Yelp secures $10 million more for local reviews

I love Yelp, but this is yet another example of more overfunding. The technology is not incredibly complex. It can, and has been, easily replicated. There are numerous competing services, including services run and being developed by, as Marshall notes, the big players. Where did the first $6 million go? What could they possibly need $10 million for?

That is so true about it.Y others get some funding, n some don’t . Is a matter of convincing one or not? Even in this web 2.0 area, luck plays a major role in determining the hit to a site. For example, yelp, i dun see any special about it, just that, it haves the WEB 2.0 characteristic. That is all.

I am skeptical bout all the web 2.0 company getting funding. But some are really usefulthough.

How to get funding?

putting aside the question of the funding amnt, i disagree re: site experience and community for Yelp being just luck. I’m a big believer in local reviews and find that Yelp has encouraged community in ways more significant than their competition (Inside Pages, Judy’s Book, Tribe, etc). At the end of the day these types of plays aren’t bets on the technology (although it needs to be good enough to scale and enable compelling functionality). It’s a momentum bet on community hitting a tipping point and getting locked in.

In most cases funding is not about buying the technology but about buying the business, and usually it’s the end-user/customers they are interested in. Flickr was a classic case of this, and I’m sure people would pay tons of millions of dollars for craiglist, which is a high school programming project at best, (scalability and server issues aside).

Yelp has major value because real passionate users provide useful information. Secondly, reports on the type of users, and user behaviour is valuable information for big companies who would pay big bucks to better understand their customers.

well that’s just my opinion at least on the majority of cases.

Marshall - those stats include major geographic expansion. Have they published any same-city stats?

hunter - maybe you’re right. I find it obnoxiously cutesy and over the top with its oh-my-god-aren’t-we-hip attitude.

User experience is crucial, and Yelp might be beating all the rest for the moment - but there’s still huge pain points for a lot of consumers, and many untapped markets.

Yelp sucks.

And for that matter, most of the Internet 2.O sucks. They don’t know what the hell to do with the Internet at this point.

I put a review on Yelp 2 months ago. I had no replies. I don’t have an honest clue as to who the fuck the other people on that website are (as far as “social individuals”). So, you know what?

I don’t give a flying fuck as to what any reviews says about a local retailer/bar/restaurant/anything else.

Maybe when the Internet becomes anything but THE GEEK/NERD PLACE PEOPLE WILL BEGING TO TAKE THIS SHIT SERIOUSLY!!!!!!!!!!!!

There are people out there (myself included) who simply don’t believe anything written on Yelp, CitySearch or any other sites like that. And don’t really read them either… Simply because they are open to everybody and who those “everybodies” are is a big question.

Not to toot our own horn… ok, to toot our own horn, myself and a handful of friends/collaborators are working on a project that, while being much smaller in scope (and probably not ever running a chance to attract this kind of funding), tries to provide more ‘editorial’-type coverage. We don’t nearly have as many reviewers or postings, but without any false modesty, we think the ones that we write are 1,000 times better. And you can actually see other things the person wrote, other places he/she has been to, etc…. If you have any interest, check out our site:

http://www.sitebits.com/

I have tried using yelp several times and find it useless. the reason is that it is too general and inexact. try searching for “gun shop” in san francisco. there’s mention of 1. if you try the same search in google, you get multiple listings. what is the point of reading that 5 reviewers think a thai restaurant down the street is good or that some optometrist has 5 stars from 6 reviewers? who checks to see if these reviewers work at that office?

for san francisco, sfgate provides new eats and shops that are more informative than yelp. the amount of labor it takes to generate this city by city search is just useless burn.

its cronyism. yelp’s founders are from dot com 1.0; and its a waste of money…duh…citysearch?

its cronyism. yelp’s founders are from dot com 1.0; and its a waste of money…duh…citysearch?

Interesting - I do wonder what the city breakdown of Yelp is.

Plus the demographics are different. Yelp caters more towards the late 20s/early 30s, whereas InsiderPages skews older.

Yelp is a very well put together effort. Don’t put it down unless you’ve seen what else is out there. Citysearch is quite junky in comparison.

BTW, whoever is running this site (techcrunch) must check their profanity filters.

“What could they possibly need $10 million for?”

Well, you gotta see this and read this to understand where all the $$$$$$$$ go.

Slavito - you do trust your friends, don’t you?

WormInBuffet - if you really care about completeness, go for the old fashioned yellow pages. If I find one good dentist / optometrist, that’s all I (and probably most people) care about. If you don’t see the point in knowing that people find that restaurant on your street very good, then you’re certainly not part of their target market.

Yelp has been live long enough and been generating revenues long enough that I suspect investors got decent visibility into its trajectory. To poster #1, I doubt the money will be going to tech but instead to sales and marketing, not inexpensive endeavours.

