Yelp

Jeremy Stoppelman, co-founder and CEO of Yelp

Two former PayPal employees, Jeremy Stoppelman and Russel Simmons, founded Yelp at a business incubator, MRL Ventures, in 2004.[9][10] Stoppelman and Simmons conceived the initial idea for Yelp as an email-based referral network, after Stoppelman caught the flu[11] and had a difficult time finding an online recommendation for a local doctor.[10][12][13] The co-founders' former colleague from PayPal and founder of MRL Ventures, Max Levchin, provided $1 million in initial funding.[10] MRL co-founder David Galbraith, who instigated the local services project based on user reviews, came up with the name "Yelp".[14] In an interview published in February 2013,[15] Stoppelman explained why they decided on "Yelp" for the company's name, stating that "it was short, memorable, easy to spell, and was familiar with 'the help' and 'yellow pages'".[16]

According to Fortune Magazine, Yelp's initial email-based system was "convoluted".[10] The idea was rejected by investors and did not attract users beyond the cofounders' friends and family.[17] 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.[10] According to the San Francisco Chronicle, "the site's popularity soared" after it was re-designed in late 2005.[18] Yelp raised $5 million in funding in 2005 from Bessemer Ventures and $10 million in November 2006 from Benchmark Capital.[10] The number of reviewers on the site grew from 12,000 in 2005, to 100,000 in 2006.[17] By the summer of 2006, the site had one million monthly visitors.[17] It raised $15 million in funding from DAG Ventures in February 2008.[19][20] 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.[21] 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, the site had 4.5 million reviews.[22] By 2010, Yelp's revenues were estimated to be $30 million and it employed 300 people.[17]

Yelp introduced a site for the United Kingdom in January 2009[23] and one for Canada that August.[22] 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.[24] From 2010 to 2011, Yelp launched several more sites, in Austria, Germany, Spain, and the Netherlands. International website traffic doubled during the same time period.[25] An Australian website went live in November 2011.[9] It was supported through a partnership with Telstra, which provided one million initial business listings,[26] and was initially glitchy.[27] Yelp had a presence in 20 countries by the end of 2012, including Turkey[28] and Denmark.[29] Yelp's first site in Asia was introduced in September 2012 in Singapore,[11] which was followed by Japan in 2014.[30]

In December 2009, Google entered into negotiations with Yelp to acquire the company,[31][32] but the two parties failed to reach an agreement.[33][34] According to The New York Times, Google offered about $500 million, but the deal fell through after Yahoo offered $1 billion.[35] 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 about the offers.[36] In June 2015, Yelp published a study alleging Google was altering search results to benefit its own online services.[37][38]

Yelp began a service called Yelp Deals in April 2011,[39] but by August it cut back on Deals due to increased competition and market saturation.[40] That 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.[41][42] 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.[43]

The 140 New Montgomery building in San Francisco, home of Yelp's headquarters

Having filed for an initial public offering (IPO) with the Securities Exchange Commission in November 2011,[44][45][46] Yelp's stock began public trading on the New York Stock Exchange on March 2, 2012. At a share price of $15,[47] the company was valued at $898 million.[48][49] In 2012, Yelp agreed to acquire its largest European rival, Qype, for $50 million.[50][11] The following year, CEO Jeremy Stoppelman reduced his salary to $1.[51][52] Yelp acquired the start-up online reservation company SeatMe for $12.7 million in cash and company stock in 2013.[53][54][55][56] Yelp's second quarter 2013 revenue of $55 million "exceeded expectations", but the company was not yet profitable.[57][58]

In 2012/13, Yelp moved into its new corporate headquarters, occupying about 150,000 square feet on 12 floors of 140 New Montgomery (the former PacBell building) in San Francisco.[59]

The company was profitable for the first time in the second quarter of 2014,[57] as a result of increasing ad spending by business owners and possibly from changes in Google's local search algorithm.[60] It is dubbed as Google Pigeon, which helped authoritative local directory sites like Yelp and TripAdvisor, in getting more visibility.[61] Over the course of the year, Yelp websites were launched in Mexico, Japan, and Argentina.[62] Also in 2014, Yelp expanded in Europe through the acquisitions of German-based restaurant review site Restaurant-Kritik and French-based CityVox.[63][64][65]

In early February 2015 Yelp announced it was buying Eat24, an online food-ordering service, for $134 million.[66][67][68] Then in August 2017, Yelp sold Eat24 to Grubhub for $287.5 million.[69][70] The acquisition resulted in a partnership to integrate Grubhub delivery into the Yelp profiles of restaurants.[71]

