Yelp

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This article is about the Internet company. For other uses, see yelp (disambiguation).
Yelp, Inc.
Type Public company
Traded as NYSEYELP
Industry Business ratings and reviews
Founded October 2004 (2004-10)
Headquarters San Francisco, California, United States
Key people Jeremy Stoppelman, Co-founder/CEO, Russel Simmons, Co-founder/CTO, and Geoff Donaker, COO
Products web-based urban guide
Revenue Increase US$ 232.988 million (2013)[1]
Employees 1,984 (December 2013)[1]
Website Official website

Yelp, Inc. is a multinational corporation headquartered in San Francisco, California, that operates an "online urban guide" and business review site. Yelp was founded by Jeremy Stoppelman and Russel Simmons in 2004. The company's Yelp website began as an email service for exchanging local business recommendations, and later introduced social networking features, discounts, and mobile applications. Yelp has extended its services to Argentina, Australia, Brazil, Canada, Chile, Japan, Mexico, New Zealand, Singapore and parts of Europe.

Google offered to buy the company in 2009, but they and Yelp failed to reach an agreement on the terms of a sale. Yelp received $130 million in venture finance as a privately held company, and began public trading of its stock on the New York Stock Exchange in 2012. The firm acquired Qype, its largest European rival, in 2012, and online reservation company SeatMe, in 2013.

The company's rating system and tools for filtering reviews have been the subject of both controversy and litigation. A Harvard business administration professor co-wrote a study in November 2013 that said that fake reviews on the site rose to roughly 20% in 2013.

Company history[edit]

Origins (2004–2009)[edit]

Co-founder and CEO of Yelp Jeremy Stoppelman

Two former PayPal employees, Jeremy Stoppelman and Russel Simmons, founded Yelp during their time at a business incubator, MRL Ventures, in 2004.[2][3] Stoppelman and Simmons conceived the initial idea for Yelp as an email-based system for referring friends to local businesses, after Stoppelman caught the flu[4] and had a difficult time finding an online recommendation for a local doctor.[3][5][6] The co-founders' former colleague from PayPal and founder of MRL Ventures, Max Levchin, provided $1 million in initial funding.[3] MRL co-founder David Galbraith, who instigated the local services project based on user reviews, came up with the name "Yelp".[3][7] According to Fortune Magazine, Yelp's initial email-based system was "convoluted".[3] The idea was rejected by investors and did not attract users beyond the cofounders' friends and family.[8] Usage data showed that users were not answering requests for referrals, but were using the "Real Reviews" feature, which allowed them to write reviews unsolicited.[3] According to the San Francisco Chronicle, "the site's popularity soared" after it was re-designed in late 2005.[9]

Yelp raised $5 million in funding in 2005 from Bessemer Ventures and $10 million in November 2006 from Benchmark Capital.[3] The number of reviewers on the site grew from 12,000 in 2005, to 100,000 in 2006.[8] By the summer of 2006, the site had one million monthly visitors.[8] It raised $15 million in funding from DAG Ventures in February 2008.[10][11] In 2010, Elevation Partners invested $100 million; $75 million was spent on purchasing equity from employees and investors, while $25 million was invested in sales staff and expansion.[12] Yelp grew from six million monthly visitors in 2007 to 16.5 million in 2008 and from 12 to 24 cities during the same time period. By 2009, it had 4.5 million reviews.[13] By 2010, Yelp's revenues were estimated to be $30 million and it employed 300 people.[8]

Private company (2009–2011)[edit]

Yelp introduced a site for the United Kingdom in January 2009[14] and one for Canada that August.[13] The first non-English Yelp site was introduced in France in 2010; users had the option to read and write content in French or English.[15] From 2010 to 2011, Yelp launched several more sites, in Austria, Germany, France, Spain and the Netherlands. International website traffic doubled during the same time period.[16] An Australia website went live in November 2011.[2] The Australian website was supported through a partnership with Telstra, which provided one million initial business listings,[17] and was initially glitchy.[18] Yelp had a presence in 20 countries by the end of 2012, including Turkey[19] and Denmark.[20] Yelp's first site in Asia was introduced in September 2012 in Singapore.[4]

In December 2009, Google entered into negotiations with Yelp to acquire the company,[21][22] but the two parties failed to reach an agreement.[23][24] According to The New York Times, Google offered more than $500 million, but the deal fell through after Yahoo offered $1 billion.[25] Tech Crunch reported that Google refused to match Yahoo's offer. Both offers were later abandoned following a disagreement between Yelp's management and board of directors.[26]

Yelp began a service called Yelp Deals in April 2011,[27] but by August it was forced to cut back due to increased competition and market saturation.[28] In September, the Federal Trade Commission investigated Yelp's allegations that Google was using Yelp web content without authorization and that Google's search engine algorithms favored Google Places over similar services provided by Yelp.[29][30] In a January 2014 agreement, Google was not subject to anti-trust litigation from the FTC, but did have to allow services like Yelp the ability to opt-out of having their data scraped and used on Google's websites.[31]

