The Exchanges

Q Okay, so, so x.com, uh, what did they do? Like, what was their business?

A Yes, I mean, x.com originally started as a bank, an online bank. It was very easy to sign up, take your money from your bank account, and shift it into things like an S&P 500 fund, a high yield money market fund. Um, so it was doing some kind of cool cutting edge online banking stuff that was fairly new. But they also made it very easy to transfer money between accounts with just an email address. So, If you had an x.com account, or even if you didn't, I could send you a payment, and then you could create an x.com account very quickly and get your money. PayPal was doing something very similar. The only difference is they weren't running a bank. They were just kind of a money transfer service.

AI assessment note: “x.com originally started as a bank, an online bank.”

Q All right, so you, you drop out of business school, uh, and you guys start working on Yelp, and, and I read that in that fall, fall of 2004, while you guys are kind of working on this, the name that you really wanted to call it was Yokel, like, local, which I actually think is a great name. What happened to Yokel?

A I mean, I thought we would combine local and yokel. And then I went to go and try and buy the domain. And, uh, there was someone that, that wouldn't part with it, uh, for any amount of money. And so that proved frustrating. And, uh, there was a, another guy in the incubator, David Galbraith, who was thinking about it as well. And he was the one, uh, that came up with Yelp. And when he pitched it to us, he was like, Yelp, help. Yelp Yellow Pages. So it had some, you know, really smart connections. And then it also turned out that you could buy it for 5000 dollars right there just by putting in your credit card like a domain squatter.

AI assessment note: “there was someone that, that wouldn't part with it”

Q What were some of the ideas that you were thinking about maybe starting?

A Uh, I had a bunch of Silly ideas. Probably the silliest that I can remember was an idea for a joke phone call site. So you could go there and you could, you know, pay for a phone call to be sent to a friend or something like that. Another that was actually pretty close to a good idea was I did realize that the economics on, ah, streaming video had gotten a lot better. But I, I didn't have the full insight. I just, there was something going on in video that was intriguing, but I, I sort of put that one on the shelf. There was some interest within the incubator around the local space. It was, you know, we were observing that Craigslist was killing the newspaper business by carving out classifieds. And so that put a spotlight on the yellow pages. It's like, hey, here's another old media business that hasn't really been transformed by the internet. You can look up basic information, You know, an address, a phone number, and so that got us thinking about what would be, you know, better than the Yellow Pages. And, uh, as I thought about and talked about it with my co-founder Russ Simmons, who was another early PayPal person, you know, reviews, capturing word of mouth, bringing it online, you know, marrying it with social networking, which was another technology that was just emerging. You had kind of Friendster and MySpace. It seemed intriguing, but we didn't think you could create a…

AI assessment note: “Probably the silliest that I can remember was an idea for a joke phone call”

Q Alright, I'm gonna ask this one last question for Trang Kim. Coming from YouTube, Trang asks, um, what tools do you have for businesses to fight back against fake reviews or reviews that they think are, were planted by a competitor or something like that?

A We do have flagging, uh, so if you log into your business owner dashboard, biz.yelp.com, you can go in there and mark a review as suspicious, or give us, you know, some context around it. We, we do have a human staff as well, in addition to all the algorithms and whatnot, that will take a look at reviews. Also, you can respond, and that's one of the most powerful tools, I think, out there, because think about yourself as a customer. If you see a negative review, you might read that and say, oh, that's weird, but then if you see a very thoughtful Reply from the business owner, a personal, like, empathetic, hey, I'm sorry it went this way, you know, when you came into my restaurant, please, you know, ask for me by name. I want to, you know, stop by and thank you for your visit. You know, it's like that type of communication can completely neutralize a situation that was bad, or even if you aren't familiar with that particular customer, just treating it seriously, showing that you care, I think, goes a long way for that next customer that's going to look at your business page.

AI assessment note: “We do have flagging, uh, so if you log into your business owner dashboard”

Q All right. So the summer, uh, comes summer after your first year, and you come back to San Francisco, to the Bay Area, for the summer. What was your plan that summer?

