
Yelp Files For $100 Million IPO - llambda
http://techcrunch.com/2011/11/17/yelp-files-for-100-million-ipo/
======
shawnee_
Yelp's motto: 'Let's legalize extortion!'

Built a review site? Fine, but leave the reviews alone. All of them. No, it is
not "OK" to close users' accounts with no warning, thereby demolishing all of
their reviews. No, it's not OK to "hide" some reviews or to take down reviews
when your blackmail tactics actually work. No, Yelp: it's not acceptable to
solicit and harass people and businesses who have explicitly posted "no
soliciting" signs on their establishments.

Show investors your business model transparently, let's see it. How is this
supposed to work legally? Is this really going to be sustainable or build
value in the long-term?

If Yelp's public offering gives them anything substantial, we have a lot to
worry about. If the IPO market says it's OK for companies to make money by
extorting the little guy and stifling the small voices, we are in a world of
trouble.

~~~
blantonl
If these businesses learn anything (Yelp and Groupon I'm looking at you!), it
should be that quickly growing a _sales force_ that is paid on incentives is
difficult and should be closely managed.

Otherwise the newly minted hundred(s) person salesforce, most whom have less
than 1 year with the company, will sacrifice the long term success of the
business for the short term success of commissions. Translation: cut ethical
corners.

I cannot even imagine how difficult it is to recruit, lead, and manage a
salesforce of hundreds of people that are all brought together in a period of
_months_.

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pg_bot
Why are all these recent tech companies that have gone through an IPO not able
to turn a profit? Groupon, Pandora, LinkedIn, and now Yelp are all valued so
highly yet they are not making money off of their services. If you have been
in business for over 5 years and don't make a profit when are you expecting
to?

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pbreit
It makes no sense to shoot for profitability when you are growing rapidly.
Yelp has only just started expanding outside the US. It's cash is much better
spent on growth than sitting in the bank.

~~~
pg_bot
How do you know that your rapid growth isn't a result of your service being
unprofitable? Wasn't that the lesson that we were supposed to learn with
pets.com and kozmo? Also I believe that profitability and rapid growth are not
mutually exclusive. I understand the theory of operating at a loss, but it
leaves very little room for uncertainty in the marketplace. If you have new
competition, capital dries up, or you make any sort of mistake, the company
could go belly up. I wouldn't want to invest in any company unless it could
show a clear path to becoming profitable.

~~~
tomkarlo
Accounting profit is not generally a great test of the long-term profitability
of a business, because much depends on how revenue from customers comes in,
how costs are timed, etc.

Generally, if you have a business where there is a significant growth
opportunity / market opportunity, the right strategy is to run at an
accounting loss to grow faster. What matters is the cash situation, not the
accrual accounting situation (and they are not that closely tied to each
other.) Growing slower so that you show an accounting profit would be the
wrong thing to do and the market would not consider it a positive indicator
for a company coming to IPO.

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tryitnow
Wow, I knew there was some people viewed Yelp negatively, but judging from the
comments here, Yelp has a credibility problem more serious than I realize.

The thing that I've found Yelp most useful for nowadways is little tidbits of
useful information like store hours and the key combinations to Starbuck's
restrooms (I hate having to ask to go the restroom like a 4 year old).

~~~
jerf
For better and for worse, we are not representative of the population at
large. My wife... has never heard of Yelp, so I suppose that's not the most
positive sign for them either... but she certainly doesn't hate them.

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rationalbeats
So I glanced through the S-1 real quick. They want to raise $100 million, and
so far this year their revenue is about $55 million?

Those numbers seem off to me.

Also they are only pulling in 50 odd million a year? Seems really low.

Did anyone else have to put in a CAPTCHA in the S-1 to read the potential
negatives???

~~~
joez
What seems off about the numbers?

I think the IPO is more about an exit for founders/investors than the actual
100 million amount. That's just the float that they're putting out (not a
valuation). 100 million is a credible number they can say they need this
amount to grow/reach breakeven.

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cantbecool
Why do people think they can turn it around, i.e., make profit? Yelp has been
around since 2004, that is a good seven years to show that they can generate
at least minimal profit, and if Yelp is not profitable yet, there is a decent
chance they never will be. Yelp is not Amazon, they are a crowd-sourced review
site. Growth is great, but operating in the black is better.

That's just my opinion though. So feel free to criticize.

~~~
mattmanser
No criticism here, it's purely to sell it on to someone else, it's bull all
the way until someone realizes they're still not making profits!

