Yelp is worth $1.5bn and 100 million people use it. Should you care?

Will London businesses warm to Yelp?

As local directories go, Yelp has a lot to shout about.

The business was founded in 2004 in America as a website for consumers looking to review and recommend local businesses. It quickly attracted millions of dollars in funding. VC firms Mission Street and Bessemer Venture Partners provided $6m Series B funding, while a further $11m came from other investors.

This helped the online business directory expand across America, into Canada and finally the UK in 2009. At the time, Yelp was enjoying revenues of $30m. It was even on the cards for a $500m acquisition by Google near the end of 2009.

Yelp took over its European rival, Qype, in 2012 - Qype had 22 million monthly European visitors. Then in March last year, Yelp became a public company with a $1.47bn valuation.

According to records sourced by Duedil, Yelp’s British wing is on an annual turnover of just under £1.5m in 2012. That has grown from £1.45m in 2010 and £1.3m in 2011, and a £78,000 net profit in 2011.

The business has moved into 20 countries, launching recently in Sweden, Denmark, Singapore and Turkey.

The directory has registered 100 million unique visitors from across the world in January 2013.

I caught up with Yelp’s head of European PR, Elliot Adams, to find out more about how Yelp is doing and - crucially for LondonlovesBusiness readers - how it could actually boost London businesses.

Of his own admission, it has the ironic position as an underground giant. It may be the number one social directory firm but, as Adams bemoans, not enough people seem to be aware of it.

“I was speaking to someone the other day and they said before the meeting they had signed up to Yelp to have a look and they realised that a number of different friends popped up who were already on there. It seems to be like an underground thing that people love but they don’t seem to be sharing as much as they should be… the brand recognition isn’t quite out there in the UK as much as it is in the US.”

How on earth does it make money? Some may be surprised to hear but it’s from premium listing. In short, Adams tells me, when consumers look for the best businesses in the area, you can make sure your firm is at the top of the listings… for a price.

Surprisingly simple that may seem, I thought I’d pry with Adams - how can Yelp help business?

Why should businesses care about Yelp?

If somebody could tell you just that there is a small independent coffee chain just around the corner and they’ve won an amazing amount of awards, who in their right mind would not like to go there?

It has generally been on the shoulders of small businesses to go out and shout about how great they were and Yelp helps them getting them out there.

Does the business have to give Yelp the details?

In 2009, we worked with a third party to get basic directory information. But now, the Yelp community helps us updating information – they see a business has closed and they notify us. They also add a business, add photos, add information and addresses. It’s very organic and it is run by people who love to shout about local businesses.

The key element is that businesses can claim their page for free, they can see “look, this is me”. We will verify that they are the business owner and they can get control of the page. That is completely free. They can make sure all the details are correct and up-to-date as they see fit.

How did Yelp grow at the beginning?

In 2004, Yelp founder Jeremy Stoppelman went to San Francisco. It was a new town for him and he needed a doctor. He realised that he had no idea where he could turn to. Usually it was asking your friends, asking your family. Because it was a new city to him, he didn’t have the means and resources to find out. So, it’s that experience that triggered Jeremy to set up the business.

Also, the opening of the internet and nowadays mobile has driven the growth for Yelp. The switching on of the iPhone in late 2000s was key for us.

But Yelp wasn’t the first directory website was it?

It wasn’t the first but it was the first to disrupt the model set by others like Yellow Pages, which was basically a listing. Whereas we offered feedback on the listed businesses.

It was like you had Encyclopedia Britannica and then you had Wikipedia, you had TV and then Youtube came along.

It has expanded on a city-by-city basis. When we launch in a particular city, we focus on urban areas, as we’re an urban city guide. We bring in an urban city manager that sits in the city and speaks with local businesses.

You get your revenue just through paid listing?

Yes, it’s a similar model to Google. You’d have sponsored links of premium listing that’d appear at the top of searches very clearly marked as an ad or sponsored link.

What about stories suggesting Yelp sales staff were offering to manipulate reviews?

There has been a number of court cases and every single one has been thrown out with prejudice in the courts. That means the case can never come back in its current form. There have been a number of people who’ve been annoyed by that but we champion the independent business . Anything that is said online is difficult for business owners not to take personally. We help them, we give them advice on how to answer things, providing top tips on how to answer negative things. You can’t please everybody all of the time.

Wouldn’t your message be to businesses worried about negative reviews that ‘Yes it’s painful but it reflects your service?’

Exactly. It’s what we keep telling businesses: you shouldn’t incite people to give reviews, concentrate on the business and on giving good service and showing what’s best about what you do, whether it be the product or a particular service.

How are you checking reviews about businesses are authentic?

We do have a review filter, an algorithm that helps with this. As an example, if there are 20 reviews in one day from the same I.P address, something smells fishy. We filter out that review.

By the end of Q4 2012, there have been 36 million reviews submitted and we take it so seriously that 20% of those are refused.

Authenticity is a watchword for us. Recently, we had a campaign of consumer alerts, where we had a team of investigators who went on sites like Craigslist and other places and noticed there were listings like ‘Pay $50 for a five star review on Yelp’. We identified a number of them and slapped a consumer alert on their page which will stay for six months which says ‘there is something fishy going on here, they were caught trying to pay for reviews’.

You also can’t leave anonymous reviews, there has to be a first name and the first letter of your surname. You can’t become an Elite Yelp user without a picture of your face.

