The Rise And Fall Of Yelp

Yelp is eleven years old, okay? What have you done to us? Before there was fake news, there were fake reviews. We all criticize each other all the time. Would we like to apologize? Local review site Yelp left a big mark on how we find restaurants and services. We've gone city by city, over 100 different cities around the world. In fact, it has become an international phenomenon. It was the first big success story in the early days of user-generated reviews, and the company enjoyed rapid growth in those early days. But it hasn't been so easy for Yelp lately with increased competition and a stagnant business model.

I think you had a lot of execution errors on Yelp. And you don't go from tech darling to tech giant without some negative reviews. I would stay away. Yelps for sale. Would you buy it? I do not think. You have it in the back of your head that Yelp is out there, lurking. Yelp was founded in July 2004 by former PayPal employees Jeremy Stoppelman and Russel Simmons to collect word-of-mouth suggestions for local businesses and services. Stoppelman and Simmons originally decided on the name Yokel, but that domain had already been taken. So, following a colleague's advice, they turned to Yelp.

Yelp and the yellow pages sound familiar, and Yelp and help, you know, is another thing the site offers. The duo launched the first version of their site in October 2004, which was basically a huge email listserv. It seems dated, but remember, this was almost three years before the first iPhone was released. Yelp was built almost community by community. They would send an organizer, almost like a grassroots local organizer, to host events in towns and cities for local businesses, letting them know about Yelp, how consumers could and would use Yelp, and how local businesses could increase their business by advertising on Yelp. .

In 2009, Yelp became so popular that Google offered its owners $550 million for the company. Yahoo! countered that offer with a $1 billion check, and Yelp rejected both. Stoppelman, according to sources at the time, never really wanted to sell the company, so they went through this process, got some interest, but felt that the price being offered on Yelp simply wasn't high enough to merit the sale. the company. Instead, Yelp went public in 2012 and shares rose on the first day of trading. We want to bring Yelp to the world. We want to manage this mobile transition that is happening. We want to play an important role in that.

And we want to be the broadest and deepest content source for local information. Really, the Amazon of local, if you think about it. These are Yelp employees who are here and have been hired for the day. It's a big day for them. Priced at $15, now open at $22.01. The important thing is that the shares opened sharply higher. At the time it had 22 million reviews on its site and 61 million monthly unique visitors. In 2018, it had 177 million reviews and an average of 164 million monthly unique visitors, including the mobile site, desktop site, and mobile app. Originally, Yelp was the only game in town when it came to reviews.

And this goes back to the initial question of why were investors so excited about Yelp originally? At first they were the only option in town when it came to reviewing a local business. Amid all of Yelp's success, the company claimed that one-time pretender Google was favoring its own content in search results and that Google was mining Yelp data for its own Google Places service, prompting antitrust investigations. And Yelp put out a pretty compelling presentation to demonstrate how Google was hurting its business. Let's be clear: Google is no longer in the business of sending people to the best sources of information on the web.

Now it hopes to be a destination site for one vertical market after another, including news, shopping, travel, and now local business reviews. But Yelp was also dealing with some internal issues. Business owners began to notice suspicious reviews. According to a Harvard study, which included all Yelp reviews of restaurants in the greater Boston area between 2004 and 2012, minus the 1 percent that violated Yelp's terms of service, 16 percent of the reviews were flagged as false. . Rival business owners would write negative reviews to lower their competition's overall rating and write positive reviews about their own businesses. Yelp says it deals with these fake or extreme reviews by filtering them out.

Each Yelp review is automatically evaluated by Yelp's recommendation software based on quality, trustworthiness, and user activity on Yelp. We try not to highlight reviews written by users we don't know much about or those that could be fake or useless rants or praise. And since the early days of Yelp, some business owners haven't been very interested in how Yelp makes money. Most of its income comes from advertising. So this is no different than, say, what Facebook or Google does, where everyone is in the same pursuit of digital advertising dollars. Yelp's niche in this is that if you search for a small business or a restaurant, those restaurants can advertise along with your search on the site and therefore you can make money that way.

An upcoming documentary announced in 2015 interviewed local business owners who claimed they received shady phone calls from Yelp sales representatives. If the mob had done what Yelp is doing, they would be thriving in every county and jurisdiction in the United States doing it over the Internet. These representatives reportedly offered to move bad reviews to a lower position on the company's Yelp page in exchange for an advertising package and threatened to block the page if they did not advertise. The Federal Trade Commission reviewed these allegations but found no reason to file charges against Yelp. In a blog post, Yelp commented on business owners.

