm

    Bloody block quotes didn’t work. Let’s try again …

  10. Jonathan Dalton

    April 26, 2008 at 6:47 pm

    Oh, the heck with this … here’s the bloody citation:

    Since unsold homes equates to unearned commissions, what are the majority of real estate agents going to do? Earlier this year, we wrote what was viewed as an inflammatory article announcing the NAR Going Out Of Business Sale. Doesn’t sound too far fetched anymore does it?

    Don’t Believe It’s A Going Out Of Business Sale…Then Somebody’s Lying To You!

    Maybe you didn’t quote 90% in the article after the headline, but methinks you’re hinting at many folks leaving the business else NAR wouldn’t be going out of business.

  11. Genuine Chris Johnson

    April 26, 2008 at 9:44 pm

    60% of the public doesn’t buy houses in ANY given year. Or more. Barry’s wrong here, because people also lie about their intentions, etc.

    Good post JD.

  12. Barry Cunningham

    April 26, 2008 at 10:23 pm

    Jonathan..think what you will. I asked a question, supported by a survey and I asked for responses. As for agents leaving the business, many reputable sources say that number could be 30-40% or higher…source: NAR…need more?

    I don’t need innuendo.

    As for genuine Chirs…mopre of the same. discrediting published surveys and data and offers no substantive data to the contrary. It’s pretty typical like I said earlier.

    An argument might have more substance if one could back it up with actual documentation. I quote a study, I get met with rhetoric and opinion…and I get accused of having flawed data.

    It might make sense to the usual suspects but to a greater portion of those in the business and more importantly, the Consumer…you know the one you actually want to buy something…sees otherwise.

    The continued rejection for business research norms is readily apparent and the Consumer is taking notice. It’s time for agents to stand up to published fact and meet it with data to the contrary to support their beliefs otherwise it sounds like a lot of whining.

    So the question remains as it did on the day the article was published…Since unsold homes equates to unearned commissions, what are the majority of real estate agents going to do?

    Instead of rejecting data and questioning motives, why not just answer the question?

  13. Bob

    April 26, 2008 at 10:34 pm

    In the first 6 months of 2005, 50% of the agents who belonged to the San Diego MLS had made one sale or less. That was three years ago in a dramatically different market.

    Someone asked about agents and lenders in California as they related to unemployment stats – “if you aren’t making money, are you still employed?”.

    Was Barry’s question that far off?

  14. Jonathan Dalton

    April 26, 2008 at 11:58 pm

    > and I get accused of having flawed data

    No, you were accused of leaping to a faulty conclusion from which you’re backpedaling in the name of calling it a question. I realize that ignoring what’s actually being written and dismissing the person with a wave of the hand once it is clear that person isn’t backing down is part and parcel of the dog blog, but I’d like to think you’re better than that, Barry.

    If you had printed the 30-40% number anywhere in your article, rather than in your defense here, I’d have supported it because I’ve already seen that happen here locally. Even wrote about it once upon a time.

    To answer the question – no, 90% of all agents will not go out of business. Happier now?

  15. Glenn fm Naples

    April 27, 2008 at 7:47 am

    Bob – were there sales of new construction which might not be tracked in the San Diego MLS? The Naples MLS does not track sales of new construction, if it is not listed on the MLS. Personally, I sold new construction with none of them listed on the Naples MLS. My stats are distorted by this fact.

    I would think that since each real estate agent has an independent contractor agreement with a broker they are employed – but contradicts the earning a living aspect of employment.

  16. Barry Cunningham

    April 27, 2008 at 8:12 am

    Jonathan…if you want to throw flame, by all means, have at it and be comfortable in it. You choose to accuse and that’s fine, if it makes you happy, indulge yourself. Trust me, I don’t “backpedal” from ANYBODY! Certainly not someone who insists on furthering an agenda of implication.

    If you have read my articles , I think you will see that I don’t have any problem with being direct. I asked a question in a manner to obtain the most amount of commentary. It was successful then and it is successful still.

    My feeling, since you never asked, Is that the number will continue to climb…to what end I don’t know. I don’t have that data. Could it get to 90%…I think only one component keeps it from rising that high. As an independent contractor, an agent can be out of the business , doing nothing in the industry and still show to be on the NAR rolls and state rolls as an active agent.

    That factor removed and I think we could possibly see a very, very, high inactive number.

    In reading your articles, you have shown the propensity for much higher articulation than resorting to implication.

    All you had to do was ask if you had a question. This is your space and you can do as you wish but implying I was being sly is wholly inaccurate and erroneously accusatory.

  17. Toby Boyce

    April 27, 2008 at 8:53 am

    I think the “being employed” and “earning a living” are too very-very different things.