Public entity (2011 – current)[edit]

In November 2011, Yelp filed for an initial public offering (IPO) with the Securities Exchange Commission.[32][33] On March 2, 2012, the company's stock began public trading on the New York Stock Exchange at a share price of $15, valuing the company at $898 million.[34][35] In 2012 Yelp agreed to acquire its largest European rival, Qype, for $50 million.[4] The following year, CEO Jeremy Stoppelman reduced his salary to $1.[36] Yelp acquired the start-up online reservation company SeatMe for $12.7 million in cash and company stock in 2013.[37] Yelp's second quarter 2013 revenue "exceeded expectations", but the company was not yet profitable.[38]

In the second finical quarter of 2014 Yelp reported that for the first time the company had become profitable since being a publicly traded company. This is due to the significant increase of paid advertised results when a user searches a particular keyword. This is similar to the strategy that Google uses with its multi-billion dollar Adwords campaign. CEO Stoppelman also noted that Yelp has seen an uptick (in traffic presumably) as a result of a recent Google algorithmic change. [39]

Yelp moved its headquarters into larger offices in San Francisco in August 2013.[40]

Features[edit]

Yelp.com
Web address www.yelp.com
Slogan Real People. Real Reviews.
Commercial? Yes
Type of site Local online reviews
Registration Optional
Available in ~20 languages
Users 132 million unique visitors per month
Written in Python, Java and a custom framework
Owner Yelp, Inc.
Launched 2004
Alexa rank 131 global, 28 in U.S.A (May 2014)[41]
Current status Online

Yelp's website, Yelp.com, is a crowd-sourced local business review and social networking site.[3] The Register described it as an online city guide. The site has pages devoted to individual locations, such as restaurants or schools, where website users can submit a review on their products or services.[42] It uses a one to five star rating system.[8] In addition to writing reviews, users can react to reviews, plan events or discuss their personal lives.[3] According to Sterling Market Intelligence, Yelp is "one of the most important sites on the Internet."[20] Yelp is primarily active in major metropolitan regions.[8] It has 132 million monthly visitors and 57 million reviews.[43] As of 2010, Yelp had an established user-base in 33 cities.[8]

As of 2012, 45 percent of Yelp searches are done from a mobile device.[4] The Yelp iPhone app was introduced in December 2008.[44] In August 2009, Yelp released an update to the iPhone app with a hidden Easter Egg augmented reality feature called Monocle, which allowed users looking through their iPhone camera to see Yelp data on businesses seen through the camera.[45] Check-in features were added in 2010.[46][47] Users can also make restaurant reservations in Yelp through OpenTable, a feature added in June 2010.[48][49] In 2013, features to have food ordered and delivered were added to Yelp[50] as well as the ability to view hygiene inspection scores.[51] Yelp's content was integrated into the mapping and directions app of Apple's September 2012 release of iOS 6.[52] Yelp also has features for finding local businesses offering special deals to Yelp users.[53]

Advertising[edit]

Yelp's revenues come from selling ads and sponsored listings to small businesses.[6][8] As of 2010, Yelp has 150 salespeople. Advertisers can pay to have their listing appear at the top of search results, or feature ads on the pages of their competitors.[8][13][54] As of 2013, advertising revenue was growing at a rate of 77% per year.[55] Yelp will only allow businesses with at least a three-star rating to sign up for advertising.[9]

According to Inc. Magazine, a sponsored "favorite review" can make a businesses' ratings seem more positive, by placing a positive review above the negative ones.[8] However, Yelp stopped offering this option in 2010 in an effort to deter misconceptions that advertisers were able to marginalize negative reviews for pay.[56][57]

Relationship with businesses[edit]

According to BusinessWeek, Yelp has "always had a complicated relationship with small businesses."[58] A Harvard Business School study published in 2011 found that each "star" in a Yelp rating affected the business owner's sales by 5–9 percent.[59][60] A 2012 study by two Berkeley economists found that an increase from 3.5 to 4 stars on Yelp resulted in a 19 percent increase in the chances of the restaurant being booked during peak hours.[61] Eighty-five percent of reviews have three stars or better,[3] but according to Inc. Magazine, some negative reviews are "painfully negative, often in a personal way."[8] Yelp receives about six subpoenas a month asking for the names of anonymous reviewers, mostly from business owners seeking litigation against those writing negative reviews.[60] In 2012 the Alexandria Circuit Court and the Virginia Court of Appeals[62] held Yelp in contempt for refusing to disclose the identities of seven reviewers; in 2014 Yelp appealed to the Supreme Court.[63][64] A 2014 survey of 300 small business owners done by Yodle found that 78 percent were concerned about negative reviews. Also, 43 percent of respondents said they felt online reviews were unfair, because there is no verification that the review is written by a legitimate customer.[60]

Interactions[edit]

