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Jeremy Stoppelman, Yelp's photogenic 31-year-old chief executive, founded the site in 2004 with fellow University of Illinois engineering school alum Russel Simmons, after the two met while working at PayPal. Stoppelman was inspired to start Yelp while looking for a doctor. With venture capital from their PayPal boss, the two launched a site where users could ask friends for referrals to businesses, but discovered that users preferred to write unsolicited reviews — for free.
Five years later, thousands of opinionated folks have written five million reviews about any business with a street address (plus the occasional wild card like the 22-Fillmore Muni line, "my mom," or the word "hella"). They rate them on a five-star scale, and the site automatically compiles the average score and how it fluctuates over the months for all to see. Technically, just about every business in the U.S. is listed, but the most active communities flourish in 24 U.S. cities (the top markets are San Francisco, Los Angeles, New York, Chicago, Boston, and Seattle), two in Canada, and, since January, Britain. Despite the site's growth and having raised $31 million in venture capital, Yelp still isn't profitable. Stoppelman predicts Yelp will start breaking even in late 2010.
"This is the first time that consumers have such a strong voice in how a business is performing," he says. Since 85 percent of reviews are three to five stars, the response for most businesses is neutral to positive: "If word of mouth is good for your business, it will be good to extend the region it can cover."
In short, in the spirit of collective intelligence that defines the so-called Web 2.0 phenomenon, Yelp has turned over the rarefied world of professional critique to Joe and Jill Schmoe. And with businesses ever more desperate for dollars in the tanking economy, the site has everyone from the mom-and-pop dry cleaner to some of the city's most renowned chefs feeling they have guns to their heads.
"If you have a bunch of bad reviews on your Yelp page, you might as well put a closed sign on your door," says Joe Alexander, sales and marketing director of the Keetsa mattress store in SOMA, who says he gets 80 percent of his business from Yelp. "In San Francisco, it's what I've found. Yelp is gospel."
But when does an online critique become a shakedown by emboldened customers or Internet trolls? Of course, such behavior is rare and against site rules, and Yelpers will often rail against instances of it in talk threads on the site. Yet with Yelp unable to police every interaction between reviewers and businesses, some San Francisco merchants are grappling with just how far they should go to make Yelpers happy. Some woo back reviewers who've bashed them with free meals or gift certificates. Sometimes they just apologize. Frank Klein, an S.F. restaurant consultant, says he once persuaded a diner at the old Original Joe's who was threatening a bad review for an undercooked steak to let them redo it instead: "I don't think they were prepared for [owner] John Duggan, a six-eight basketball player, and I to come over and say, 'Did you say Yelp?'" he recalls. At his own restaurant, Fish & Farm, Klein sends a free glass of biodynamic cider to diners he identifies as Yelpers. (Telltale signs: passing around plates at the table, lots of foodie talk, and snapping photos to later upload to the site.)
To the consternation of business owners, Yelp doesn't allow them to publicly respond to reviews. The company will reportedly take down a review only when it violates the site's terms of service. For instance, you have to have actually have firsthand experience with the business to review it.
Sarah Dunbar, the owner of the Pretty Penny vintage shop in Oakland, wasn't so lucky. In January, a Yelper accused a Pretty Penny employee of being racist and pushing him. Dunbar flagged the review, explaining to site administrators that it was a bald-faced lie. Yelp didn't take down the review, but did remove her own review of her store (merchants can't rate their own businesses). Dunbar says another time she complained about a particular negative review, a Yelp representative suggested she offer a gift certificate to coax the customer back.
Stoppelman says the site errs on the side of users. "We don't want to tip the balance in a way that business owners can shout down consumers," he says. "If every time negativity comes out [and] the business owner tries to say it didn't happen or discredit that information, it causes an additional disincentive to share that information, which I think is important to consumers."
Yelp user support staff told Dunbar via e-mail that she could sign up for a free owner's account, which allows businesses to e-mail users and track how many people view their Yelp pages. In addition, for $300 a month, owners can write descriptions of their businesses, post and enlarge photos, and select a favorable review to be featured up top, clearly labeling the business as a Yelp sponsor. For up to $1,000 a month, businesses can pay to show up among the first in Yelp search results, also labeled as a "sponsored result," or to be posted on competitors' pages.