A Well, months prior to actually coming back, I had reached out to my old network, and so I reached out to Elon, I reached out to Peter Thiel, reached out to Max, uh, and Peter right off the bat offered me an opportunity to come to Clarion Capital, um, his investment arm, and, you know, it was very amorphous. Like, we had no idea what exactly I'd be doing, but he said he, he certainly had a spot for me, and so I accepted, And then maybe a month later, like, Elon actually took a little while to get back to me, and I think it was about a month later, Elon, uh, reached out and said, oh, you should come work for me at SpaceX. And it's kind of a funny question of what would have happened if Elon had responded faster. I probably would have gone to SpaceX just because, I don't know, hedge fund versus rocket ship company.

AI assessment note: “Peter right off the bat offered me an opportunity to come to Clarion Capital”

Q You invited them to, like, gather and, what, talk about restaurants, or, yeah, like, what would you do?

A Yeah, interestingly, like, right around the time that we were about to relaunch, I hired a marketing person. And so this marketing person-ish One of his first suggestions, right, as soon as we had some users, was, let's meet them. And I'm like, whoa, no, no, no, we, we work on the product. Like, I do the wireframes, and I work with Russ, and we figure stuff out. I don't go and meet people. That's not, I don't do that, you know. Uh, but he's like, no, no, no, no, you gotta do it, you gotta do it. And so he arranged a meetup. It was like two users. People we had no idea who they were. And we met up, you know, for a happy hour at a nearby bar. And, uh, the crazy thing, I assumed that the first users of Yelp would be tech early adopters. You know, in my mind, we're a technology site. But I would actually say the early users of Yelp were urban early adopters. Like, they're looking for what's new and cool and interesting in their city. Their focus is like, what's the hot new restaurant? Oh, have you been to that boutique? That's really cool. You know, and frankly, the demographics were different. It wasn't all a bunch of engineers and, you know, men. Those first two users were both women, actually.

AI assessment note: “he arranged a meetup. It was like two users... for a happy hour”

Q So, initially, like, so as you continue to raise money, five million, then ten million, was there any revenue coming in, or was it just the idea, at least initially, was just to get more and more users?

A Mostly it was focused on, you know, growing the community of reviewers, More content, more reviews. Uh, we eventually added photos, and also, you know, with all of that content came more traffic, because the more review content we had, generally, the more we would show up within Google's web search, and therefore, that would attract more users, which would increase the size of the community, you know, and so I created this positive feedback loop. You know, from a business model standpoint, it was something on our minds, so it was probably, End of 2006 that we really got serious about building out, you know, our advertising products, and eventually landed on a pretty simple ad model, and that's actually how the Yellow Pages business works, how the newspaper business works, how the magazine business works, so we just started with that because it was the, the least friction. Businesses already knew what we were talking about.

AI assessment note: “Mostly it was focused on, you know, growing the community of reviewers”

Q How much of your success do you think was because of your hard work and intelligence, and how much do you think had to do with just being lucky?

A Um, I'd probably give it 60% luck would be my breakdown. I do feel like circumstances played a big role. Uh, you know, obviously I worked hard to be able to understand technology, and, but, you know, you have to look at the timing of the fact that I joined PayPal, PayPal was a success, that entire group of people was sort of dumped out back into Silicon Valley, all with capital, at a moment that, you know, people Weren't really focused on building new internet companies, and so you had all these confident technologists from PayPal all working on new internet ideas with capital at a time where it was kind of wide open. That's lucky, in my view.

AI assessment note: “I'd probably give it 60% luck would be my breakdown.”

Q And what was your impression of Elon Musk? Did he make an impression on you at that time?

A He made a strong impression. Um, you know, I definitely liked him right from the get-go. It was also inspiring to me that, you know, here was a twenty-eight-year-old who had already sold another company, and he had these incredible ambitions for the company. He was gonna, he's, you know, said right out of the gate, oh, we're gonna take down Visa and MasterCard. And I thought, this is just kind of crazy. Like, he's a crazy person, you know, he's got this crazy idea, these insane ambitions, he's got a lot of confidence. It was kind of mind-blowing. I'm like, I don't know about this guy, but I just have to see this. I have to see what's gonna happen.