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betterlabs
Yelp is an awesome service, but I am surprised to see that they are still not
profitable. Considering an annual revenue run rate of approx. $70m, I am
wondering what costs them $70m a year to run the site - with most online
businesses salaries and marketing are the biggest expenses and considering
Yelp's amazing organic rankings, I doubt they are buying a lot of traffic. Any
idea what the other big costs are? Sales teams, perhaps?

~~~
mkr-hn
Probably paying people to go out and try places to review. Organic traffic
(and ad revenue) comes from having content, so it's a good investment.

~~~
meowzero
I doubt they would pay people to review, unless it's a well kept secret. What
they do have are Community Managers. They are located in each major city
prompting Yelp, providing support for the yelpers in that city and so on. They
probably spend a lot on their sales team as well.

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mhartl
$100 million is less than I would have expected.

~~~
fraserharris
They want to _raise_ $100M. They are seeking a valuation of $1 - 2B.

~~~
mhartl
Ah, thanks for the clarification. That makes a lot more sense. (I should have
RTFA more carefully.)

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rishi
Yelp is 1 of 3 apps on my Android that I actually use. They have the best
mobile experiences for reviews about a restaurant before you eat there. They
have built a strong brand and I hope they do more with it. I for one, am
really excited about their IPO.

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vaksel
they are too dependent on Google, which is why they were silly to walk away
from their offer.

~~~
dmix
I love how everyone becomes armchair experts on the decisions tech companies
made when they try to IPO.

~~~
DevX101
I don't disagree with your diagnosis of the prevalence of armchair CEOing
around here, but Yelp is indeed concerned about Google.

Yelp and a couple other companies forced in Google to a Congressional hearing
where senators attacked Google over having too much power over other sites.
Yelp gets a SIGNIFICANT amount of its traffic from google searches. So if
Google arbitrarily decided to promote its own restaurant reviews from Zagat
after a user search, this would crush Yelp's traffic.

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callmeed
Not sure I'd want to invest in a company that rings a bell every time they
close a sale [1]. Unless of course it's 7-figure enterprise sales. I'd rather
put my money into things that ring up sales non-stop.

[1]See the 8:00 mark at [http://techcrunch.com/2011/02/03/dogs-unicorns-and-
mysteriou...](http://techcrunch.com/2011/02/03/dogs-unicorns-and-mysterious-
gongs-inside-yelps-5-star-pad/)

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earl
Yelp seems like another business that would have worked much better for the
users as a nonprofit ala craigslist (I know craigslist isn't a nonprofit but
it's more or less run as one.) See the sporadic bursts of drama about
businesses being forced to buy ads on yelp to influence reviews [1:3]. You
have to wonder what they're going to do to get enough revenue to support their
desired $1-$2B valuation.

[1] [http://www.cbsnews.com/8301-505123_162-42744374/inside-
yelps...](http://www.cbsnews.com/8301-505123_162-42744374/inside-yelps-
blackmail-lawsuit-ceo-stoppelman-seems-to-hate-his-
advertisers/?tag=bnetdomain)

[2] [http://www.eastbayexpress.com/gyrobase/yelp-extortion-
allega...](http://www.eastbayexpress.com/gyrobase/yelp-extortion-allegations-
stack-up/Content?oid=1176984&showFullText=true)

[3]
[http://articles.nydailynews.com/2010-03-20/news/27059507_1_y...](http://articles.nydailynews.com/2010-03-20/news/27059507_1_yelp-
small-business-extortion)

~~~
wavephorm
But you're forgetting that this time it's different. With social networks, you
don't need a business model. Because of the network effects, and increasing
number of mobile devices, they will be able to leverage the cloud and produce
real-time location-based analytics. So, as you see, Yelp doesn't require a
conventional business model to have a multi-billion dollar valuation.

~~~
bomatson
I think I count 15 buzzwords

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porfirio
Does this mean self-absorbed hipsters cum wannabe food critics are worth
something? The end is near.

Yelp does a great service though. But half the reviewers are just intolerable
attention whores. Found this hilarious explication:
[http://www.freddiew.com/2009/05/22/yelp-is-great-i-just-
hate...](http://www.freddiew.com/2009/05/22/yelp-is-great-i-just-hate-the-
people/)

The other sites, like City Search and Google reviews, don't attract this
element, probably because they don't allow for elaborate "profiles" and don't
cultivate a "community."

