Howard Lerman can be a little intense. After the CEO of Yext finished his demo at this year’s Techcrunch50 (embedded below) he left one judge “speechless,” and during rehearsals Michael took him aside and asked him, “Are you on drugs?” He wasn’t. Lerman just has the heightened dopamine levels of an entrepreneur. And he hadn’t slept for 45 days because he was pushing his New York City startup to relaunch on an entirely new technology platform for TechCrunch50
Over the past three years, Lerman and his co-founders (who all went to the same high school together in Virginia), have built a local advertising business under everyone’s nose that is on track to generate $20 million in revenues this year.Yext is going after the huge, entrenched Yellow Pages business with online ads for local businesses that result in phone calls instead of clicks.
At TechCrunch50, which was the company’s public debut, Yext relaunched with a whole new product, going from plain vanilla pay-per-call ads to pay-per-action ads where the action is a relevant call that actually drives new business. Each ad has a unique trackable number that goes through Yext’s system, where it is recorded, transcribed, and analyzed. Yext customers get their own inbox for calls which is like a Google Voice for businesses. There is a transcript for each call, the phone number of the person who called, and a full audio file that can be played back. When a business signs up, Yext places ads for them across the Web in local directories such as Yellowpages.com, SuperPages.com, Local.com, 1-800-Free-411, 4Info, Topix, and more. It turns those ads into phone calls.
Yext uses speech-to-text recognition licensed from IBM and fine-tuned with its own algorithms for each business category it targets. Co-founder Brent Metz used to be an engineer in IBM’s speech science labs, and his name appears on many IBM patents. Only when certain key words related to the actual services offered by the business are mentioned in a call (”spinal decompression,” “oil change,” “install countertops”) does Yext charge for it. Wrong numbers, marketing calls, or calls from beyond a pre-determined geographic area are put in a junk folder and Yext doesn’t charge for those.
This means Yext needs to be really good at both driving relevant calls to local businesses and identifying them. “You’ve got to be transparent,” says Lerman. “We take all the risk, then we pull our pants down and show them what they get.” Lerman is so confident of his technology that at TechCrunch50, he switched all 20,000 local businesses already using Yext over to the pay-per-action system. It is a big, gutsy bet.
The minute he stepped off the stage, Lerman was inundated with emails and business cards from seemingly every venture capitalist and M&A officer in the room. He tried to ignore them and soak in the rest of the conference, but some of them were from people any startup CEO would be foolish to ignore. He took a few meetings with the most serious VCs, and ended up closing a $25 million B round, led by Institutional Venture Partners (which is also an investor in Twitter). The money just hit Yext’s bank account a few hours ago. “Anyone who doesn’t launch at TechCrunch50 is crazy,” says Lerman.
IVP partner Dennis Phelps will be joining Yext’s board. Sutter Hill Ventures, which had put in $3.5 million in an A round in June, 2008, also participated in this latest funding.
Yext is currently only in 12 local categories, including auto repair, chiropractors, gyms, vets, and yoga. There are 2,300 Yellow Pages categories. Lerman is going to take the $25 million and aggressively expand into those categories, hiring sales people to go after each one. He already has 75 employees.
Lerman is also extremely excited about getting Yext numbers into mobile apps. He thinks he can build an AdSense for mobile phones. “What do you think is the perfect action for mobile?”he asks. “It is a phone call, not a click.” App developers who sign up here can freely import Yext numbers into their apps by business type and category. So a travel app could bring up nearby auto garages or window repair shops for stranded travelers and get a cut of any call revenue they generate. Lerman has a lot of ideas like that.
Here is the demo from TC50 that got him $25 million:
Photo credit: TechCrunch/Chanaye Thomas.
Well, every VC and their dog will jump whenever they find a company with $20 million in revenue.
My question is, why did Techcrunch allow a company with $20 million in revenue to be on TC50.
+1 – TC50 is not about “start ups” – unless you want to pay $4k for the demo pit.
