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This article is about the Internet company. For other uses, see yelp (disambiguation).
Yelp, Inc.
Company typePublic company
NYSE: YELP
IndustryBusiness ratings and reviews
FoundedOctober 2004
HeadquartersSan Francisco, California, United States
Key people
Jeremy Stoppelman, Co-founder/CEO, Russel Simmons, Co-founder/CTO, and Geoff Donaker, COO
ProductsInternet rating and review services
RevenueUS $137.6 million (2012)[1]
Number of employees
1214 as of 2012[2]
WebsiteOfficial web site

Yelp, Inc. is an American company that offers Internet rating and review services including a directory service and review site with social networking features.

Its website had more than 100 million monthly unique visitors as of January 2013, up from 71 million on the same time last year.[3][4][5] Yelp's revenue comes from local business advertising.[6][7]

History

2004: Concept and founding

Yelp developed out of a business incubator called MRL Ventures that was founded by Max Levchin and several former PayPal executives.[8] After a lunch meeting between Levchin, Jeremy Stoppleman and Russel Simmons, Stoppleman proposed a web site where users could ask friends for their recommendations on local services via email[8][9][10] and Levchin agreed to invest $1 million in the project.[8] MRL co-founder, David Galbraith, who had instigated the research into a Yellow Pages style Internet product, came up with the name "Yelp",[11] and the project was launched in 2004.[8]

2005 to 2010: Expansion

The initial web site was not user-friendly and failed to attract significant Internet traffic.[10][12] However, Stoppelman and Simmons noticed the popularity of the write-a-review feature[9][10] and the web site was relaunched in February 2005 with this as one of it's key features.[13] By 2007 the web site had received one million user submitted reviews of local businesses.[14]

In 2005, Yelp began adding social networking features to its web site[14] and formed a group of super-users called, The Yelp Elite.[15] [16] These elite users were rewarded by being invited to parties and other special events sponsored by Yelp.[12][17] The number of reviewers grew from 12,000 in 2005, to 100,000 reviewers in 2006.[12] That year, Yelp began a marketing campaign featuring window stickers for store windows.[18] and by 2008 the website had fifteen million visitors per month.[19][20][21]

Yelp released a free REST- and JSON-based application programming interface (API) in August 2007.[22] The API provided access to business listing details, reviews, photos, and ratings and was used to add business information to a website, widget, or mobile application.[23]

Venture capital

Yelp 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.[12] In October 2006, Benchmark Capital made a $10 million investment[24] followed by a $15 million investment from DAG Ventures in February 2008.[25][26] In January 2010, Yelp obtained $100 million in venture capital from Elevation Partners which was used to increase their sales staff.[27]

Further development

In 2008, Yelp added new features that allowed business owners to manage their own listings,[28] and introduced its first iPhone app.[29][30] Yelp web sites were launched for Canada in 2008,[31] the United Kingdom in 2009,[32][33] France in 2010,[34] and in Spain[35] and Australia in 2011.[36][37] 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.[31][38][39] It was considered the first augmented reality mobile app for the iPhone.[40]

That December, Google entered into negotiations with Yelp to acquire the company[41][42][43] but the two parties failed to reach an agreement.[44][45][46] According to a New York Times report Google had offered "more than $500 million" but the deal was derailed after an offer from Yahoo for 50% more money. According to a report by Tech Crunch, Google refused to match Yahoo's offer and Yelp's management team and board of directors could not reach an agreement on the terms of the sale and both offers were abandoned.[47]

San Francisco, the city of origin, remained the most active as of 2008, with significant adoption in 18 metro areas including Boston, Chicago, New York, Washington, D.C., San Diego, and Los Angeles.[19] San Francisco usage earned the site over 4000 reviewed restaurant listings, some with hundreds of reviews each.[19] The site claimed over 2.3 million reviews overall as of February 2008.[25] Reviews trended 85% positive as estimated by the CEO[48] and were thought to come primarily from the 26–35-year old demographic.[49]

In January 2010, Yelp released "check in" features that put the company in competition with social networking company, Foursquare.[50][51] That June, Yelp incorporated OpenTable's restaurant reservation features into its website.[52][53]

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 Yelp's web site. 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. [54][55]

2011 to present

Yelp began offering a service called Yelp Deals in April 2011 and the service became available to Android and iPhone apps in June.[56] By August, Yelp 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.[57]

That September, Yelp participated in the Federal Trade Commission's investigation of alleged anti-competition practices by Google. Yelp alleged that Google Places was using Yelp content without disclosing its source. It also alleged Google favored Google Places over Yelp in its consumer search engine.[58][59]

