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Yelp, Inc.
From Wikipedia, the free encyclopedia
This article is about the Internet company. For other uses, see yelp (disambiguation).
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| Type | Public company |
|---|---|
| Traded as | NYSE: YELP |
| Industry | Business ratings and reviews |
| Founded | October 2004 |
| Headquarters | San Francisco, California, United States |
| Key people | Jeremy Stoppelman, Co-founder/CEO, Russel Simmons, Co-founder/CTO, and Geoff Donaker, COO |
| Products | Internet rating and review services |
| Revenue | US $137.6 million (2012)[1] |
| Employees | 1214 as of 2012[2] |
| Website | Official website |
Contents
History
2004: Concept and founding
Yelp Inc. developed out of a business incubator called MRL Ventures that was founded by Max Levchin and several former PayPal executives.[3] Stoppleman proposed a website where users could ask friends for their recommendations on local services via email[3][4][5] and Levchin agreed to invest $1 million in the project.[3] MRL co-founder, David Galbraith, who had instigated the research into a Yellow Pages style Internet product, came up with the name "Yelp",[6] and the project was launched in 2004.[3]2005 to 2010: Development and expansion
In 2005, Yelp Inc. began adding social networking features to its website[7] and formed a group of super-users called, The Yelp Elite.[8][9] These elite users were rewarded by being invited to parties and other special events sponsored by Yelp.[10][11] The number of reviewers grew from 12,000 in 2005, to 100,000 reviewers in 2006[10] and by 2007 the website had received one million user-submitted reviews of local businesses.[7][12] In 2008, website traffic increased to fifteen million visitors per month.[13][14][15]Yelp Inc. obtained $5 million in venture funding from Bessemer Venture Partners in October 2005 to fund expansion into the New York City, Chicago and Boston markets.[10] In October 2006, Benchmark Capital made a $10 million investment,[16] which was followed by a $15 million investment from DAG Ventures in February 2008.[17][18] In January 2010, Yelp Inc. obtained $100 million in venture capital from Elevation Partners which was used to increase their sales staff.[19]
In 2008, Yelp Inc. added new features to its website that allowed business owners to manage their own listings,[20] and introduced its first iPhone app.[21][22] Yelp websites have been launched for Canada (2008),[23] the United Kingdom (2009),[24][25] France (2010),[26] Germany (2010),[27] Australia (2011),[28][29] Denmark (2012),[27] Turkey (2013),[30] New Zealand (2013), Brazil (2013), the Czech Republic (2013)[31] and Spain (2013).[32] In August 2009, an update to the Yelp iPhone app was released with a hidden Easter Egg feature called Monocle, that superimposed Yelp ratings onto the camera view of the iPhone.[23][33][34] It was considered the first augmented reality mobile app for the iPhone.[35]
That December, Google entered into negotiations with Yelp Inc. to acquire the company,[36][37][38] but the two parties failed to reach an agreement.[39][40][41] According to The New York Times, Google had offered "more than $500 million" but the deal was derailed after Yahoo offered $1 billion.[42] Tech Crunch reported that Google refused to match Yahoo's offer. Then, Yelp Inc.'s management team and board of directors could not reach an agreement on the terms of the sale and both offers were abandoned.[43]
San Francisco, where Yelp was founded, remained the most active as of 2008, though there was significant adoption in 18 metro areas including Boston, Chicago, New York, Washington, D.C., San Diego, and Los Angeles.[13] The site had more than 4,000 reviewed restaurant listings in San Francisco, some with hundreds of reviews each.[13] Yelp is reported to have 108 million visitors per month and 42 million total user reviews.[44] Reviews trended 85% positive as estimated by the CEO[45] and were thought to come primarily from the 26–35-year old demographic.[46]
In January 2010, Yelp Inc. instituted Internet "check in" features that put the company in competition with social networking company Foursquare.[47][48] That June, Yelp incorporated OpenTable's restaurant reservation features into its website.[49][50]
In September, two economists from the University of California, Berkeley surveyed 300 restaurants in San Francisco, California, and correlated their evening reservations rates with their rating on the company's website. Using online reservation data from July 2010 to October 2010, they concluded that an upgrade from 3.5 to 4 stars caused an increase of 19 percentage points, in the sellout rate for 7pm bookings.[51][52] That same month, an assistant professor at Harvard Business School published a paper using data from all Yelp reviewed restaurants in Seattle, Washington during the period of 2003 to 2009 concluded that a one-star increase in a restaurant's Yelp rating led to an increase of 5% to 9% in revenues.[53]
2011 to present: Further development and public stock offering
