If yelping doesn't sound like fun, you may not be as hip as you think. Yelp offers user-generated reviews and information on local businesses and service providers through its website at Yelp.com, and via its mobile app. Its content targets younger, urban consumers and covers restaurants, bars, salons, retailers, doctors, and museums. The site has a social media-friendly interface -- users can create and maintain profiles (complete with friend networks and photos), where they can blog on experiences with businesses. Yelp has established a foothold in cities across the US, Canada, and Europe. The firm was founded in 2004 by former PayPal engineers Jeremy Stoppelman and Russel Simmons. It went public in 2012.
The company's IPO had been months in the making, and follows Yelp's decision to reject search giant Google's bid to buy the firm for some $500 million in 2009. Yahoo! reportedly next offered to buy Yelp for about $750 million. The company eventually raised about $107 million in the offering, which values the company at nearly $900 million. Yelp is using the proceeds for general corporate purposes, including sales and marketing, capital expenditures, and working capital.
Yelp reported about $83 million in revenues during 2011, most of which came from selling advertising on its site to local businesses. (Local advertising accounts for some 70% of revenues.) Its ad revenues continues to climb (the $83 million total revenue figure is up from $47.7 million in 2010), as the site benefits from a geographically-targeted user base, and from local businesses who are increasingly spending their advertising dollars online. However, Yelp continues to spend big on sales and marketing; it has incurred high costs, the main factor in why it has yet to post a profit. In 2011 it posted a loss of $16.7 million, up from a loss of $9.6 million the year before.
Meanwhile the company is counting on a strategy of reaching more people for growth: As it adds users, its content expands to cover more local businesses, which in turn attracts more consumers and more advertisers. The website reached about 66 million unique visitors in 2011, and Yelpers, as they're known, have written some 25 million reviews since the company's founding, up 64% from the prior year. In addition, in 2011 some 606,000 locations were represented on the site, up 97% from 2010. The company sees its local business accounts as an opportunity for growth, as it generates revenue from only 24,000 of these 606,000 businesses.
Yelp has also been expanding globally. In 2011 it launched a site in Spain, while the previous year it introduced sites in Austria, France, Germany, and the Netherlands; the new European sites added to existing international sites in Canada, Ireland, and the UK. The firm continues to strengthen its presence in markets throughout the US, and has plans for expansion in Canada and Western Europe. It intends to invest some $15 million in sales and marketing internationally in 2012, mostly to hire sales staff. Currently all of the company's revenues are generated in the US.
Major shareholders include PayPal co-founder Max Levchin, who owns about 13% of the company, and Jeremy Stoppelman, who has an 11% stake. Other investors with board representation are Fred Anderson, a managing director at Elevation Partners (with a stake of about 22%), and Peter Fenton, a general partner at Benchmark Capital (about 16%).