Dr. Oogle Guy - we’re getting right on those profanity filters. Just as soon as we’re finished with the smug filters.

Tsk Tsk Tsk. Bad Jeremy Stoppelman, bad!

Great, you have just dilluted everyone.

First of all congrats to the Yelp team. Benchmark is a great investor. And they have certainly built up the best community in the U.S.

And if you can get 10m USD at a good valuation, why not take it? It allows for better long-term planning. And the game is not won yet.

We (www.dialo.de) are doing the same in Germany. And after reading the Forbes piece and seeing the Flickr pics I will reallocate some marketing budgets.

These guys have done a great job creating buzz…girls only kissing!?! Someone once told me that Yelp is all about secretaries figuring out where their next date shall invite them to. But that might be changing.

1.5m uniques are great, especially considering that Yelp so far has focussed primarily on the Bay area. With their war chest they have a chance to scale across the U.S.

BUBBLE 2.0 , anyone? We are creating a next generation bubble.

I’m with Drama. Overfunded 2.0.
Yelp is cool, but not expensive. Like others say, it’s done well at creating community, but creating community doesn’t cost all that much.
Where’s all this money going and why are the founders giving away so much of their baby?

organically grown chowhound and dinosaur zagat’s are much more reliable resources for me in this space.

I’ve been a subscriber to yelp newsletters and I do like their map integration, but the socialness of it all actually takes away from the quality of the product… which should be honest reviews on restaurants, bars, and shops.

1,5 million Yelp users Where are they? What are they doing? Just check the biggest reviewers in NYC and San Fransisco and you can see that the majority of reviews come from their own employees or paid writers. Nothing wrong with that, but don’t just throw numbers out without questioning them.

I agree with Sven that if someone is willing to invest 10 million at a good valuation (or any valuation in some of these cases) - why not take the money?

But Drama 2.0 has a good point - where’s the first 6 million (it’s not in any defensible technology for sure)? Moreover, I do feel that these recent investments don’t make a lot of sense. I think one vc finds something cool so the others have to have a horse in the race which just bids up valuations.

Hitwise directly contradicts the Alexa traffic comparison for Yelp, Judy’s Book and Insider Pages and puts Yelp in last place among the three competitors. “Alexa, for what it’s worth” indeed.

http://weblogs.hitwise.com/lee....._grow.html

I don’t disagree that if you can raise $10 million at a good valuation that you shouldn’t, even though it may hamper your exit opportunities. A decision like that may not be the smartest, in my opinion, but depending on your outlook and goals, it could potentially be justified.

I think the parties that should be criticized the most, and that are the big losers in these types of deals are the VCs (and those investors that have put money into their funds). Obviously, Benchmark has a lot more insight into Yelp’s business than we do (revenues, growth, etc.), but how the first $6 million was spent and what the additional $10 million is needed for are valid questions. You don’t need access to any confidential information to see that Yelp is a simple business with a non-defensible product/technology in a market where it is competing with other startups as well as big players. Thus, the risk is huge.

VCs are typically looked at by the general public as being smart, disciplined investors, especially if you’re a “top-tier” firm like Benchmark. I think the type of funding we’ve been seeing indicates that’s not very accurate and that there’s definitely a herd mentality out there right now. One of the biggest factors in any VC investment decision is supposedly the management team. Where did the money from the first round go? According to startup.in’s post, at least a small part of it was spent on parties. The VentureBeat article is very interesting. When asked where they want to be in 5 years, Jeremy Stoppelman, Yelp’s co-founder, said “Sitting on top of a pile of money … [in unison with Simmons] … surrounded by women! Yeah! [high five].” Obviously, most founders would like to make a ton of money and some would like a certain lifestyle, but the more appropriate answer to this question, at least publicly, is “I’d like to build Yelp into a profitable company that is the leader in the space.” I question the judgment, and focus, of any founder that made a comment like Jeremy’s. It’s inappropriate at best and makes you question whether his objectives are aligned with the best interests of the company and its shareholders. Is a guy that says something like this actually capable of making decisions and executing on a business plan that creates value for the shareholders? Any VC that would fund this type of management team loses a lot of credibility in my mind. They deserve the loss there’s a good chance they’ll get. I don’t care who they are and how “top-tier” people consider them to be, I question the intelligence of any VC that invests in a management team that is, in my opinion, apparently this dumb and immature.