In late 2015, a "Public Services & Government" section was introduced to Yelp and the General Services Administration began encouraging government agencies to create and monitor official government pages.[72] For example, the Transportation Security Administration created official TSA Yelp pages.[73][74] Later that year Yelp began experimenting in San Francisco with consumer alerts that were added to pages about restaurants with poor hygiene scores in government inspections.[75] Research conducted by the Boston Children's Hospital found that Yelp reviews with keywords associated with food poisoning correlates strongly with poor hygiene at the restaurant. Researchers at Columbia University used data from Yelp to identify three previously unreported restaurant-related food poisoning outbreaks.[76]

On November 2, 2016, concurrent with its earnings report for Q3 2016, Yelp announced it would drastically scale back its operations outside North America and halt international expansion. This resulted in the termination of essentially all international employees across Yelp's 30+ international markets from the sales, marketing, public relations, business outreach, and government relations departments. Overseas employees now primarily consist of engineering and product management staff. Yelp claims these layoffs affected only 175 individuals, or 4 percent of its total workforce.[77][78]

In April 2017, Yelp announced that it had acquired Wi-Fi marketing company Turnstyle Analytics for $20 million.[79][80]

In early 2020, Yelp listed space at 55 Hawthorne Street, San Francisco, for 235 employees as available for sublease.[81] Business closures and stay-at-home orders during the COVID-19 pandemic in the United States caused a massive decline in searches on Yelp (down 64%-83% from March to April, depending on category) and company revenues. On April 9, the company announced it would lay off 1,000 employees, furlough about 1,100 with benefits, reduce hours for others, cut executive pay by 20-30%, and stop paying the CEO for the rest of 2020.[82]

Yelp added the ability for business owners to respond to reviews in 2008.[17][105] Businesses can respond privately by messaging the reviewer or publicly on their profile page. In some cases, Yelp users that had a bad experience have updated their reviews more favorably due to the businesses' efforts to resolve their complaints. In some other cases, disputes between reviewers and business owners have led to harassment and physical altercations.[17] 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.[89] A business owner can "claim" a profile, which allows them to respond to reviews and see traffic reports.[17] Businesses can also offer discounts to Yelp users that visit often using a Yelp "check in" feature.[92][106] In 2014, Yelp released an app for business owners to respond to reviews and manage their profiles from a mobile device.[107] Business owners can also flag a review to be removed, if the review violates Yelp's content guidelines.[108]

Yelp's revenues primarily come from selling ads and sponsored listings to small businesses.[13][17] Advertisers can pay to have their listing appear at the top of search results, or feature ads on the pages of their competitors.[17][22][105] As of 2016, advertising revenue was growing at a rate of 30% year over year.[109] Yelp will only allow businesses with at least a three-star rating to sign up for advertising.[18] Originally a sponsored "favorite review" could place a positive review above negative ones,[17] but Yelp stopped offering this option in 2010 in an effort to deter the valid criticism that advertisers were able to obtain a more positive review appearance in exchange for pay.[110][111]

On Jun 5, 2020, Yelp have launched a new tool to allow businesses on the platform to identify themselves as black-owned. Customers are now able to search the Yelp app for black-owned businesses they want to support.[112]

As Yelp became more influential, the phenomenon of business owners and competitors writing fake reviews, known as "astroturfing", became more prevalent.[88] A study from Harvard Associate Professor Michael Luca and Georgios Zervas of Boston University analyzed 316,415 reviews in Boston and found that the percentage of fake reviews rose from 6% of the site's reviews in 2006 to 20% in 2014.[113] Yelp's own review filter identifies 25% of reviews as suspicious.[117]

Yelp has a proprietary algorithm that attempts to evaluate whether a review is authentic and filters out reviews that it believes are not based on a patron's actual personal experiences, as required by the site's Terms of Use.[17][118] The review filter was first developed two weeks after the site was founded and the company saw their "first obviously fake reviews".[117] Filtered reviews are moved into a special area and not counted towards the businesses' star-rating.[117] The filter sometimes filters legitimate reviews, leading to complaints from business owners.[88] New York Attorney General Eric T. Schneiderman said Yelp has "the most aggressive" astroturfing filter out of the crowd-sourced websites it looked into.[117] Yelp has also been criticized for not disclosing how the filter works,[117] which it says would reveal information on how to defeat it.[17]

Yelp also conducts "sting operations" to uncover businesses writing their own reviews.[119] In October 2012, Yelp placed a 90-day "consumer alert" on 150 business listings believed to have paid for reviews. The alert read "We caught someone red-handed trying to buy reviews for this business".[120][121][122] In June 2013, Yelp filed a lawsuit against BuyYelpReview/AdBlaze for allegedly writing fake reviews for pay.[123][124] In 2013, Yelp sued a lawyer it alleged was part of a group of law firms that exchanged Yelp reviews, saying that many of the firm's reviews originated from their own office. The lawyer said Yelp was trying to get revenge for his legal disputes and activism against Yelp.[116] An effort to win dismissal of the case was denied in December 2014.[125] In September 2013, Yelp cooperated with Operation Clean Turf, a sting operation by the New York Attorney General that uncovered 19 astroturfing operations.[117] In April 2017, a Norfolk, Massachusetts jury awarded a jewelry store over $34,000 after it determined that its competitor's employee had filed a false negative Yelp review that knowingly caused emotional distress.[126]