Yelp added the ability for business owners to respond to reviews in 2008,[8] in order to give them a voice against reviews they feel are unfair.[54] Businesses can respond privately by messaging the reviewer or publicly on their profile page. Businesses can also update contact information, hours and other basic listing information or add special deals.[8][13] In some cases Yelp users that had a bad experience have updated their reviews more favorably due the businesses' efforts to make it right, while in other cases disputes between reviewers and business owners have led to harassment and physical altercations.[8] The system has led to criticisms that business owners can bribe reviewers with free food or discounts to increase their rating, though Yelp users say this rarely occurs.[65] A business owner can "claim" a review, which allows them to respond to reviews and see traffic reports.[8] Businesses can also offer discounts to Yelp users that visit often using the "check in" feature.[46][47]

Astroturfing[edit]

According to the Los Angeles Times, as Yelp became more influential, the practice of fake reviews written by competitors or business owners became more prevalent.[66] A study from Harvard professor Michael Luca analyzed 316,415 reviews in Boston and found that fake reviews rose from 6% of the site's reviews in 2006 to 20% in 2014.[59] Yelp's own review filter identifies 25 percent of reviews as suspicious.[67] In 2013 a study by Maritz Research found that 53 percent of survey respondents said they did not trust Yelp's reviews; a similar number of respondents distrusted other review sites.[67]

Yelp may remove reviews it feels are not based on actual personal experiences, which is part of the requirements set forth in its Terms of Use.[68] The site has a proprietary algorithm that attempts to evaluate whether a review is authentic and filters out suspicious reviews.[8] Filtered reviews are not removed entirely, but moved into a special area and not counted towards the businesses' star-rating.[67] The review filter was first developed two weeks after the site was founded and the company saw their "first obviously fake reviews."[67] New York Attorney General Eric T. Schneiderman said Yelp has "the most aggressive" astroturfing filter out of the crowd-sourced websites it looked into.[67] The Los Angeles Times confirmed that the aggressive filter sometimes filters legitimate reviews, a common complaint from small business owners.[66] While many internet businesses look at Yelp's system against astroturfing as an example to follow. Yelp has also been criticized for not disclosing how the filter works,[67] which it says would give users information on how to out-smart it.[8] Yelp also has a system for identifying fraudulent check-ins.[69]

Yelp also conducts "sting operations" to uncover businesses writing their own reviews.[70] Small business caught writing their own Yelp reviews have had their profiles updated with a message "We caught someone red-handed trying to buy reviews for this business" as a "virtual scarlet letter."[71][72] In October 2012, Yelp placed the 90-day "consumer alert" on 150 business listings believed to have paid for reviews.[73] In June 2013, Yelp filed a lawsuit against BuyYelpReview/AdBlaze, accusing the company of writing fake reviews for pay.[74][75] In 2013 Yelp and a law firm were involved in a dispute over their agreement for advertising services. The lawyer publicized court transcripts accusing Yelp of extorting business owners and Yelp sued the lawyer for violations in the site's terms of use, pointing out that many of the reviews on his law firm originated from inside his office.[58] In September 2013, Yelp cooperated with Operation Clean Turf, a sting operation by the New York Attorney General that uncovered 19 astroturfing operations.[67]

Alleged manipulation by Yelp[edit]

Throughout much of its history there have been allegations that Yelp has manipulated their website's reviews based on participation in its advertising programs.[76] Many small business owners say Yelp salespeople offered to remove or suppress negative reviews if they purchase advertising.[66] Yelp says its sales staff do not have the ability to modify reviews and that the changes in the reviews are caused by its automated review filter.[42][77]

Several lawsuits have been filed against Yelp accusing it of extorting small businesses into buying advertising products. Each have been dismissed by a judge before reaching trial.[66] In early 2010, a class-action lawsuit was filed against Yelp alleging it asked a Long Beach veterinary hospital to pay $300 a month for advertising services that included the suppression or deletion of disparaging customer reviews.[78] The following month, nine additional businesses joined the class-action lawsuit,[79] and two similar lawsuits were filed.[80] In May the lawsuits were combined into one class-action lawsuit,[81] which was dismissed by San Francisco U.S. District Judge Edward Chen in 2011. Chen said the reviews were protected by the Communications Decency Act of 1996 and that there was no evidence of manipulation by Yelp.[82] The plaintiffs filed an appeal.[83]

The Federal Trade Commission received 2,046 complaints about Yelp from 2008 to 2014,[60] mostly from small businesses regarding allegedly unfair or fake reviews or negative reviews that appear after declining to advertise.[63] According to International Business Times "critics both in and out of the courtroom continue to go to great lengths to characterize Yelp as an unscrupulous bully, bent on wielding its influence to extort advertising revenue from small businesses on the receiving end of the countless negative rants by Yelp users."[83] In August 2013, Yelp launched a series of town hall style meetings in 22 major American cities intended to address concerns among local business owners. Many attendees, however, expressed frustrations with Yelp's automated filter removing positive reviews after they decline to advertise, receiving reviews from users that never entered the establishment, and other issues.[83][84] A 2011 Harvard study by Michael Luca found that there was no significant statistical correlation between being a Yelp advertiser and having more favorable reviews.[60]

See also[edit]

References[edit]

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External links[edit]