There is no relationship between advertising on Yelp and recommended reviews. Uh, that's no way to run a business, and that's not how we do things here at Yelp. But the documentary's director Kaylie Millikin was not convinced, nor was the FTC. I've talked to many of the lead attorneys in cases filed against Yelp and the FTC has never gone to them for the documentation that those attorneys have, the evidence that they have. Dismissing the FTC, dismissing five federal judges who found no wrongdoing, dismissing all of that seems a little strange when all of it has very thoroughly debunked the claims.

You're willing to dismiss an FTC investigation that found nothing wrong and tell yourself that maybe they didn't do a good job and you're doing a better job. I don't discount what they said. I'm going to address this at length in the documentary and let the experts speak for themselves. To this day, there is a divide between business owners who love Yelp and those who resent it. One business owner who asked to remain anonymous for fear of retaliation from Yelp hasn't had the best experience using the service. It's an uncomfortable association for those of us in this business who advertise on Yelp because we feel like we have to rather than because we actually choose to.

And there's a sort of wink, nod, and whisper that you might want to advertise on Yelp instead of shooing away their advances. I'm sorry if I sound like I'm talking about, you know, the mafia, but that's kind of how people or companies feel. Other companies, on the other hand, have had great success with the Yelp advertising program. I actually have positive reviews on Yelp, I defend it, so... We're on the 21st floor, so advertising is very important to us since we're not on the ground level so people can see where exactly . But it's the fastest way to get your business out there.

Yes, it has been very positive for us. I'm happy with that. Despite these accusations and encroaching tech superpowers like Google, Facebook, and Instagram, Yelp stock continued to

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. It peaked in March 2014 at over $100 per share due to positive Wall Street analysis. But since then he has not been able to return there. I think you had a lot of execution errors on Yelp. It is a difficult business to scale. Yelp has struggled to monetize the recommendation business and turn it into a growing technology company that can compete with the largest technology companies in the market, such as Facebook and Google.

Investors were eager to see Yelp become an advertising powerhouse, but it failed to meet many investors' expectations. Yelp on the other hand, Scott, I just look at this name and see the fact that they don't make any money yet. I don't know when they are going to start making money and when they will, what is Yelp's PE level? I think this is one of those names that is very high in the stratosphere and with a lot of room to go down. I would stay away. And the products that Google and Facebook had been creating to compete with Yelp began to look better and better in the eyes of investors.

Google has increasingly introduced local information, local service information, and restaurant reviews. In a way, that's the reason Yelp exists and Google increasingly started to encroach on that. Google took its services and prioritized them in searches, driving fewer and fewer people to the Yelp site. This self-favoritism was a setback for Yelp, but some analysts say Yelp hasn't been innovating at the pace it should. I think Yelp, in some ways, was too slow to innovate. Some of these things that they've implemented now, so they called Request a Quote where you can actually go to the site and request a quote, they should have implemented them several years ago.

I think this company was good at innovation, but not great at innovation. And I think that slowness is what really created the opportunity for other companies. A recent wake-up call for Yelp comes in the form of an activist investor. These investors buy large sums of a company's stock and use it as leverage to get the company to change its strategy. So SQN has been an investor in Yelp for over four years and decided to go public and essentially become an activist shareholder. SQN published a 112-page document outlining Yelp's obstacles and what it needed to do to get back on track.

And if he doesn't deliver, SQN is going to shake things up, starting with Yelp's board of directors. SQN came out and said, look, there are a bunch of different changes we want you to make, and if you don't think you can make the changes, we want you to try to sell yourself. Yelp responded pretty quickly. The first thing they did was actively replace three members of the board of directors. They also reported a very strong quarter. But Yelp is trying to diversify and gain some traction. Yelp as a company is going through a couple of transitions.

From a consumer point of view, it is undergoing a transition from being a purely information or research site to one that is more transaction-oriented. If you could actually go to the site, look at those reviews, and make a reservation at one of those sushi restaurants or order delivery through a partnership that Yelp has developed with GrubHub. So it went from being a purely informational site to being more of a transactional site. And as for the future of Yelp? This is the $64,000 question, right? Can Yelp survive as an independent company? At this stage, I'd say Yelp is probably too small to survive as an independent company.

I wouldn't be surp

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d at all if they sold to a larger competitor. There's always a chance for businesses to catch up, and that's what Yelp is finding out now. Either too little or too late. I don't know. But I don't know why... why one would come to that conclusion.