    Glenn, I wouldn’t be surprised if Bob’s number is right — I went to a CE class and the stats – which I of course can’t find to support – are that the average agent does something like 1.5 deals per year. And they got very specific that something like 30% have never done a deal. (these are from memory — so hopefully someone will correct me).

    I just closed on a deal on Friday where the other agent made a comment “this is my first transaction since last September.” Went into a contract where the other agent hasn’t had an ACCEPTED OFFER since July.

    This is in an area where the average “one-side” commission is less than $5,000, pretty quick to see why the herd is thinning.

  18. Jonathan Dalton

    April 27, 2008 at 9:20 am

    Barry, I guess I missed the comment on your thread where you explained that you didn’t mean to imply that 90% of all agents were going out of business. I only saw the comments where you chose to mock those who were commenting not on the notion of supply or demand but on the implied conclusion in your headline.

    For instance, Lane Bailey simply quoted the numbers and referred directly to your 90% figure from the headline. You chose to give Lane the number for the AP and said to call if he felt the data they used was erroneous. Except he never questioned the data.

    Larry Brewer had no issue with the data either and agreed some agents won’t survive. Your question was the one I posed above. Again, there was no issue with the data, only the conclusion … I’m sorry … question in your headline.

    If I had a question I would have asked and risked facing the wrath that comes to many. But in my mind, there was no question about the intent.

  19. Jonathan Dalton

    April 27, 2008 at 9:22 am

    And to Toby, Bob, etc. – the number I keep hearing from Dave Liniger at RE/MAX is 400,000 of the agents in NAR did not close a single side last year. Being licensed doesn’t mean you’re in business.

  20. Barry Cunningham

    April 27, 2008 at 9:34 am

    Didn’t know svengali went along with agentgenius..but if it works for you then fine. In any event. You have an opinion and nothing more, I surely know what I wrote and my intent. Only I know that, and I have stated it clearly.

    You are entitled to that which is your opinion…and that’s all it is.

    FYI…here in Broward County…500+ closed sales in each of the last couple of months…or 1500+/- closed sales in total thereabout in the last 3 months…if each was seperate then we’re talking 3,000 sides of transactions…over 30,000 licensed agents…do the math.

    My question remains. We do not know the spot where the parachute will land but it’s not looking good. Like I said and will reiterate, As an independent contractor, an agent can be out of the business , doing nothing in the industry and still show to be on the NAR rolls and state rolls as an active agent.

    I am not here to convince you, and this is my last comment, but “some” agents really, really, need to look at the numbers BEFORE insinuating.

    We’re going to have somebody from AOL Finance on this week to talk about the numbers and the data they have compiled. We’re also going to have somebody from Gallup on this week to talk about the real estate numbers.

    You might find it interesting, you’ll definitely find it educational.

    The following week we have Bob Shiller on. After these interviews there will be a lot of substantive data for you to question. Not liking the data is one thing…but it is substantive nonetheless.

    Do you have anybody that you would like us to talk to that maintains data that you feel is nationally recognized and can support your continued discrediting of published research? I would gladly get them on the show…anybody? Maybe one person?

    Have a great Sunday.

  21. Jonathan Dalton

    April 27, 2008 at 9:42 am

    In this age of transparency, some things are more transparent than others. You don’t need to be a svengali to see that.

    And since this is my last comment, it’s not the data I’m questioning. I’ve said that several times now.

  22. Bob in San Diego

    April 27, 2008 at 10:57 am

    Glenn,

    The builders that coop with agents tend to list their inventory in the MLS, so the numbers are probably not that skewed.

  23. Jonathan Dalton

    April 27, 2008 at 12:42 pm

    It may be a local thing, Bob … builders don’t put new homes in the MLS and only a portion of their spec inventory as well.

  24. Bill Lublin

    April 27, 2008 at 1:13 pm

    Johnathan – Great Post, as I said earlier, and clear in your point – Which is that statistics can be used to prove any point and are only worthwhile to the person commissioning the research for specific purposes (and understanding that the stats , or poll, or survey, are limited by the scope fo the data gathering, the methodologies of collection and interpretation) – So plainly put – generally people use statistics to prove a point – and usually there are other statistics which prove the opposing point.

    Barry; Not everyone writes for traffic as you said earlier – Johnathan made that point earlier, and I wanted to reinforce it (I just write because after 32 years of marriage it was a pleasure to have someone ask me for my opinion! – I’m not doing it to drive traffic anywhere)
    And since you wanted a survey or poll regarding statistics, I took a survey of a number of respected international figures – I hope this data is sufficient for the purposes of this discussion, since, statistically, 100% of the participants polled felt that statistics were unreliable.