How can Yelp’s influence benefit business?

We did a study in the US to look at how it translates to footfall. Businesses on Yelp found that the average first time customer coming there through Yelp was £65. There is a Harvard Business School study which found that an increase of one star on Yelp equated to an increase of 5% in revenues for restaurants. If people can’t find you on Yelp and the information is incorrect, they’re going to look somewhere else.

Case study: Ms Cupcake and founder Melissa Morgan

Ms Cupcake

Ms Cupcake

From baking vegan cupcakes in her two bedroom Brixton flat to sell on a Greenwich Market Stall, Morgan went on to open London’s first entirely vegan retail bakery in the local area.

How has Yelp helped your business?

Ours is a business that’s definitely grown through social media and online presence, with Yelp becoming a driving force, working with us to maximise our online reputation.   Initially, we didn’t sell cakes online but needed to make sure people knew about us first, with the market stall being their final destination. 

We set-up a Yelp page as well as listing on every free website. After just a few months people were talking about us and we couldn’t keep up with demand. The early days were spent making cakes at home in the evening and then running the market stall by day. There were only a finite number of cakes available, which helped drive demand. 

In summer 2010, we opened a second market stall in Brick Lane - with a couple of part-time staff prepping so I could make more cakes. Within a year, demand for our cakes was so high that we opened our first shop in Brixton, with two full time staff on board to smooth the transition.   This growth couldn’t have happened so quickly without online word of mouth recommendations.

What’s next for Yelp? How do you grow even bigger if you’re already the leading social directory?

The big thing we’re focusing on this year is the integration with Qype. All the figures we have don’t include Qype. We acquired them in October last year and now we’re focusing on the integration process of bringing that content over, bringing the users over and into one big user experience.

They were our biggest European competitor and there were so many things they were doing that were similar to us so it was a perfect fit. You can imagine the traffic is going to go… I wouldn’t say through the roof but it’s going to increase significantly.

Not through the roof?! How modest!

If we were still private I’d probably say that but we’re a listed company now so I’ve got to be a little more modest.

But your activities for the future surely don’t just centre about Qype?

Another big thing for us is partnerships. We’re partnering with BMW, Lexus, Mercedes, Honda to be included in dashboard information. You’re driving along, you want something to eat or for whatever reason your car is broken and you can look directly where the best rated business nearer to you is and the car will take you there. Also with local search on Bing. There are lots of partnerships that are still possible and we’re looking into them.

You’ve got to remember that we’ve only monetised in the US, Canada, the UK and Ireland at the moment.

So Yelp doesn’t have sales teams in the other countries the firm has moved into?

We don’t have a sales team in the 16 other counties because we concentrate on building the community, introducing and educating them…

Why haven’t you done that yet?

There has to be a certain number of eyeballs first. It’s a chicken and egg situation. If the site was empty and there was no content and it wasn’t used, what would be the interest for businesses on being there?

The concentration is on building that community and showing people the usefulness of it and then it can be influential for small businesses.

How quickly did Yelp first monetise their website when they were introduced?

I’d say it was after three years. Obviously there is internal metrics and we look at them before we launch in a country, whether they use mobile, demographics and lots of other things. We don’t want to stretch ourselves or do too much because we want to make sure we spend well and use the correct resources.

Where is Yelp aiming to expand into next? Getting more into Asia?

We’ve already launched in Singapore so that’s the first line in Asia. Our goal is to have Yelp worldwide, that is the grand goal and one day we will get there.

With Yelp’s established dominance, what are its threats? Where are its problems?

There is massive opportunity. If you think of the number of small businesses out there, I thin at the moment we’ve got a little over 40,000 small businesses worldwide that work with us and advertise with us in the four countries I’ve mentioned. That is quite a small number of the millions of numbers of small businesses that are out there. It’s a huge opportunity for us to tap into.

Threats? There are always going to be competitors. When you jump into that number one spot, all of a sudden everybody is biting at your heels. Of course there is going to be competition with people trying to do the same things or trying to do them with a twist.

Localism is a massive area to people and big and small companies are looking into it and investing a lot of money into it. Fortunately we are there and were one of the pioneers. We already identified the importance of mobile and mobile is no longer part of our business, it has become our business. It is developing the audience around the mobile the whole time. I wouldn’t say that’s a problem though…!

A big issue, but it’s the same for all tech companies, is the talent. Developing talent, keeping talent, especially in the engineering sector. We also have from the acquisition of Qype a small engineering base in Europe which is a very useful tool for us. Qype was our first acquisition and we’re very much in the first stages of integration. The timeline we’ve got on that is 12 to 18 months.

How are making sure that people check Yelp in the first place?

If you do a Google search for local businesses, the chances are the top two or three will be Yelp just from the mass volume of reviews. We have partnered with Apple so we update into Apple Maps so there are 400 million apple devices out there, once they get upgraded onto the new iOS and use Apple Maps, there’ll be local business information with the content obtained through Yelp and only Yelp.

Elliot Adams, Yelp head of PR

Elliot Adams, European PR head of Yelp

So your message to business is you can champion the little guy?

When the service is good, the quality is good; the Yelp profile will take care of itself.  It’s an incredible free marketing tool.

Are customers visiting new businesses due to Yelp regular returners?

If you find a business that you like and gives you a product that you like, you’ll go back!

Thanks for your time Elliot!


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