In 2014, Yelp even managed to become profitable, an achievement that had previously eluded it. It’s a big milestone for a ten-year-old company; While Yelp’s $36.5 million profit last year is approximately what Google spends reupholstering its beanbag chairs, it was a big deal for a company that had spent its entire life wandering in a desert of red ink. “We’ve had to endure nearly 10 years of the bears saying, ‘Oh, a money-losing Internet company–what a surprise,’” says Jeremy Stoppelman, Yelp’s CEO and founder.
In fact, he says, Yelp could easily have crossed into the black years earlier, although it would have required pumping the breaks on hiring and other areas of investment crucial to sustaining momentum. “We always knew it was up to us to choose the time and place,” he says. “The nice thing about the last couple quarters was we didn’t actually slow our growth.”
Things have generally been going Yelp’s way lately. In September, a storm cloud that had been looming over the company for four years suddenly dispersed when a federal appeals court ruled against the plaintiffs in a class action lawsuit accusing Yelp of giving better reviews to businesses that bought advertising. He faces a challenge when it comes to setting strategy now that Yelp is a publicly-traded company. In its early days as a startup, Stoppelman was able to make gutsy calls with a minimum of deliberation. Two that proved particularly crucial to long-term success were deciding to invest a large share of Yelp’s then-modest resources in developing an app for the iPhone when it first arrived in 2007; and electing not to devote significant time and money to Facebook’s first developer platform, which came out around the same time but quickly withered from a lack of support.
On the rare occasions that he has to make a snap decision, he says he’s glad to be able to draw on the credibility that comes from being a founder-CEO. “It’s helpful to be able to say: This company is my identity. I know how and why it was built in the first place and I know where to take it in the future,” he says.
That sort of maneuverability may come in handy as more and more competitors take the model Yelp pioneered of user-generated business reviews and iterate on it. After all, that old saying about opinions cuts both ways: Yes, Yelp has them by the millions, but it’s hardly alone.
Stoppelman is dismissive of efforts by the biggest of the Internet giants to muscle in on his turf. “The reality is it’s very hard for somebody in a particular core business to go completely outside that business,” he says. “If I had a dollar for every time someone said, ‘The new product from Google is going to kill Yelp,’ ‘the new product from Facebook is going to kill Yelp’ – I would be a very happy man if I was getting paid for those headlines.
And Fitzgerald notes that the number of reviews submitted by Yelp’s users, an important measure of engagement, has steadily grown by about 20 percent annually. “They’re continuing to scale the model,” he says.It’s clearly the case, however, that advertisers are willing to pay more to companies that can offer them not just consumers’ awareness but also their actions. Yelp’s $134 million purchase of the food-delivery service Eat24 in February was a big step in that direction; more quietly, it has been building out its transactional platform, which 60,000 local businesses now use.The future holds a lot more of that, Stoppelman says: “Whatever it is the consumer might want to transact with, we want that to be able to plug into Yelp.Read More