    There are three kinds of lies: lies, damned lies, and statistics. -Benjamin Disraeli (1804 – 1881)

    Statistics: The only science that enables different experts using the same figures to draw different conclusions. -Evan Esar (1899 – 1995)

    The statistics on sanity are that one out of every four Americans is suffering from some form of mental illness. Think of your three best friends. If they’re okay, then it’s you. -Rita Mae Brown

    Get your facts first, and then you can distort them as much as you please. (Facts are stubborn, but statistics are more pliable.) -Mark Twain (1835 – 1910)

    Statistician: A man who believes figures don’t lie, but admits that under analysis some of them won’t stand up either. -Evan Esar (1899 – 1995)

    I could prove God statistically. -George Gallup

    Like dreams, statistics are a form of wish fulfillment. -Jean Baudrillard (b. 1929), French semiologist

    He uses statistics as a drunken man uses lamp-posts-for support rather than illumination. – Andrew Lang (1844-1912), Scottish author

    Out of the air a voice without a face
    Proved by statistics that some cause was just
    – W.H.Auden (1907–1973),Anglo-American poet

  25. Barry Cunningham

    April 27, 2008 at 1:20 pm

    Bill..run your business on thos quotes and project your earnings on them. Hope they work out for you.

  26. Chris Lengquist

    April 27, 2008 at 7:21 pm

    Back off my Royals! 🙂

    Anyway, the author of that post has made quite a splash in the blogging community of late. But then again, the National Enquirer generates quite a readership to. I just don’t bother to pay attention to either.

    But that’s just me. He can do what he wants. I’m fine with it. Whatever works for him. I just choose to handle myself differently, that’s all.

  27. Bill Lublin

    April 27, 2008 at 8:27 pm

    Barry; I’m celebrating 37 years in the business, and 25 years of operating a business knowing that those quotes need to be kept in mind when analyzing any numbers or reading about anyone else’s analyses – I appreciate your good wishes, and will continue to grow the business as I have in the past 🙂
    Chris – I’m feeling the love for the Royals – after all I’m a Phillies fan, something that carries its own unique burden! 🙂

  28. Bob

    April 27, 2008 at 8:53 pm

    Jonathon – its aways a local thing. 😉

  29. Jonathan Dalton

    April 27, 2008 at 9:21 pm

    Bob – that’s the beauty of this business, my friend.

    Bill – Only 37 years? Clearly you’re unqualified to comment. 🙂

    Chris – I agree with you. When I was reading yet another tired argument about disintermediation, I ignored it. I’ve actually ignored most of what was written because it’s as predictable as a Hardy Boys novel. Blogger writes something sensationalistic, dares anyone to enter the “conversation” and then dismisses any counter-argument without the slightest bit of introspection.

    And for just a few hundred bucks, you too can learn to write from a position of moral certitude even when you’re absolutely wrong.

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Business Marketing

Spruce up your product images with Glorify (just in time for Black Friday!)

(BUSINESS MARKETING) Want professional, customizable product images for your company? Consider Glorify’s hot Black Friday deal.

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Glorify app lets you create beautiful designs for your products.

Glorify, the app that creates high converting, customizable product images for your business, is offering a lifetime deal for $97 this Black Friday. In just a few clicks, you can transform one of Glorify’s sleek templates into personalized, professional-looking content – and now, you don’t have to pay that monthly fee.

Whether your business is in electronics, beauty, or food & drink, Glorify offers a range of looks that will instantly bring your product images to the next level. With countless font styles and the ability to alter icon styles, shadows and other elements, you can access all the perks of having your own designer without the steep price.

In 2019, Glorify was launched – the app was soon voted #2 Product of the Day and nominated for Best Design Tool by Product Hunt. Since then, they have cultivated a 20k+ user base!

Glorify 2.0, which was launched last week, upgrades the experience. The new and improved version of the app is complete overhaul of intuitive UI improvements and extra features, such as:

  • background remover tool
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  • design bundles for your website/store, social media
  • annotation tool
  • upload your brand kits and organize your projects under different brands
  • 1 click brand application
  • & much more!

“But the most important aspect of Glorify 2.0, is that it comes with a UI that sets us up for future scalability for all our roadmap features”, said CEO of Glorify Omar Farook, who himself was a professional graphic designer.

Farook’s dream was to provide a low-cost design service for the smaller businesses that couldn’t otherwise afford design services. Looking through reviews of the app, it’s evident that Glorify does just that – it saves the user time and money while helping them to produce top-notch product images for their brand on their own.

Glorify is one of the many new design-based apps that make producing content a breeze for entrepreneurs, such as Canva. As someone who loves design but doesn’t have the patience for Creative Cloud, I personally love this technology. However, Glorify is unique in that it is the only product-driven design app. All you have to do is upload your photo!

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This new Chipotle location will be fully digital

(BUSINESS NEWS) In the wake of the pandemic and popularity of online delivery, Chipotle is joining the jump to online-only locations, at least to test drive.