Alot of potential here, improvement in a very inefficient market. Things are headed this way.
Good question. Can we have an answer to that? And are there revenue caps on companies allowed to compete in TC50 or are we going to see a trend of Jason and Mike selling out for publicity to promote their own ventures?
I agree. Michael and Jason need to either rethink TC50 as the “conference for start-ups” or possibly take a minute to explain to those that are actually launching a company who they will be competing with at these events.
$20M in revenue and they call it a “launch.” Amazing.
Yext was definitely not the typical TC50 startup, but:
A) they had managed to stay under the radar for 3 years quietly building their business and this was their first public debut
and B) they did launch a major new bet-the-company product.
We felt the company and its new direction was important enough to give them a spot on the stage.
I don’t buy that explanation, especially on the conference terms & conditions..
Would you like a refund for the TC50 ticket that I’m guessing you also didn’t buy?
Such Arrogance!!
So if you bought a ticket to the TC50, you’re allowed to ask questions about the nature and purpose of the conference. But if you’re just a reader of TC, then you should keep your mouth shut. Would you agree that’s a fair description of your position Eric?
Listen – all we are saying is that there is clearly an interest in either keeping TC50 truly start-up “never been launched” focus or possibly an opportunity for TC to create a new conference focused on existing companies looking to redefine themselves/launch a new company changing product (panelists can judge the merit of the business direction change) while keeping TC50 in the original spirit of the conference.
It’s disheartening and DISCOURAGES ticket sales and participation when we hear of companies with $20M getting a spot against a true start-up.
+1 for Erick.
I liked the presentation. To those who didn’t, you can:
A) Pause until the next presentation
B) Close the browser, and *gasp* do something other than sit in from of a computer
C) Close your eyes
There’s more, but I don’t feel like feeding your ignorance.
I agree with Mike +1
maybe they’ll use that money and invest in a good domain name. first things first.
Are you serious? Coming from a person with the domain name “Miroza.” LOL!
Seriously RD, what’s with the never-ending shilling for Yext? Can’t you even try to be discreet about it? And how much are they paying you?
What’s with you making baseless claims? Any proof that I’m shilling? Ask any of the admins / editors here at TC; my IP should be based out of Michigan.
I think they have an excellent domain and brand, though I do tend to agree, that they can hardly be considered a startup with their track record of revenue.
nicely done. Yext is going to be a huge winner. We were lucky to have them launch at TC50.
launch? you mean re-launch, right?
Success has a thousand fathers.
And failure only one very disappointed mother.
Thanks Mike, we feel lucky to have been selected given the caliber of other startups at the show. TC50 is hands down the best way to launch a new product. The advice and coaching participants receive is invaluable and the caliber of people involved is extraordinary. There is no other!!!
Hey, can you two get a room?
Dude what did you smoke before the talk?
i want that shit..
Probably doesn’t inspire confidence for a CEO running $20mn business.
COP – LOL – yes Lerman wants it so bad. Determination! Because with those eyes you bet he worked his a.. off – Congrats to Yext!
And how come they didn’t win TC50? http://www.tech...or-phone-calls/
Interesting idea – not sure small businesses are ready for a pay-per-call model since they get a lot of junk calls and don’t want to bear the risk of either paying for all of them or having to spend time deliberating with a provider like yext to get them credited.
watch the presentation…or just comment without knowing what you are talking about
I run a successful business that serves smbs, so I actually know what I’m talking about.
Clearly you do! That’s why this company has grown to $20M in revenue, and continues to expand fast.
What’s your company’s revenue, Jim? Hell, maybe you can make TC50 next time…
Did you even bother to read about the company or watch their presentation? Or did you just comment for the sake of commenting? One of their strongest points and what sets them apart from the competition is that they filter junk calls and very efficiently at that.