AI assessment note: “He made a strong impression. Um, you know, I definitely liked him right from the get-go.”

Q the table and not presumably not just ideas to, um, To, to staunch the, the, the, the bleeding, to stop the bleeding, but also to think of new ways to build out revenue, right? New ideas that could create new revenue streams. What are, what are some things that you've started to do on the platform since the pandemic started that might actually redefine Yelp, you know, in the future?

A I mean, there's so much stuff related to obviously COVID. Business data becomes so much more important. It was already hard to corral things like, you know, the hours of a business, and consumers really value it. And it changes, and so it's hard to keep, keep up to, up to date. We rely on the community as well as business owners to submit some of that stuff. But we really felt like we needed to turn it up a notch. And so we now have, you know, hours that, but they're also listed with when it was last updated. So you can get a true sense of like, okay, is this fresh? Can I rely on this data? We've also done a lot of data gathering ourselves. So for lots of popular businesses all over the country, we've been scrambling with our own personnel to try and make sure that The most important listings have the most accurate information. Also, one of the things we heard from, from both business owners and consumers is, hey, I care about my safety. I want to know before I go, like, what is this business doing? And business owners, That are trying to make their customers safe for saying, I want to be able to broadcast, like, what my approach is. Employees are wearing masks, or what have you, and how do I put that out there for people to see? So, you know, we have a whole section now dedicated to COVID-CN safety, where businesses can publish the things that they're doing. The future iterati…

AI assessment note: “There's also things, That are probably here to stay that are new for us”

Q work, and if anyone is gaming the system. So I put some of those questions to Jeremy Stoppelman. So Yelp has, as you know, is long faced accusations of pay to play, where essentially, you know, you charge to keep up good reviews or high listings. Can you address that? Is that something that Yelp does? Can businesses pay to get better reviews placed higher? What's your response to that?

A The answer is, of course, absolutely not. That's never been the case. And in fact, you can prove it to yourself. Uh, look at any one of our advertisers and see if you find negative reviews. Chances are you will, because everyone gets the occasional negative review. And so if there was a delete negative review button that you could pay for, presumably people would be using it. But yeah, I would say Yelp has been the canary in the coal mine on this misinformation issue. You know, when it comes to sort of Accusations that get spread through social media. This is something that, you know, we've been dealing with for a decade. Obviously there's lots of business owners out there. And when some of them don't like their, you know, what they see on their Yelp page, they come up with theories or reasons why, you know, the, the Yelp rating doesn't mean anything to them, why it doesn't matter. And I can kind of understand that you have this rating out there that you can't control, which is by design and you get frustrated with it. And so the natural thing is to say, oh, Well, I, I think it's pay to play, or I heard it's pay to, you know, this friend of mine told me, and so it's kind of this rumor mill Thing, uh, that gets started, spread on social media, propagated, uh, repeated, unfortunately in the media, and then is seen to be, well, it must be true because where there's smoke, there's …

AI assessment note: “The answer is, of course, absolutely not. That's never been the case.”

Q I mean, did you have like an inner voice that was sort of, I'm imagining you're in your twenties, you've got a bunch of people now who've put their lot in with you in this company, or were you saying to yourself, oh, who are you? Why do you think you can make this work?

A I mean, my biggest fear was We had some, obviously we knew that we could build, you know, a useful internet service. Like, we could make it functional. We could design features. We could engineer them. We could put it out there. The question was, could we connect the parts so that it turned into something that people really loved? And then, you know, also top of mind was Max was one of my most valuable, you know, professional contacts, and he had committed a million dollars, which seemed like an awful lot of money. And so I was terrified that I was going to let him down, and I probably would only get one shot at Like this. So it was, yeah, there was a lot going on. I was definitely worried about the implications if, if we didn't figure it out.

AI assessment note: “I was terrified that I was going to let him down”

Q Yeah, I mean, even so, right, when that deal with Google was on the table, I mean, half a billion dollars in To say no and to walk away from that, right?