According to BusinessWeek, Yelp has "always had a complicated relationship with small businesses".[116] Throughout much of Yelp's history there have been allegations that Yelp has manipulated their website's reviews based on participation in its advertising programs.[127] Many business owners have said that Yelp salespeople have offered to remove or suppress negative reviews if they purchase advertising.[88][128] Others report seeing negative reviews featured prominently and positive reviews buried, and then soon afterwards, they would receive calls from Yelp attempting to sell paid advertising.[129]

Yelp staff acknowledged that they had allowed their advertising partners to move their favorite review to the top of the listings as a "featured review", but said the reviews were not otherwise manipulated to favor the partner businesses.[86] Such featured reviews were shown with a strip above them that said "One of [Insert Business Here]'s Favorite Reviews" and "This business is a Yelp sponsor."[86] The company also said it might have had some rogue salespeople that misrepresented their practices when selling advertising services.[86] In response to the criticism of their allowing their advertising partners to manipulate the review listing, Yelp ceased its "featured review" practice in 2010.[110]

Several lawsuits have been filed against Yelp accusing it of extorting businesses into buying advertising products. Each have been dismissed by a judge before reaching trial.[88] 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.[130] The following month, nine additional businesses joined the class-action lawsuit,[131] and two similar lawsuits were filed.[132] That May the lawsuits were combined into one class-action lawsuit,[133] 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.[134] The plaintiffs filed an appeal.[135] In September 2014 the Ninth U.S. Circuit Court of Appeals upheld the dismissal, finding that even if Yelp did manipulate reviews to favor advertisers, this would not fall under the court's legal definition of extortion.[136][137][138]

In August 2013, Yelp launched a series of town hall style meetings in 22 major American cities in an effort to address concerns among local business owners. Many attendees expressed frustration with seeing Yelp remove positive reviews after they declined to advertise, receiving reviews from users that never entered the establishment, and other issues.[135][139] A 2011 "working paper" published by Harvard Business School from Harvard Associate Professor Michael Luca and Georgios Zervas of Boston University found that there was no significant statistical correlation between being a Yelp advertiser and having more favorable reviews.[114][140] The Federal Trade Commission received 2,046 complaints about Yelp from 2008 to 2014,[114] most from small businesses regarding allegedly unfair or fake reviews or negative reviews that appear after declining to advertise.[141] According to Yelp, the Federal Trade Commission finished a second examination of Yelp's practices in 2015 and in both cases did not pursue an action against the company.[142][143]

Journalist David Lazarus of the Los Angeles Times also criticized Yelp in 2014 for the practice of selling competitors' ads to run on top of business listings and then offering to have the ads removed as part of a paid feature.[144]

In 2015, San Francisco filmmaker Kaylie Milliken was reportedly producing a documentary film titled Billion Dollar Bully about Yelp's alleged business practices.[145]

In 2018, in the case Hassell v. Bird, the California Supreme Court held by a narrow 4-3 margin that a business cannot force Yelp to remove a review, even if the review is defamatory of the business.[146][147]

A 2019 investigation by Vice News and the podcast Underunderstood found that in some cases, Yelp was replacing restaurant's direct phone numbers with numbers that routed through GrubHub, which would then charge restaurants for the calls under marketing agreements GrubHub has with restaurants.[148]

Eater reported that between 2012 and 2015, a number of users who review restaurants on the site have posted reviews that contained comments about the political activities and political views of businesses and their owners or have submitted ratings affected by political motivations. The article found that in some instances, the Yelp review area for a business has become flooded with such review submissions after a business was involved in politically sensitive action. Yelp has removed reviews of this nature and has tried to suppress their submission.[149]

According to data compiled in 2014 by the Wall Street Journal, 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.[114] In 2012, the Alexandria Circuit Court and the Virginia Court of Appeals[150] held Yelp in contempt for refusing to disclose the identities of seven reviewers who anonymously criticized a carpet-cleaning business. In 2014, Yelp appealed to the Virginia Supreme Court.[141][151] A popular public argument in favor of Yelp at the time was that a ruling against Yelp would negatively affect free speech online. The judge from an early ruling said that if the reviewers did not actually use the businesses' services, their communications would be false claims not protected by free speech laws.[152] The Virginia Supreme Court ruled that Yelp, a non-resident company in the state of Virginia, could not be subpoenaed by a lower court.[153] Also in 2014, a California state law was enacted that prohibits businesses from using "disparagement clauses" in their contracts or terms of use that allow them to sue or fine customers that write negatively about them online.[154][155]