Google voice and other services try to do that and the technology is imperfect, so there’s always going to be disputes about which calls are valid (chargeable) and which are not. For the demo they showed a best case (surprise). Try some muddled calls from customers on cell phones in bad areas and those that get dropped, then tell me their technology does it efficiently. I’ve been down this path. Based on your analysis, I’m guessing you haven’t.
Jim, you are a jealous donkey.
Howard and team rock. Period. Full Stop.
alright you freakin’ tools, here’s some evidence
http://news.vin...articleId=13851
Let me know how much you’d like to pay for the bridge I have to sell you.
Jim, I agree with the countless other comments that imply you’re a jealous bozo / donkey / etc.
Yext has some rocket scientists on their team and Howard is a great leader. I recently got to visit their offices and see “under the hood” a little bit. Was very impressed! Yext will be huge.
http://www.tech...or-phone-calls/
Bye-Bye Reach Local! RL uses mainly PPC and charges for the click, with additional charges for call management and other services.
Yext is putting Reach Local out of business with this payment model. Can you imagine…only charging a client for a PPC campaign when a click is verified by a lead??
This is a gutsy move by Yext. A $20 million dollar move. Congrats!
I think your analysis has a flaw: the number of leads is limited, and definitely many less than calls. So even if the idea is great, the chances they get advertisers paying tiny amounts a month are pretty high.
Great for the advertiser, but from a company prospective makes things hard to manage. Just saying.
Yext is definitley one to watch. A real company with real passion…
Lerman is a breathe of fresh air!
I was thinking this article was a little over-the-top but until I watched the video. Hats off to Yext and the Yext CEO; he’s my kind of freak.
Oops typo (what I meant to say): I was thinking this article was a little over-the-top until I watched the video. Hats off to Yext and the Yext CEO. The best demo I’ve seen in years.
Dont add up for me. if pay-per-call was wildly successful to the tune $20M in revenue, why not scale that up to the max rather than change the business model?
It seems like a great idea. I wonder if they noticed a limitation in the current model (too much hardware, too much time, etc) and changed it.
nicely done. The video is really worth watching. Lots of thought has gone into this model and clearly the founders are executing.
The only part that sucks for Yext is that they don’t own the speech platform. But, then again TellMe didn’t own theirs (Nuance) and they got acquired for $800M by Microsoft.
Great idea on paper. My only question is that Google Voice has a hard enough time transcribing my voice mail. How much money are they going to have to invest in voice transcribing to:
1. Avoid having False negatives and leave money on the table.
2. Be better than Google’s Voice Transcribing.
Will 25 Million be enough to surpass Google’s Voice Transcribing quality and support the sales push?
Other than that it is a great idea, nobody created an Adsense for Local let alone Adsense Mobile Local. These guys are on the right track.
This demo is fantastic.
Yext presentation is a bit misleading
They are reselling AT&T’s pay per call product. They do not own the technology nor the distribution network for those ads . Local.com, superpages.com, yellowpages.com etc are all part of AT&T pay per call distribution network.
They are counting search and visited numbers from AT&T local search network too. It’s like efficient frontier claiming to be the #1 search company cause they resell yahoo and google.
And that mobile thing is also not their product or technology.
wrong
Best company response I have heard in a long time. LOL
+1
howard, why not go for scale with the pay-per-call model if it ramped to 20M. this sounds like Schmidt waking up one morning and throwing PPC out the door to go PPA.
yes, yes, i understand the “greater fool” theory that prevails on sand hill. and i am now familiar with the lipstick-on-a-pig doctrine of TC50, a la mint.
but whats wrong with making money if it works?
+1
Will, this company just raised a $25M series B from well-known VCs. I highly doubt Yext is pulling the wool over anyone’s eyes.
RD, while I was impressed by the Yext demo, this argument does not convince me in general.
That’s how Maddoff got all his victims, after all.
Kudos to Yext, but yes, why the change in business model?
Let’s say 50% of calls under PPCall are junk. Are local businesses willing to pay more than 2x per call?