That November Yelp filed for an initial public offering (IPO). According to the filing, the site contained 22 million user reviews[60] but had not yet generated a profit despite a 79.9 percent increase in annual revenues.[61] The IPO was held on March 2, 2012 at a share price of $15 and a company valuation of $898 million.[62] Shares rose 60 percent to $24.50 on the first day of trading.[63]

Yelp's content was integrated into the mapping and directions app in Apple's September 2012 release of iOS 6.[64] Yelp reported in November 2012 that 45% of its user traffic came from mobile devices.[65] The same year Yelp made an agreement to acquire its largest European rival, Qype, for $50 million.[66][67] The following year, Yelp CEO Jeremy Stoppelman, reduced his salary to $1, and began receiving compensation only through his stock options.[68] Yelp also began adding restaurant hygiene inspection scores from the health departments of New York and San Francisco to its restaurant listings.[69] Several competitors who emulated Yelp's concepts have failed or were acquired.[22][70][71]

Internet services and features

Search engine

Yelp provides specialized search capabilities and provides information about business' 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.[22] Listings include stores, service businesses, cultural venues, public places and more.[72] Yelp websites and features are available for many mobile devices.[73]

Advertising

Businesses may advertise with Yelp for preferred search result placement and extra listing features. For the advertising fee, the business may include an individualized message, video and photo slide show onto the web page for its listing as well as receive reports on listing traffic.[74] Yelp has taken measures to prevent false check-ins by service users at their advertising clients' locations.[75]

Online-offline community

Yelp combines reviews and social networking functionality to create an Internet community.[76][48] The social web features allow web site visitors to view each contributors popularity, community status, business reviews and interests.[77] Yelp's "First to Review" reward system, peer feedback mechanisms, and preferred placement for popular reviews are designed to motivate contributors.[78][79] Business owners can also communicate with their reviewers via private messages or public comments.[80] 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.[81] The web site also has an Internet forum to discuss local businesses and events.[49]

The company's attempts to strengthen their user community include events at nightclubs, bars, restaurants, and cultural venues for its "Elite" members in various cities.[9][82] Elite reviewer status is gained by writing useful and entertaining reviews that gain the recognition of others.[83][84]

Disputes over legitimacy of reviews

Complaints regarding Yelp's relationship with the business owners reviewed on its web site were reported by CBS news in August 2008.[74] In early 2009 East Bay Express reported that it had spoken to "dozens" of local business owners "over a span of several months" and six of them reported that Yelp 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."[85] Additional allegations by several business owners were reported in a follow up article a month later.[86]

In early 2010, a class-action lawsuit was filed against Yelp and alleged that it had attempted to force a Long Beach veterinary hospital into paying $300 a month "to suppress or delete reviews that disparaged the hospital."[87] The following month, nine additional businesses joined the class-action lawsuit[88] and "two similar lawsuits" were filed.[89] 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.[89][90][91][92] Yelp stopped offering business advertisers the option to bring a positive review to the top position in an effort to increase review process transparency.[93][94]

This collection of 2010 lawsuits was combined into one "potential class-action lawsuit"[95] and was dismissed by San Francisco U.S. District Judge Edward Chen in 2011. Despite objections from the plaintiff's lawyer,[96] Chen ruled that Yelp's choices for which user reviews to display on the site was covered by the Communications Decency Act which protects Internet companies from liability concerns caused by user-generated content.[97][98] The 9th Circuit Court held a hearing for 3 judges regarding Judge Chen's dismissal and stated that Yelp had immunity for some things but not for other things (such as being the original writer of reviews). One Appeals Court judge stated that the dismissal might have been premature before discovery was permitted because the facts are important and in this matter the facts "are a moving target."

In August 2012, two New Haven, CT business owners alleged that Yelp had removed positive reviews after they declined to buy advertising.[99] In October, Yelp "began using a computer filter to help uncover companies that purchase[d] fake positive reviews" and published the names of those companies.[100] ABC news reported that several companies were offering to pay people to publish positive reviews on the Yelp website and that "according to various online reports, as many as 30 percent of online reviews are fake."[100] In November, CBS Denver reported a complaint from a "small business owner" about Yelp's review filtering system.[101]

In 2013, a California court upheld Yelp's right to use "an automated review filter to suppress" inappropriate business reviews using an undisclosed criteria.[102] Yelp successfully defended itself in a similar case (Levitt v. Yelp) in 2011.[102] In 2013 in Portland Oregon, {Bernath v. Yelp 1305 06167} a business owner sued Yelp as the original publisher (and not an inter active publisher hosting the comments of others) as Yelp meets many if not all definitions of being an employer of its writers under the legal theory respondeat superior.

See also

References

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