Yelp is eleven years old, okay?
What have you done to us?
Before there was fake news, there were fake reviews.
All of us are critiquing each other all the time.
We'd like to apologize?
Local review site Yelp made quite a mark on how we find restaurants and services.
We've gone city by city now, over 100 different cities across the world.
So it's actually 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 at Yelp.
And you don't go from tech darling to tech giant without a few bad reviews.
I would stay away.
Yelps for sale.
Would you buy it?
I don't think so.
You have it in the back of your head that Yelp is out there, lurking.
Yelp was founded in July of 2004 by former PayPal employees Jeremy Stoppelman
and Russel Simmons to compile 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 at the advice of a colleague, they went with Yelp.
Yelp and Yellow Pages kind of sound familiar and Yelp and help, you know,
is another thing that the site provides.
The duo launched the first iteration of their site in October of 2004,
which was basically a huge email listserv.
Seems antiquated, but remember, this was almost three years before the
launch of the first iPhone.
Yelp was built almost community by community.
They would send out 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.
By 2009, Yelp became so popular that Google offered the owners $550 million
for the company.
Yahoo! countered that offer with a $1 billion check, and Yelp
refused both.
Stoppelman, according to sources at the time, never really wanted to sell
the company, so they ran this process, they did get some interest, but he
felt like the price that was being offered for Yelp just wasn't high
enough to merit selling the company.
Instead, Yelp went public in 2012 and stocks surged on the first day of trading.
We want to bring Yelp to the world.
We want to manage this mobile transition that's happening.
We want to play a big part of that.
And we want to be the broadest and deepest content's source for local
information. Really, the Amazon of local, when we think about it.
These are Yelp employees that are here that have been brought in for the
day. It's a big day for them.
Priced at $15, now open at $22.01.
Important thing is, stock opened very much to the upside.
At the time it had 22 million reviews on its site and 61 million unique
monthly visitors.
In 2018, it had 177 million reviews and 164 million average unique monthly
visitors, including the mobile site, desktop site and mobile app.
Originally, Yelp was sort of the only game in town when it came to reviews.
And this goes back to the initial question of why were investors so gung
ho on Yelp originally?
They were the only game in town at first, when it came to reviewing a local business.
Amid all of Yelp success, the company claimed that once suitor Google was
favoring its own content in search results and that Google was scraping
data from Yelp for its own Google Places service, which spurred antitrust
investigations. And Yelp released a pretty convincing 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.
It now hopes to be a destination site itself for one vertical market after
another, including news, shopping, travel and now local business reviews.
But Yelp was dealing with some internal problems as well.
Business owners started noticing suspicious reviews According to a study
done at Harvard, which included every Yelp review for restaurants in the
Boston metropolitan area between 2004 and 2012, minus the 1 percent that
violated Yelp's terms of service, 16 percent of reviews were flagged as
fake. Rival business owners would write negative reviews to lower their
competitions overall rating and write positive reviews on their own
businesses. Yelp says it deals with these fake or extreme reviews by
filtering them out.
Every Yelp review is automatically evaluated by Yelp's recommendation
software based on quality, reliability and user activity on Yelp.
We try not to highlight reviews written by users we don't know much about
or those that might be fakes or unhelpful rants or raves.
And since the early days of Yelp, some business owners have not been too
keen with how Yelp makes its money.
A majority of its revenue comes from advertising.
So this is no different than, say, what Facebook or Google does, where
they're all on the same hunt for digital ad dollars.
Yelp's niche in this is that if you're going and looking for a small
business or restaurant, those restaurants can advertise right up there
against your search on the site and therefore you can make money that way.
An upcoming documentary that was announced back in 2015 interviewed local
business owners who claimed to have received shady phone calls from Yelp
sales representatives.
If the Mafia had done what Yelp is doing, they'd be thriving in every
county and every jurisdiction in the United States by doing it over the Internet.
These reps reportedly offered to move bad reviews to a lower position on
the businesses Yelp page in exchange for an advertising package and
threatened to dock the page if they didn't advertise. The
Federal Trade Commission looked into these allegations but found no cause
for charges against Yelp.
In a blog post, Yelp commented on the business owners.
There's no relationship between advertising on Yelp and the reviews that are recommended.