Howard, We’ve been managing PPCall campaigns for the past 2 yrs for SMBs and can tell that sometimes up to 90% of the calls are useless. I liked your product, although I have to say the transcribing, smb inbox stuff are not new.
Kudos to you for delivering value for advertisers. But your company might go from $20m to $4m assuming SMBs will now only willing to pay 2x for the qualified lead.
I hope your have more innovations on the traffic side, don’t depend on the Yellowpages.com sites.
Thank you.
1) Propaganda for TC-50. What the hell?
2) This demo really isn’t that good. Truly. 1.5 minutes in and I still don’t know what he’s talking about.
“Truly. 1.5 minutes in and I still don’t know what he’s talking about.”
It takes intelligence to understand an intelligent product. ’nuff said.
incredible. when, if ever, will this be available to resellers?
Let’s watch it again and take a shot every time he says “awesome”.
Erick, is there anyway we can watch all of the TC50 presentations? at least most of them? please
http://www.techcrunch50.com/
There is a post for every company with a video embedded at the bottom of each. You can find links to all the TC50 posts here:
http://www.tech...ps-who-made-it/
I mean other than ustream which for some reason does not work for me.
call tech support
Correction. This is the best company response I have heard in a long time.
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Well at least over here the Negroes are too busy finding new ways to hold each other back. Keep up the good work in the free market.
Congratulations Howard on the new investment. I was lucky enough to watch your demo in-person at TechCrunch50 and was very impressed.
TechCrunch mentions that you currently have $20 million in yearly revenues. If you can and are allowed to elaborate is that just from the Yext directory product?
Signing up 20K local businesses, presumably one by one, via direct sales, is an awesome accomplishment.
And the fact that they have cool tech to keep those businesses happy is a bonus.
We saw this demo streamed from TC50 and we signed up as part of their distribution network on the same day.
Go Yext.
That’s an overblown hyped up mess in the works there.
I hope they do well, but my gut tells me this is a train wreck and overhyped for sure. try collecting from a bunch of small mom and pops advertisers, its like herding cats. Cool technology, they just need to find a dumb buyer like ATT or Verizon, etc. or a YP company.
They listen on every call and then they transcribe the conversation. So they end up with a big block of text after hearing the entire phone call, then the pull keywords on the conversation and try imply a billable event. Come on, privacy intrusion, not to mention all the errors that will occur. I think that it may be easier to shrink a million bean counters and attach them to the cash register.
Did you hear the phone call he made live at TC 50? The caller is notified that the call is recorded. If you don’t want to be recorded, hang up.
Obviously on the business end, they KNOW the call is being recorded. They signed up for the service. Where is the privacy intrusion?
As for the errors, it’s not like they hacked together some speech to text program – they licensed the tech from IBM and the lead developer of the Tech and many of it’s patents is also a co-founder of this new Yext product. I’m quite confident they know what they’re doing.
That’s an overblown hyped up mess in the works there. I hope they do well, but my gut tells me this is a train wreck and overhyped for sure. try collecting from a bunch of small mom and pops advertisers, its like herding cat. Cool technology, they just need to find a dumb buyer like ATT or Verizon, etc. or a YP company.
$25M…amazing
I think the technology of the Yext inbox is the true value not the pay per call function. They should make a Yext Inbox platform and license it to all the web companies who use per pay call models.
I agree. Let other people sell your product. Not as sexy, but surely more scalable.
John, we agree that Inbox would be valuable for all phone calls (not just calls we drive our customers) and might consider that offering the in future.
how did these guys solve the transcription dilemma that many companies have? Are they using humans to help fix mistakes? lots of players with lots of money working on this. what is their secret?
The transcription process isn’t their own tech, it’s licensed via IBM. They just have fined tuned algorithms picking out the relevant actions.