Yelp Inc. began offering a service called Yelp Deals in April 2011 and the service became available to Android and iPhone apps in June.[54] By August, Yelp Inc. had cut back on the frequency of its offering of Yelp Deals and was planning to cut its Yelp Deals sales staff in half, due to increased competition and market saturation.[55]That September, Yelp Inc. participated in the Federal Trade Commission's investigation of alleged anti-competition practices by Google. Yelp Inc. alleged that Google Places was using its web content without disclosing the source. It also alleged Google favored Google Places over the Yelp website in its consumer search engine.[56][57]
That November, Yelp Inc. filed for an initial public offering (IPO). According to the company's filing with the Securities Exchange Commission[58] it had not yet generated a profit yet, despite a 79.9 percent increase in annual revenues.[59] On March 2, 2012, the company's stock began public trading on the New York Stock Exchange at a share price of $15 and was valuated at $898 million.[60][61] The more than $110 million raised from the stock offering has helped to fund rapid expansion into both U.S. and international markets.[27]
The company's website content was integrated into the mapping and directions app in Apple's September 2012 release of iOS 6.[62] The company reported in November 2012 that 45% of its web traffic came from mobile devices.[63] The same year Yelp Inc. made an agreement to acquire its largest European rival, Qype, for $50 million.[64][65] The following year, Stoppelman reduced his CEO salary to $1, and began receiving compensation exclusively through his stock options.[66]
In 2013 Yelp Inc. acquired the start-up, online reservation company, SeatMe, for $12.7 million in cash and company stock.[67] That year the company began adding food ordering and delivery options[68][69] and displaying restaurant hygiene inspection scores on the website.[70] According to a September 2013 article by CNN, Yelp Inc.'s second quarter revenue "exceeded expectations" but like "many other Internet darlings, has yet to turn a profit."[31]
Employees and corporate culture
In 2012/13, Yelp moved into its new corporate headquarters, occupying nearly 150,000 square feet on 12 floors of 140 New Montgomery (the former PacBell building) in San Francisco.[71] The company’s sales employees are located in the U.S. cities of San Francisco, New York City and Scottsdale, Arizona. International locations include Hamburg, Germany and London.[72] The company's corporate culture includes informal dress, a non-hierarchical structure and an egalitarian desk arrangement in a large, central room.[27] Employees "of any rank" are encouraged to speak out at organizational meetings.[31] Recreational facilities include computer games, a pool table and snack area.[27] The company aggressively recruits new employees at universities.[27]Internet services and features
The company's website was attracting more than 100 million unique visitors per month as of January 2013[73][74][75] with 30% of its traffic coming from the "mobile web".[76] According to the founder of Sterling Market Intelligence, Yelp Inc.'s website is "one of the most important sites on the Internet, for both business owners and consumers."[27]Search engine
The company's website provides specialized search capabilities and provides information about businesses in a given area using address or ZIP code information. Each paid business listing contains a filtered 5-point rating, filtered reviews from other site visitors, and details such as the business' address, hours, accessibility, and parking. Site visitors can update business listings with moderator approval, and business owners can access and update their listing information directly.[77] Listings include stores, service businesses, cultural venues, public places and more.[78] Yelp websites and features are available for many mobile devices.[79] The company released an application programming interface API in August 2007, which gave developers the ability to use data from Yelp's business listings in third-party applications.[77][80]Advertising
The company's primary source of income is through business advertising on its Yelp website, including preferred search result placement and special listing features.[81][82] As of August 2013, 80% of Yelp Inc.'s revenues were being generated through merchant profile enhancements and advertisements on its website. Another 15% of its revenues was attributed to advertising revenues from national companies[27][83] with advertising growth measured at 77% per year.[83] As of 2013 about half of Yelp Inc.'s staff were advertising salespersons.[31]Online-offline community
The company's Yelp website utilizes user reviews and social networking to create an Internet community.[45][84] The social web features allow website visitors to view each contributors popularity, community status, business reviews and interests.[85] Yelp's "First to Review" tags, peer feedback mechanisms, and preferred placement for popular reviews are designed to motivate contributors.[86][87][88] Business owners can also communicate with their reviewers via private messages or public comments.[89] Yelp requires reviewers to register and encourages them to publish their real name and a photograph. This creates a participatory culture where users share their personal insight and suggestions providing collective feedback to local businesses.[90] The website also has an Internet forum to discuss local businesses and events.[46]The company's attempts to strengthen its user community include events at nightclubs, bars, restaurants, and cultural venues for its "Elite" members in various cities.[4][91] Elite reviewer status is gained by writing useful and entertaining reviews that gain the recognition of others.[92][93]
