Yelp case study: from $0 to $898M

In just three years, Yelp went from having no users to having 25 million active users, and it finally grew to be a $898 million business.




The following are the essentials for their success:


  1. Jeremy Stoppelman and Russell Simmons, two friends, applied to and were accepted by the company incubator MRL Ventures in 2003.


  1. Jeremy contracted the illness and asked his friends for advice on where to get treatment, but no one had any suggestions.

In order to address his issue, he established Yelp, a straightforward email-based referral recommendation business.


  1. Max Levchin, the founder of MRL Ventures, liked the concept and contributed $1 million as early capital.


  1. It turned out that Yelp’s early consumers disliked asking their friends for recommendations. The service persisted because the idea was a failure.


  1. The founders realised through data analysis that the relatively uncommon features “Write a Review” and “Real Reviews” were actually highly popular.

So they decided to give them their whole attention.


  1. They changed direction and relaunched as a social recommendation web site in February 2005 with these 2 essential elements.

They also choose to roll out their service one city at a time. They initially concentrated primarily on San Francisco.


  1. Yelp concentrated on creating a select community of reviewers with profiles, friends, and honours while rivals waited for anonymous reviews to start flowing in.

They gave first-time reviewers of businesses extra recognition.

They allow other users to commend reviews that are helpful, amusing, or cool.

7.3. “Elite” status was given to the Yelp users who were the most active.

7.4 It turned out that consumers really enjoyed being acknowledged for their evaluations, which led them to write even higher-quality reviews.


As a result: + Yelp received six times as many multiple reviews as its rivals. + These reviews were authentic and of high quality, which won over customers who praised Yelp and told their friends to use it. 12,000 active reviewers have joined Yelp.


  1. Bessemer Ventures provided $5 million in funding in response to Yelp’s expansion.


  1. They increased their efforts to develop their Elites:

9.1 They planned routine Yelp Events where Elites have priority in RSVPing.

9.2 As well as exclusive Yelp Elite parties that provided free food, drinks, and swag.

9.3 They employed community managers who assisted in motivating and encouraging community support.

9.4 Users had to maintain both the amount and the quality of their new reviews in order to keep Elite rank.

As a result, they increased to 100,000 active reviewers by 2006.


  1. Competitors would give in to pressure from advertisers to delete bad reviews, but Yelp made it a point not to.

As a result, Yelp gained a reputation as a reliable source of information about small businesses in the area.


  1. Yelp prioritised search engine optimization.

As a result, extensive profiles and top-notch reviews drove infinite amounts of Google traffic.


  1. The website attracted a million monthly visitors by the summer of 2006.


  1. As a result of their success, they raised $10 million from Benchmark Capital in November 2006.


  1. They made the choice to descend on Los Angeles.


  1. They started paying $5 for reviews in new markets in order to expand more quickly.

Low-quality reviews as a result. The plan fell flat.


15.2 In order to get fresh reviewers in new cities, they went back to their Elite community.


  1. Local companies have observed a considerable rise in revenue as a result of Yelp reviews. So they started requesting reviews on Yelp from their customers.

16.1 Yelp emphasised this point by providing companies with Yelp stickers and website embeddable review widgets.


Results: + A new wave of viral growth; + Widgets produced a tonne of high-quality backlinks; + Google traffic increased dramatically.


  1. 25 million people were a part of their readership by 2007.


  1. They continued to grow, spread their success to more locations, and attracted the attention of larger investors before filing for an IPO in 2012. The firm was worth $898 million.


Scroll to Top