When I worked for a .com in ‘99 , “fined tuned algorithms” was code for human interaction.
http://news.vin...articleId=13851
Sure looks like those Vets he was talking about are having a grand time with Yext. From one persons account they are paying $35 per new client. Ow. Pain. Most small businesses can’t bother with $35 a client.
Also, ow, the same guy had to pay 25% of his revenue on these first time clients. I’m just not seeing the benefit here yet.
See, this qualifies a story as journalism. It would have been easy to google this up and include it in the original story… but that doesn’t help the hype machine.
It’s better than spending $30,000 annually to list a business in the yellow pages with no guarantee of leads, like the vet from Charlotte, N.C. did, also mentioned in the same article. It’s an advertising cost, and it’s lower than what most are currently paying. What’s your point?
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The guy was nuts in the demo. But I posited, also, that he was looking an awful lot like what Google Voice is already delivering. Google is quickly moving into local (as in, down to the zip code based in IP). I’d say he’ll have competition from the big G pretty soon.
agreed. Google should go ahead and copy this fast. They have the technology to do it (Voice + Maps + Search).
I really don’t get what they’re trying to do. Someone makes a call, yext handles the call and records it and identifies these actions that the business has indicated an interest in. That part, I get. What I don’t get is that the business answers the phone and has to engage with the customer regardless of whether the call is relevant or not. The fact that the transcribed actions go into the relevant inbox or the junk call box is a bit late for the guy who has to answer the phone.
What am I missing? The only thing I can think is that with yext, the business gets more exposure due to the advertising that yext does…but that’s about it.
Bob, it is all about the money savings for the merchant. The merchant gets qualified leads, but does not have to pay and arm and leg using Yellopages.
Like the founder said, an awesome value proposition, and the revenue speaks for itself.
I liked the presentation.
I was little annoyed at the end Q&A. It seemed like a lot of people on the panel were either unimpressed or equally annoyed with Howard Lerman. I’m assuming it was either because they didn’t understand why a company already earning $20m in revenue was at a startup conference or because Lerman did come off a bit dismissive in some of his replies.
Regardless of that, I did quite enjoy his enthusiasm and regardless of whether or not this should’ve be a TC 50 launch or not – I think it’s a gold mine.
If I had a local business, I would be signing up right now instead of posting this comment. The transcription services they’ve (reportedly) licenses from IBM seem top notch and can only get better. If the algorithm is as good as they say it is, then this service is going to do really well.
My only concern is clients gaming the system by marking items as non actionable, when they really are to avoid paying for high traffic terms. For instance, in the demo “Oil Changes” wasn’t an actionable item. How many calls does “Frank’s” actual get for oil changes and earn money on via Yext ad’s, but isn’t paying for because it’s not listed as actionable.
Other than that, sick product.
20 mio and the market is billions
Great Concept. Hope the execution works. Good luck Guys.
#genius
One of my favourite demos at TC50 (fantastic conference btw).
Startups today really need to use the power of computing and software intelligently; it’s hard. NLP (natural language processing) either voice or text is hard. Its even harder to do well. But it is the future.
If you’re running and start-up and you don’t provide some sort of way to filter the data or reduce barrier to entry to virtually zero, your start-up has a good chance of not having longevity.
“on track to generate $20 million in revenues this year”
How will they achieve $20 mio in 12 months with 20,000 local businesses?
$20mio / 20K businesses = $1,000 / local business
If a local business gets 5 calls / month or 250 calls /year this is $4 / call
Currently Yext has less than 100,000 visitors / month
http://siteanal...e.com/yext.com/
100,000 visitors / month for 20,000 businesses = 5 calls / business per month
$20,000,0000 / 12months / 100,000visitors = $17 for every visitor
And not all visitors will call.
Numbers don’t match up.
I imagine when they on track they take their last month (which presumably is the biggest month) then expand that revenue along with current growth rate x12.
So they are not saying their going to do 20 mil with 20k customers they are saying they are going to do 20 mil and they currently have 20k customers.