User review filter
Since its inception in 2004, Yelp Inc. has utilized an "aggressive" user review filter designed to isolate reviews that are either unhelpful or suspected of being in some way biased or fraudulent.[94] As a result 25% of the user reviews that are submitted to the company's website are isolated and placed in a secondary location on the site.[94] The filter is described as an algorithm in a "sophisticated software system" that disqualifies many users reviews from being used in the calculation of that merchant's star rating on the Yelp website.[95]Business reviews controversy
Throughout much of its history, Yelp Inc. has been the focus of criticism from some of its business clients who have alleged that Yelp Inc. manipulates its website, user reviews based on that business' participation in Yelp's advertising programs.[96] Yelp Inc. denies this and has expressed dissatisfaction with business owners who have solicited reviews from friends and associates[97] or paid for "fake" reviews.[98]Complaints from business' were reported in August 2008 by ABC News[81] and in 2009, East Bay Express reported that it had spoken to "dozens" of local business owners and six of them reported that Yelp Inc. salespersons had promised to "move or remove negative reviews" from their Yelp web page profile, if they purchased advertising. The article also reported Yelp's COO as saying that "advertisers and sales representatives don't have the ability to move or remove negative reviews."[99] Additional allegations by several business owners were reported in a follow-up article a month later.[100]
In early 2010, a class-action lawsuit was filed against Yelp and alleged that it asked a Long Beach veterinary hospital to pay $300 a month for advertising services which would include the suppression or deletions of customer reviews "that disparaged the hospital."[101] The following month, nine additional businesses joined the class-action lawsuit[102] and "two similar lawsuits" were filed.[103] Yelp denied that its sales force was "strong arming" businesses and in response to the lawsuits, Yelp altered its "review policy" and added new web features in April 2010 to deter misconceptions by business owners.[103][104][105][106] In an effort to increase review process transparency, Yelp stopped offering business advertisers the option to bring a positive review to the top position.[107][108] This collection of 2010 lawsuits was combined into one "potential class-action lawsuit"[109] which was dismissed by San Francisco U.S. District Judge Edward Chen in 2011. Despite objections from the plaintiff's lawyer,[110] Chen ruled that Yelp's choices regarding the display of user reviews on their website was covered by the Communications Decency Act which protects Internet companies from liability concerns caused by user-generated content.[111][112] In July 2013, the plaintiffs filed an appeal in the 9th Circuit Court of Appeals in San Franscisco.[113]
In August 2012, two New Haven, CT business owners alleged that Yelp had removed positive reviews after they declined to buy advertising.[114] In October, Yelp implemented a system to "uncover companies that purchase[d] fake positive reviews".[115] An ABC news article reported its own list of companies offering to pay people to publish positive reviews on the Yelp website.[115] In November, CBS Denver reported a complaint from a "small business owner" about Yelp's review filtering system.[116] In October, Yelp Inc. placed, 90 day, "consumer alert" warnings on their website for about 150 business' that they concluded were guilty of paying for user reviews.[98][117][118]
In 2013, a California court upheld Yelp's right continue to use their "aggressive"[94] and "automated review filter" designed to eliminate false or inappropriate business reviews using an undisclosed criterion.[119] Yelp successfully defended itself in a similar case (Levitt v. Yelp) in 2011.[119] In June 2013, Yelp Inc. filed a lawsuit against BuyYelpReview/AdBlaze accusing the company of "selling Yelp reviews from unknown accounts to unknown third parties."[120][121][122]
In July, the International Business Times reported that the company continues to be criticized outside the courtroom and that "anti-Yelp sentiment is rampant on the Internet and social media."[113] The article also reported that the Federal Trade Commission had received almost 700 complaints against Yelp in the prior 4 years.[113] In August, Yelp Inc. launched a series of town hall style meetings in major American cities to address misconceptions amongst local business owners.[44][113] Yelp assisted the New York State Attorney General in an investigation that led to $350,000 in total fines for 19 companies "that were writing fake reviews for small businesses that paid them."[94][123] In September, Yelp Inc. filed a lawsuit against a San Diego attorney who had previously led litigation against them, alleging that the attorney "had his employees write his [company's Yelp] reviews, and that he belonged to a cadre of lawyers who reviewed each others firms" on Yelp's website.[97]
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