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Above all, review site Yelp prizes its independence

Since he helped found Yelp in 2004 amid the wreckage of the dot-com bust, Jeremy Stoppelman has relentlessly expanded its footprint, building communities of writers who have penned more than 10 million reviews of restaurants and other businesses across North America, Britain, and now France.

Yelp is a hive of social engagement that Google reportedly tried to acquire last year with a $500 million bid. Yelp turned it down, instead accepting a private equity investment from Elevation Partners. But recent months have also brought some harsh scrutiny in the form of several class-action lawsuits from small businesses that say the company's sales representatives told them they'd get better reviews, or fewer bad ones, if they advertised with Yelp.

In a recent interview with the San Jose Mercury News in Yelp's sunny offices in San Francisco, Stoppelman, 32, talked about why turning down a half-billion dollars from Google has him "fired up" about coming to work each day, and why those who charge that Yelp's business model is based on "extortion" don't understand how the site works.

With Yelp going into France and other European countries, can it become a global brand?

We're going to keep expanding market by market, city by city, that's always been our roll-out strategy. … I don't feel necessarily it's winner-take-all across the globe, where there has to be one local guide for the entire world. We'll certainly do as many of these markets as we can. But at the same time, we have a huge footprint in the U.S.; we have a nice footprint in the UK and Ireland and Canada, and we'd love to extend that first to Europe and then beyond. We'll have to see how fast we can go.

What did you gain by keeping your independence and turning down the bid from Google?

I've been through a couple of mergers — they're not that fun. And it's easy to lose your focus on this grandiose mission you established for yourself as an independent company. Once you see you're succeeding in a particular area, you start seeing the future — here's what it looks like in 10 years. And I think once you get within a larger company, that vision somewhat can get muffled by the vision of whatever company you're in.

Why are privately held Internet startups like Yelp, Facebook and Twitter avoiding the rush to an IPO that characterized the Internet boom of the 1990s?

I think what's happened is there has been a change of perception, and there's been real change, around what it takes to be a public company. The conventional wisdom within the valley is that being public is not necessarily fun, and it's a huge burden. You're on sort of a quarterly mantra, you lose your flexibility, so you have to make promises to Wall Street, and if you're off by a penny, your stock can get hammered. I've talked to various public companies' CEOs as we were thinking about what's our process — Are we going to do a private equity deal, or are we going to think about trying to go public sooner rather than later? — talking to these folks you find 30-plus percent of their time is soaked up just talking to investors, whereas now I might spend a few hours a quarter preparing for our board meeting and having our board meeting.

In responding to the lawsuits against Yelp, you've said there is a misunderstanding about how the site works. What don't they understand?

So, a typical case history might go like this: "Okay, I got a call from Yelp advertising" — because we call pretty much all the local businesses, so everybody gets a call — and so that business owner declines advertising that time, looks at the site and then sends out lots of e-mails to their friends and family members and preferred customers, and they say, "Hey, I found out about this Yelp thing; it's great; review me." And it's a success, they get 15 reviews up on their page. But that's also extremely biased, and if every business could do that, the site wouldn't be useful. And so what happens? Well, all those reviews get filtered. And so then they are convinced that if they had paid, those 13 reviews would have stayed up. It's not a perfect system, but without it, the site becomes useless. There is this correlation-causation problem, but the fact of the matter is, advertising and content are completely decoupled. There's no connection there.

Above all, review site Yelp prizes its independence 07/11/10 [Last modified: Friday, July 9, 2010 11:37pm]

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