Strangers – anyone can use the site to learn about a specific merchant (e.g., is Oxenrose a good place to get my hair styled and what is the phone number) or discover a certain type of merchant (e.g., what are some good French restaurants in Soho?) There are two ways for a consumer to use Yelp: Try it at It offers consumers a way to discover and share their thoughts on local merchants while building a feeling of local community. Yelp and a number of online local services competitors are building solutions to improve the local search and discovery offerings for consumers and to shift local merchant ad spending to the Internet. For the most part, however, local merchants (restaurants, salons, dentists, doctors, plumbers, etc) cannot partake in the most prevalent online ad marketplaces like Google and Yahoo, because a) a lot of the traffic represents out-of-town customers that physically cannot buy their services and b) they generally don’t drive transactions through web sites, so the pay-per-click model that dominates Internet advertising does not work well. Over the last ten years, Internet advertising grew from nothing into a $10 billion industry in the US, and its defining characteristic is probably its performance-oriented, direct marketing nature. Very little of this market has moved online (yet). Approximately 65% of all small and medium local businesses purchase ad space in local yellow page directories. That market is led by yellow pages publishers which collect about $25 billion of annual listing fees, mostly from small- and medium-sized companies. Local advertising is a $94 billion market in the US and $150 billion globally. Consumers conduct 80% of their commerce within 50 miles of home. Yelp is targeting local advertising markets across the globe starting with San Francisco, Boston and a few other US cities. Therefore, I tried to pre-empt Yelp’s financing plans with a term sheet last week and agreed to terms with the company over the weekend. However, Business Week named Yelp the top services company on the Internet (ahead of Craigslist) in their latest issue which hit newsstands on Friday 9/23 (see ). I have been tracking the company for several months and was planning to propose an investment and bring them in for a presentation next week. We have an opportunity to lead the company’s first venture financing with a $5 million one-handed investment at a $13 million pre-money valuation (there was a $1 million angel round). They have spent less than half the capital they raised but have managed to accumulate what I believe is the most compelling (though far from complete) local merchant content on the web with a very loyal user base. The founders are both early Paypal entrepreneurs who worked for Max. The business was launched about a year ago and raised $1 million of angel financing from Max Levchin, the founding CTO of Paypal. Yelp is a San Francisco-based early stage “Web 2.0” yellow pages company.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |