Mid-Market

Reinvention by Empowering the Consumer

Mid-Market Company of the Week: Yelp

The internet destroyed the Yellow Pages, a long standing consumer staple of local business information, but people still needed directories to find everything from restaurants to plumbers. That basic need for information became the foundation for Yelp.

Jeremy Stoppelman left PayPal in the summer of 2003 (at the time he was VP of Engineering) to attend the Harvard Business School. Yet, the allure of Silicon Valley called and after his first year at HBS, Stoppelman joined an incubator started by Max Levchin (co-founder of PayPal) for a summer internship. It was there that Stoppelman was reunited with his former PayPal colleague Russel Simmons.

Stoppelman and Simmons had been talking about doing something with local review or local search and began asking questions. How do you get your friends to help you find the best plumber or doctor or nicest restaurant close by? Soon, the duo created an e-mail type of product where you ask friends to help you come up with a ranking of businesses, a precursor of Yelp.

Yelp was launched in February 2004 and took off. By June 2006, it had 1 million unique visitors per month. The site was very popular in San Francisco, but then came the question of scalability. People told Stoppelman that Yelp might work in San Francisco, but it would not fare as well in larger metropolitan areas. Stoppelman bridged this gap in New York, Boston, Los Angeles, etc. by creating the “Yelp Elite Squad.” This group, comprised of the most prolific “Yelpers” were invited to social events held at bars and restaurants, thus turning an online experience into a community of like minds. “You want experimentation,” says Stoppelman, “Every once in awhile you stumble upon something that blows your mind.”

According to Nielsen, 85% of consumers find local business information online. Yelp has demonstrated that it is a “go to” platform for such information. Yelp’s mobile application was used on approximately 10.4-million unique mobile devices on a monthly average basis during the second quarter of this year. 117-million people visit Yelp’s website each month and 47-million individual reviews have been written. According to Elon Musk, “Effectively, Yelp is fulfilling a much better function than the Yellow Pages ever did. What Jeremy did was come up with an unmet need to know about local businesses and services.”