Yelp, a user-generated database of customer reviews of local businesses, first launched in October 2004. Users rate and leave reviews for local businesses, participate in forums, and can generally get social around local businesses.
Yelp almost immediately caught on organically in San Francisco, but founders Jeremy Stoppelman and Russel Simmons ran into some early criticism. Rumors circulated that they were paying people to leave reviews on the site. Some users were outraged, claiming that paid reviews couldn’t be untainted. Yelp claimed that they were only “marketing assistants” employed by the company to “get the ball rolling” in new cities, and the reviews themselves were honest.
2006 proved to be the year of new competition, with Judy’s Book receiving an $8 million round in November 2005, Intuit releasing Zipingo in October 2005, and idealab’s Insider Pages receiving a cool $8.5 million Series A in March 2006. A daunting situation for a new startup to be in. But Yelp pulled through it to secure a $10 million in a Series B from Benchmark Capital in October 2006 and was named one of the 50 coolest sites on the web.
Then the competition started dropping like flies. Insider Pages laid off 2/3 of their staff and sold quickly to CitySearch in February 2007, Intuit said “goodbye” to Zipingo in August 2007, and Judy’s Book closed their doors in October 2007. Yelp was the sole survivor.
When Yelp released their API in August 2007, they were doing pretty well, getting 1.4 million U.S. visitors and 6 million page views per month. They’ve seen rapid growth since, now at almost 15 million U.S. visitors per month, surpassing competitor CitySearch in March (via Compete). Yelp has raised $31 million in capital, and mainstream press is all over them.
All that press gives business owners the idea that they need to pay attention to Yelp. So they ask their customers to leave positive reviews. Those customers then become Yelp users, and may leave reviews on other businesses, too. A virtuous and self sustaining cycle is created.
But when can you truly say that a company has “made it?”
It’s when people start hating you, of course.
Sites like Yelp-Sucks and IHateYelp have been popping up, with the general theme being an angry business owner who was Yelped. Those business owners that think they must use Yelp for competitive reasons are getting frustrated over some of Yelp’s policies, and are starting to complain about it. Loudly.
The good news for Yelp is that when businesses are afraid of you, it’s only because they realize how much power you really have. See, for example, Paypal and Ebay, two of the most reviled and profitable businesses on the Internet.
The major complaint is negative reviews, and how to get rid of them. But business owners are also complaining that they can’t use their accounts to leave reviews on other businesses, as well as a number of other complaints.
Yelp CEO Jeremy Stoppelman said recently in the NY Times, “We put the community first, the consumer second and businesses third.” Their goal is clearly to make businesses need Yelp, but not to expect a lot of help when it comes to disputes. Complain all you want, you’re just proving that you need Yelp more than they need you.
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