If I call my garage for a repair or maintenance, i want to know immediately when I can bring in my car as it has to match my agenda.
These appointments require understanding of each business and the time each job will take. Not possible to automate.
As a customer I make an appointment call and I have to wait until the garage calls back?
I will have dialed another garage already and made an appointment with the operator at that garage.
please understand what this business is about before posting…
Howard rocks!
“….hadn’t slept for 45 days…”
That’s not medically possible. I mean, without dying.
nice hyperbole, though.
It is possible. I suggest you research “Fatal Familial Insomnia.”
I doubt that’s the case here.
For those of you who have run a start-up, you know how stressful launching a product and platform can be, not to mention timing that lauch to coincide with a big PR opportunity (TC50). I think we can forgive Howard his “rough around the edges” look in the demo. For those questioning the business (absulutely fair), remember that yext’s goal isn’t to get in between the business and the customer (which is what a traditional lead gen service does); instead, they market on behalf of the local business (which, as I undertsood it, the local business does not pay for directly) and drive qualified customers directly to the business. Businesses only get charged when the receive a qualified call (compared to CPC, this is quite a bit deeper down the intent funnel). Whether they can charge enough for those calls, and collect in a timely way are certainly good questions, but I liked what I saw.
Holy moly,
You commenters are so smart!!! Smartest commenters ever for sure.
Yeah King Maker!
Suddenly the local business market gets a lot of attention. TC50 winner Redbeacon also in the same space.
Interesting though, http://www.QuestBid.com is another sick model, one that does both Yext and Redbeacon combined. They convert the text request to a phone call, automatically send it out the local providers and ask for bid. Everything automated. Chicken and egg problem solved!
I assume it is not very difficult to get 25 Million $ in funding when you make 20 Million $ revenue with a growing rate of 6% as a start up …!
Is this a spectacular message? WOW ! They made a presentation on TC 50 … and BOOM they achieve a 25 million $ funding .
My view of the world has changed!!!
Now I know how to get funding! I make 20 million revenue and than I go to TC and do a presentation, and I get 25 million or more as well.
As simple as that
But wait.. damn … I still did not have a seed investor … damn … although I have contacted 99% of the here in TechCrunch mentioned VCs …!
“all animals are equal but some animals are more equal than others”
looks awesome, good for them.
it’s a little ridiculous that anyone is attacking the CEO for being nervous and excited about his company, the dude has passion and can sell which is demonstrated by the large funding round they cleared from the pitch.
“are you on drugs?” come on, more like he’s the one NOT on drugs. i’ll bet you 1/3 of the other presenters are taking beta-blockers or anxiolytics.
Love the model and the revenue is a proof of concept. We would love to try out the service on our Yellow Pages site.
Excellent presenation – A real life call to a merchant was a very nice touch.
Excellent Execution – $20M within 3 years of starting out.
Standard Technology – Nothing particularly impressive here. Voice technology has been around for years, developed by a myriad of companies. And IBM’s speech recognition technology is not considered the best here. Seems like a pretty simple algorithm, match words that are transcribed to the keywords choosesn by Merchant.
Investors – Why not pitch the business to Sequoia or Andressen or Kleiner or any of the other top-tier VC firms (or maybe they declined to invest, but you should have made an extra effort). That could make or break the business when it tries to go for the $1B hurdle.
Speech recognition crap, that converts the spoken word to text, logs it,
and stores it for the business when they log into their account. Very big brotherish. So once you have been called a bunch of times, via yext’s tracking numbers, they own that log interaction so they can verify if you have set an appointment or sold something so they can bill for that implied action. It doesn’t mean the register opened just logs intent over the phone. Which is
better than paying for clicks frankly
100% of all the posters owning startups would have taken the opportunity for some great PR via TC50 or any other conference if they had anything to promote. So for this article, any rant translates to a bitching “I want that too, let me in” whining post. Nuff said.
Yext is already axed:
http://www.goog...lbc/listingads/