Yelp’s Ambition: Turned Down MSFT Too

I thought Yelp was foolish to walk away from $550 million, but it may have also turned down $700 million from Redmond. According to BusinessWeek:

Stoppelman and his crew believe they’ve only begun to tap the potential of local online advertising. Their desire to keep control is strong enough that Yelp recently turned down a $550 million acquisition offer from Google (GOOG) and a bid north of $700 million from Microsoft (MSFT), according to two people involved in the negotiations. “Yelp has the chance to become one of the great Internet brands,” says Stoppelman. “That for me is the chance of a lifetime.”

$700M — Yikes. Yes, Yelp is becoming a big Internet brand but success in the local ad market is far from certain. That said, the company will be doubling its sales force in the near term, which is part of what the Elevation money is being used for.

There are in fact threats to Yelp: Google and potentially Facebook (though not Gowalla and Foursquare). However, the site has been able to establish itself among consumers as a primary resource and destination for reviews and it has been aggressive in mobile as well.

What do you think? Do you think Yelp has a shot at being one of  the Internet’s “great brands” (and presumably a successful IPO) or do you think Yelp and its board are being greedy and have become “drunk with ambition”?

(Thanks to David Mihm for pointing me to the BizWeek story.)

11 Responses to “Yelp’s Ambition: Turned Down MSFT Too”

  1. Malcolm Lewis Says:

    b) Drunk with ambition

  2. Greg Says:

    Drunk on local.

  3. fredp Says:

    Yelp executives would be wise to remember the rise and fall of “push” pioneer Pointcast.com. http://en.wikipedia.org/wiki/PointCast_(dotcom) Murdoch offered $450 million in 1997, but Pointcast didn’t jump. Pointcast ended up selling two years later for $7 million. Ouch!

    There will be lots of other fantastic Internet opportunities down the road. Yelp executives should have taken the $700 million, declared victory, and moved on, IMHO.

  4. Larry Says:

    Silly/drunk for sure.

  5. Davis Freeberg Says:

    I think that it all depends on what their goals really are. On one hand, Citysearch was a “great” brand when the net took off and seem to have had their socks knocked off by Zagat and Yelp, but on the other hand what Yelp has built isn’t going to go away overnight. I think the way I would look at it if it was my lovechild is whether or not I felt like I could sell it for $50 million further down the line. After that, all those extra zeros don’t really buy you anything that you can’t already afford. If you knew that your financial future was secure (and for your employees too) and were willing to play a high stakes game of poker, then maybe they IPO at a higher valuation or eventually become the next Google. On the other hand, if they end up blowing it and don’t have any real revenue or profits coming in, then it’s a lot of risk to walk away from that kind of a sure thing for something that may never happen. Maybe this is a dangerous game of chicken or maybe they just care more about running a good company than they care for retirement. Either way, it’s their call because they built it. Once they take public money, they won’t have the luxury of saying no because they’ll have a fiduciary responsibility to their shareholders.

  6. Greg Sterling Says:

    It’s a gutsy move for sure and I admire it on the one hand but that’s a great deal of money to walk away from in the very fickle world of the Internet.

  7. Pat Lazure Says:

    Right said fred(p). See above.

  8. Kyle Kazak Says:

    I have been interested in this whole Yelp deal for a while. I again…believe this to be another ploy on their part to drive up valuation, not saying it isn’t a good idea though😉

    When you think of online review they are number 1.

    My guess is they will use a good amount of the fresh funds to rapidly expand their sales team.

    Jumping abroad is a great way to capture undiscovered market share too!

    I will keep following the Yelp saga!

    P.S. I’m rooting for you Jeremy!

  9. James Delli Santi Says:

    Social-Local is a huge market opportunity. There is plenty of room for growth among a number of new players. The market does typically only allow 1-3 great brands to gain critical mass and market share though. And this huge opportunity, like all opportunities, will come and go. Competition will be intense. And the prize is to become any one of these 3 top brands.

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  11. Andrew Shotland Says:

    If you’re one of the top private brands on the Web – Maybe only Facebook, Skype & Twitter are bigger – I get why you’d want to take a shot at the uber big time.

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