Yelp Inc.: Local Business Directories and Reviews that Make the Big Difference

Yelp Inc. is the operator of yelp.com, a review site and local business directory with social networking features. From 71 million unique visitors per month in 2012, yelp.com had more than 100 million unique visitors in January 2013. Yelp’s income is coming from advertising local businesses.

Yelp started off MRL ventures. MRL was founded by incubator Max Levchin along with a few ex-PayPal executives. MRL was created to develop Levchin’s investments. Levchin and his associates Russel Simmons and Jeremy Stoppelman met to discuss Yellow Pages in 2004. Stoppelman’s difficulty in finding a local physician on the internet led them to agree to ask Levchin to ask his friends for recommendations from friends through email. On that day, Levchin agreed to pour in $1 million for the project. It was co-founder David Galbraith who gave the name “Yelp”.

Initially, yelp.com was difficult to use. It attracted just a handful of visitors and reviewers. However, in a period of serendipity, Simmons and Stoppelman have noticed that a huge portion of users preferred to use the feature that allows them to write reviews without prompting. The site was re-launched in 2005 based on the unsolicited reviews.

Yelp’s community started to grow. Many local businesses wanting to attract patrons joined the community. Yelp also launched the Yelp Elite, a super-user community which was created to give rewards to the best reviewers. Yelp Elite is always invited in parties and special events.

In 2005, Yelp accounted close to 12,000 reviewers in 2005. In 2006, the number grew to 100,000. Yelp produced “People Love Us on Yelp” stickers to increase awareness for Yelp. In 2008, monthly visitors to the website grew to 15 million. Three years into Yelp’s launching, the company was active in 24 cities with website traffic doubling in just six months.

Yelp was able to raise funding amounting to $5 million from Bessemer Venture Partners at the onset of the company. In 2006, another $10 million was contributed by Benchmark Capital and another $15 million from Dag Ventures in 2008. Elevation Partners also contributed $100 million in 2010.