Uh, That's just no way to run a business, and it's not how we do things here at Yelp.
But documentary director Kaylie Millikin was not convinced, not even by the FTC.
I have spoken with a lot of the lead attorneys in cases brought up against
Yelp and the FTC never went to them for the documentation that those
attorneys have, the evidence that those attorneys have.
Dismissing the FTC, dismissing five federal judges who all found no
wrongdoing, dismissing all of that seems a little weird when all of it has
very exhaustively debunked the claims.
You're willing to dismiss an FTC investigation which found nothing wrong
and say yourself that maybe they didn't do a good job and you're doing a better job.
I'm not dismissing what they said.
I am going to touch extensively on that in the documentary and I will 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 uneasy partnership for those of us in this business that advertised
with Yelp because we kind of feel like we have to rather than we really choose to.
And there's a, sort of a wink and a nod and a whisper that it'd
behoove you to advertise with Yelp rather than to a-shoo their advances.
Sorry if I sound like I'm talking about, you know, the mob, but that's
sort of, it's a little bit what it feels like to people or business.
Other businesses, on the other hand, have found great success in Yelp's advertising program.
I actually have positive reviews for Yelp, I'm an advocate for it, so...
We are on the 21st floor so advertising is really big for us being that
we're not on the ground level for people see where exactly.
But, like, it's just like the quickest way to get your business out there.
Yeah, it's been very positive for us.
I'm happy with it.
Despite these allegations and the encroaching tech superpower's like Google
and Facebook and Instagram, Yelp's stock continued to climb.
It peaked on March of 2014 at over $100 a share due to positive Wall Street analysis.
But it hasn't been able to get back there since.
I think you had a lot of execution errors at Yelp.
It's a tough business to scale.
Yelp has had a difficult time monetizing the business of recommendations
into a growthie tech company that can can compete with the biggest tech
companies out there like Facebook and Google.
Investors were chomping at the bit to see Yelp become an advertising
powerhouse, but it fell short of many investors expectations.
Yelp, on the other hand, Scott, I just look at this name and I look at the
fact they don't make money yet.
I don't know when they're going to start making money and when they
do,what's the PE level of Yelp?
I think this is one of those names that's way up into the stratosphere
with plenty of room to the downside.
I would stay away.
And the products that Google and Facebook had been creating to compete with
Yelp started looking better and better in the eyes of the investors.
Google has increasingly introduced more more local information, local
services information, restaurant reviews.
They've kind of, that's the, that was the reason for existence of Yelp and
Google increasingly starting encroaching on that.
Google took its services and prioritized them on searches, driving less and
less people to Yelp site.
This self-favoritism was a setback for Yelp, but some analysts say Yelp
has not been innovating at the pace it should be.
I think Yelp, in a way, was too slow to innovate.
Some of these things that they have rolled out now, so they called a
Request a Quote where you can actually go on the site and request a
quote, they should have been rolling that out several years ago.
I think this company was good on innovation, but not great on innovation.
And I think that slowness is what really created the opportunity for other companies.
A recent wakeup call to Yelp comes in the form of an activist investor.
These investors buy up 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 more than four years and they
decided to go public and in essence become an activist shareholder.
SQN released a 112 page document outlining Yelp's pitfalls and what it
needed to do to get back on track.
And if it doesn't comply, SQN is going to shake things up, starting with
Yelp's board of directors.
SQN came out and said, look, there's a whole 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 fairly quickly.
The first thing they did was that they actively replaced three board
members. They also reported a very strong quarter.
But Yelp is trying to diversify and gain some momentum.
Yelp as a company is going through a couple of transitions. From
a consumer side, it's going through a transition of being purely an
information or a research site to one that's more transactions oriented.
If you could actually go to the site, see 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's moved from being a purely information site to being more of a transaction site.
And as for Yelp's future?
This is the $64,000 question, right?
Can Yelp survive as an independent company?
At this stage, I would say Yelp is probably too small to survive as an
independent company.
I would not be surprised at all if they sell to a larger competitor.
There's always a chance for companies to catch up, and that's what Yelp is
finding out now.
Whether it's too little, too late.
I don't know.
But I don't know why you would- why one would have to reach that conclusion.