Yelp’s best bet is an acquisition, but the higher they raise the bar on the valuation, the tougher that becomes. It is imperative that startups do not rely solely on the acquisition exit because there are a lot of things that could happen very quickly that take this away (a slowdown in the ad market, recession, etc.). Startups prove themselves in tough times more than they do in boom (or bubble) times. Any Girls Gone Wild fan (i.e.

pwb: Sales and marketing are very important, but if a large chunk of this $10 million is earmarked for these things, I think it’s a losing proposition. Some of Yelp’s competitors can and do spend more than this on just a few marketing campaigns. Microsoft, for instance, will probably do individual campaigns for Live.com that exceed $10 million. One of the things that has made many Web 2.0 companies so compelling as investments is that viral growth potential eliminates much of the marketing needs most startups have. In fact, many of the more successful Web 2.0 companies are said to have spent little to no money on marketing and were still able to hit critical mass. The selling point that you don’t need a huge marketing budget mitigates against some of the risk these startups have due to the fact that these sites can be cloned very easily. If these startups start asking for large amounts of money to spend on marketing, they become much less compelling as investments, and actually may become black holes.

Looks like I accidentally deleted some of the text from my post above. Deleted portion:

Any Girls Gone Wild fan (i.e. Jeremey and Russel?) would be better off starting a GGW clone and maybe their investors would actually make some money. At least they would get the lifestyle they want and wouldn’t have to worry about running a boring company like Yelp.

So you hire a few scantilly clad, anorexic dancers… what’s that cost? A can of tuna and some saltenes? I think a party like this probably costs a lot less than you’d think (if it was planned properly) and bear in mind that they’re a very necessary evil.

You and I get buffet style staff parites at the legion while multimillion $ funded companies hire some entertainment and offer free drinks. It’s all about scale perspective.

The only objectionable issue here is the extra funding. I find it odd that a company couldn’t bring themselves into the forefront of public conciousness with their initial $6M investment and required an additional 10…

Especially when there are plenty of other Web 1x and 2.0 sites that came from virtual obscrurity. Maybe the business landscape is changing as a whole now that you’ve introduced money into it.

Back when the baby boomers were planting the seeds of their fortunes they didn’t have much big $ competition. There weren’t other, better funded start-ups trying to take your share of the pie. Now that these boomers have nothing better to do with their money, they’re investing in new startups, which begins to skew the situation in favor of those with funding.

Money ruins everything! :p

Interestingly Qype is a German (3R) review, rating and recommendation site that has covered over 1,000 cities in Germany also raised a multi-million pound round from Advent Partners recently. This was their first round and according to their CEO the last.

The concept of “trusted” recommendation engines has been around ever since the web 1.0 days. Some one will crack it and as a service it will have immense value for all of us but only if the reviews are relevant to our personal profile.

Worth reading is the new tightness of European startup founders. http://www.thealarmclock.com/e.....oun_1.html

Congratulations to the Yelp guys. They’ve done an awesome job.

$16M in funding looks more like a telecom play than a user review play, but to be fair, Yelp’s model is to really nail a city down - to have a local presence through feet on the street, parties, etc. It takes cash to do that on a national level - a lot of cash.

Michael, no offense. I was not aware you are still in charge of the site. It’s grown so big you can never tell who might be doing the admin work.

Maybe one day soon my posts about my IM start-up won’t be getting blocked either.

Cheers!

I dig yelp. I used to use citysearch until I realized the ratings were not based on user reviews (which I think is the best way to keep ratings current - I don’t care if someone got 4 star service at a restaurant 18 months ago, I want to know about last week), and they cut down the number of characters you could use in a review to like 500. AND they were taking advertising dough for “featured” businesses that ended up taking up most of the search page and somehow always had high ratings from the “impartial” editors.

Totally useless.

Then came Yelp. I find it helpful. In fact, just last month I used it to find a place to take my out of town guests for dinner at a reasonable price AND with parking. So, I’m glad it’s out there. PS - it was Dragonfly in the Inner Richmond - delicious and reasonable.

I use the reviews as a guideline. Everyone can have a bad night or bad service or perhaps the reviewer is just a jerk. Who knows? If there is only one or two bad reviews out of several, I can chalk that up to one of the above.

And for John C., who posted 1 review 2 months ago with no replies…your review still counts - whatever it was for. You can’t really expect people to respond if you don’t interact.

Geez, maybe I should go work for them. Yelp! Hire Me!

Drama 2.0 has it right… I know the Yelp founders, been to a few Yelp parties, and can say that they likely lack the seasoning and maturity you’d normally find in good management. Yet again, those aren’t always the qualities required to make big money. If you watch their message boards, their core users, the ones that wrote most of the insightful and useful reviews, are leaving the site. It’s much like what happened to Friendster… which happens to be 2 blocks away from Yelp HQ. Everyone thought Friendster was the cat’s meow in 2002, then, out of nowhere, we have MySpace going far beyond what Friendster ever was.

Does anyone know how Yelp.com makes money?