Working Paper: NBER ID: w30810
Authors: Michael Luca; Abhishek Nagaraj; Gauri Subramani
Abstract: We evaluate the extent to which small businesses maintain an online presence, looking at restaurant listings on a major online review platform. While the majority of restaurants have an online presence, we find that roughly 18 percent in our sample have no presence as of the end of 2017, despite being able to list their business for free. Using temporal variation in a restaurant's online presence as well as a natural experiment arising from a data acquisition that led over a thousand businesses to be added to the platform, we find that maintaining an online presence is valuable for small businesses. Establishing an online presence leads to a 5% revenue increase. Using data on customer reviews post-add, we explore potential channels that could explain why restaurants continue to remain offline despite potential benefits from digital representation. Consistent with models of voluntary disclosure, we find that businesses that had stayed offline until the acquisition ended up having lower ratings, on average, than those that added themselves or were added by customers.
Keywords: online presence; business performance; Yelp; small businesses; digital engagement
JEL Codes: D8
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Being added to Yelp (Y91) | Business revenues (H25) |
| Being added to Yelp by super adders (Y90) | Business revenues (H25) |
| Being added to Yelp through bulk data acquisition (D26) | Business revenues (H25) |
| Online presence (L86) | Business performance (L25) |
| Businesses remaining offline (L81) | Average ratings (Y10) |