First, congratulations to the Yelp team on raising another round.
Just last week at the Online Marketing Summit after our panel talk, I spoke to a few people from other verticals like medical, finance and automotive about how I think everyone sees the world through their own little lens. By the same token, I think I got a harsh taste when I started reading some of the comments on TechCrunch this morning. It's no secret that I'm a huge fan of Yelp's. I think the Yelp crew know what they are doing, they are attracting the right crowds and they are doing all the right things to retain their members. So with that said, I was surprised that there were as many negative comments about Yelp's valuation. I thought everyone felt the way I did about Yelp - intense love and adoration. Apparently not.
- Number of user reviews is high, so what? The questions that seemed to be raised are around whether 'user reviews' on Yelp are a sustainable fact that counts towards a proper valuation. The answer is probably not. Facts are a great thing, but let's leave it to the HBS/Stanford/Kellogg/Wharton MBA grads-turned-VCs to determine what facts count towards a proper valuation, please. Some Yelp elites churn out several reviews a day, I doubt that's a telling fact by any measure. Yelp is popular because of its honest set of reviews by people like you and me. Yelp is probably popular with the VCs because of its booming user base.
- The NYC Office - The most number of reviews on Yelp are for businesses that are restaurants. According to statemaster.com, the state of New York has the 5th largest number of restaurants per capita. California is way down there. I wish I had numbers to back me up (I'm sure they're somewhere on the web), but I'm positive that San Francisco and Manhattan are right up there when it comes restaurants per capita. It only makes logical sense for Yelp to establish an east coast presence in a vibrant town that houses young people like NYC. Also, I remember looking up places on Yelp when I was in NYC last year. There aren't as many reviews by locals there - Yelp isn't quite the brand in NYC that it is here. As one of the comments correctly pointed out on TC :
"Because Yelps distribution is not viral. It’s manual, word of mouth.
Here’s how this works: Local interest websites are always non-viral, because they operate in the disjoint “internets” of each metropolitan area. So one needs to wait a very long time before they reach decent size."
That comment is so money!
Besides, DC is another town that has a ridiculously high number of restaurants per capita. An east coast presence is the logical next step.
- Profitability - Private companies don't need to report these numbers. Period. Unless you are seriously considering working for a private company or are investing in them, there is no reason to understand this stat. And, no one will give'em to you.
- Yahoo Open Search - Let's see here, what company did Yahoo! pick to highlight their recently announced Open Search platform? First, kudos to Yahoo for this - this is super innovative and as opposed to doing all the work themselves they're opening their platform up to 3rd parties. Companies, especially like Yelp, can really benefit from this.
- Agility - Yelp is super agile, even for a company that has as many impressions and unique as it does. I use Yelp daily, and every week I see new, interesting and usable features pop up. I know the Yelp crew has been trying to hire devs for a while now, I think they're doing great for a small company with big ambitions and such a huge user base.
If there's one area where I think Yelp can do better, it's working with the tech crowd in SF and maybe forming some more partnerships, like they have with Nokia. It's commendable that Yelp has the kind of reputation they have with the consumer crowd, but the influential web crowd in SF can be great evangelists for them (trust me 😉 And if there's one thing I've learned from Microsoft, that is to have great partners.
Yelp's valuation is not high. Let's not forget that
- Yelp has not even gone international yet, and,
- Yelp reviews are not yet available for all US cities.
There's still a LOT of work to be done.
There's several ways to determine a company's worth, and if Yelp's user trends and impressions are any measure, they are going to take off in a big(ger) way.
PS: This person ought to be ashamed of himself/herself - nice job maintaining your blog.