A Yeah. It was definitely not a, an easy decision for anyone involved, uh, financially, but it also felt like we don't have to do it. We have a bright future. We could take the company public. We had full confidence that we could do that. We knew that there were investors ready to finance us, but the independent path, like, prior to that moment, I did see myself as kind of like, young entrepreneur. I'm not a public company CEO. I really didn't think that I would ever be a public company Public company CEO. But that moment forced me to seriously contemplate, you know, was that true? Could I never imagine myself as a public company CEO? And the more I thought about it, you know, might not be comfortable, but some of my best decisions are the ones that push me out of my comfort zone. And so I, you know, the more I thought about it, the more exciting, like maybe I'm going to fall on my face, but it's pretty exciting nonetheless. And also I'm growing into being a real, you know, what I would call a real CEO. As I headed towards the public markets, um, or at least seeing myself that way.

AI assessment note: “It was definitely not a, an easy decision for anyone involved”

Q So you got that million dollars in the summer of 2004. I read that it was only in like November of oh five where you got really the first outside raise, which was five million dollars. So, so that million dollars, was it running out?

A We were definitely getting down to the lower end of that initial financing round. I think by the time we secured our A round of financing, we were pretty close. But one thing that did seem to be happening is, like, it did feel like the company was alive. I mean, we had passionate users. We had traffic numbers going up and to the right. You know, it certainly wasn't all figured out, and I wasn't a hundred percent confident I was still a little gun shy because we had been shot down so badly, uh, you know, the year prior. But, you know, as I gauged the reaction that I was getting from venture capitalists, I had some sense of, like, I think we have enough to raise.

AI assessment note: “We were definitely getting down to the lower end of that initial financing round.”

Q So with this kind of product, right, with a review site, with that territory comes Some really pissed off business owners, right? Because there are going to be restaurants that get three or four star reviews or bad reviews, and you guys start to get hit with some class action lawsuits.

A I mean, yeah, Yelp has always been controversial, uh, because we host people's opinions, and, uh, and not every business, uh, wants to hear the feedback or is open to the feedback, uh, It's not totally dissimilar to a restaurant critic. Like, restaurants have a love-hate relationship with their local restaurant critic, or certainly did, you know, in the years past, where, sure, if they got a great review, they thought the restaurant critic was wonderful, but if they got a negative review, they were upset, it was unfair, etc. So, you know, take that and multiply it times millions of users, and it gets to be an interesting conversation. But, you know, ultimately, having all this word of mouth that exists anyways, bring it online, Uh, creates a lot of value for society, both for small business owners who can now stand out, you know, with relatively modest marketing budgets. If they deliver great value, great service, you know, their word of mouth is right there for everyone to see. Their great reviews are there. But it does come with, obviously, the occasional negative review. Everyone gets them. And that, that hurts.

AI assessment note: “Yelp has always been controversial, uh, because we host people's opinions”

Q At what point were you and Russ, like, able to actually see that this wasn't just turning a corner, but this was actually becoming quite big? Because you guys, I think you hit a million unique visitors by the middle of 2006, so two years after you, you know, you kind of bring this idea to Max Lovechin. That's a lot of unique visitors.

A February 2005, Was really about getting the, you know, getting the initial momentum, which was really San Francisco. So getting a San Francisco community of contributors, writers, reviewers going, and, you know, showing that that would result in traffic. Once we got financing, the question became, well, can you do it anywhere else? Is this just a San Francisco phenomenon? And actually, like, that was the funny thing, trying to raise that round of financing. You know, the most common question was like, well, San Francisco, isn't that just unique? It's a bunch of hippies. They like to help other people. This isn't going to work in New York. And, you know, so that was, once we had the money on board, That's what we aim to figure out, is like, can we get it to grow and happen in New York? Can we get it in LA? Can we get it in Seattle? And so, in 2006, that's really what we were focused on, was spreading city by city, both to make sure that we filled the gap, and you know, a competitor couldn't beat us, but also to prove that the model really did scale, at least across the US, and then maybe beyond.

AI assessment note: “in 2006, that's really what we were focused on, was spreading city by city”