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Chipotle exterior, possibly moving to a fully digital restaurant space soon.

A lot of industries have switched to an online-only model in the wake of the pandemic. Most of them have made sense; between abundant delivery options and increased restrictions on workers, moving away from the traditional storefront paradigm isn’t exactly a radical choice. Chipotle making that same decision, however, is a plot twist of a different kind—yet that’s exactly what they’re doing with their first online store.

To be clear, the chain isn’t doing away with their existing locations; they’re just test-driving a “digital” location for the time being. That said, the move to an online platform raises interesting questions about the future of the restaurant industry—if not just Chipotle itself.

The move to an online platform actually makes a lot of sense for businesses like Chipotle. Since the classic Chipotle experience is much less centered on the “dining” aspect than it is on the customizability of food options, putting those same options online and giving folks some room to deliver both decreases Chipotle’s physical footprint and, ostensibly, opens up their services to more people.

It’s also a timely move given the sheer number of people who are sheltering in place. A hands-on burrito assembly line is not the optimal place to be in a pandemic, but there’s no denying the utilitarian appeal of Chipotle’s products. To that end, having another restaurant wherein you have the option to order a hearty meal with everything you like—which is also tailored to your dietary needs—is a crucial step for consumers.

Chipotle’s CTO, Curt Garner, says he is hoping this online alternative will offer a “frictionless” experience for diners.

As a part of that frictionless experience, consumers will be able to order in several different mediums. Chipotle’s website and their mobile app are the preferred choices, while services like GrubHub will also be available should you choose to order through a third-party. The idea is simple: To bring Chipotle to you with as little fuss as possible.

For now, Chipotle is committing to the single digital location to see how consumer demand pans out. Should the model prove successful, they plan to move forward with implementing additional digital locations nationwide.

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Business Marketing

Your business’ Yelp listing may be costing you more than you think

(BUSINESS MARKETING) The pay per click system Yelp uses sounds good in theory, but it may be hurting small businesses more than helping.

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Man browsing Yelp for his business listing in open office environment.

We all know Yelp – we’ve probably all used Yelp’s comment section to decide whether or not that business is worth giving our money to. What you might not know is how they are extorting the small businesses they partner with.

For starters, it’s helpful to understand that Yelp generates revenue through a pay per click (PPC) search model. This means whenever a user clicks on your advertisement, you pay Yelp a small fee. You never pay Yelp a cent if no one clicks on your ad.

In theory, this sounds great – if someone is seeking out your product or service and clicks on your ad, chances are you’re going to see some of that return. This is what makes paying $15, $50, or even $100 a click worth it.

In practice, it’s not all it’s cracked up to be. When setting up your Yelp account, you are able to plug in keywords that correspond with your business. For example, owner of San Francisco-based Headshots Inc. Dan St. Louis – former Yelp advertiser turned anti-Yelp advocate – plugged in keywords for his business, such as “corporate photographer” and “professional headshots”. When someone in the Bay Area searches one of those terms, they are likely to see Headshots Inc.’s Yelp ad.

You are also able to plug in keyword searches in which your ad will not appear. That sounds great too – no need to pay for ad clicks that will ultimately not bring in revenue for your business. In the case of Headshots Inc., Dan plugged in terms such as “affordable baby photography” and “affordable studio photography”, as his studio is quite high-end and would very likely turn off a user who is using the word “affordable” in their search.

How Yelp really cheats its small business partners is that it finds loopholes in your keyword input to place your ad in as many non-relevant searches as possible. This ensures that your ad is clicked more and, as a result, you have to pay them more without reaping any of the monetary benefits for your business.

If you plugged in “cheap photography” to your list of searches in which your ad will not appear, Yelp might still feature your ad for the “cheap photos” search. As if a small business owner has the time to enter in every single possible keyword someone might search!

In the case of Headshots Inc., Dan ended up paying $10k in total ad spend to Yelp with very little return. Needless to say, he is pissed.

So what does this mean for you if you use Yelp for your business? If you don’t want to completely opt out of Yelp’s shenanigans, try these 3 tips from Dan:

  1. Try searching some potential irrelevant keywords – are your ads showing up in these searches?
  2. Do your best to block the irrelevant keywords. It’s impossible to get them all, but the more you do the more money you will ultimately save.
  3. Keep an eye on the conversation rate on your profile – does more clicks mean more client inquiries? Make sure Yelp isn’t sending low-quality traffic to your profile.

Ultimately, it’s about protecting your small business. Yelp is the latest in big tech to be outted for manipulating individuals and small businesses to up their margins – a truly despicable act, if you ask me. If you don’t have tens of thousands of dollars for ad spend, then either boycott Yelp or try these tips – your company may depend on it.

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