Yelp: We Were Sued Because of Funding

As the various Yelp class actions proceed and rumors about sales practices swirl he company is making stepped up efforts, using the unfortunate phrase, to “open the kimono.” We’re seeing more PR outreach and visibility from Yelp, now a major Internet brand.

Yelp executives have been speaking at more conferences and there have been many more news articles, in part driven by the controversy, about the company. When Yahoo dropped out of the “local search engines” panel at SMX West at the last minute it was logical to replace them with Yelp, given the stature of the company.

In a piece appearing on the CNN Money website the argument is made that Yelp is being sued by lawyers who want a piece of the company’s recent $100 million funding:

The lawsuits, [Corp. Communications VP Vince] Sollitto points out, came after Yelp’s $500 million dalliance with a Google buyout fell through, leading to a new $100 million investment from Elevation Partners earlier this year. Yelp believes it’s dollar signs, not business practices, which brought out the attorneys. “Lawsuits often come to companies around financing rounds, that is a fact of life,” says Sollitto.

While it’s the financial prize that undoubtedly caused some lawyers to find the plaintiffs to bring the various suits, the confusion and frustration animating them were building for some time — partly a result of some early arrogance on Yelp’s part. Now that the company has “grown up,” as the article headline asserts, it has taken a much more balanced view and made greater outreach to local businesses recognizing that it much educate them in order to get their ad dollars.

As I’ve said before I tend to be very skeptical of the review manipulation claims but the facts will out.

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I like how Yelp CEO and co-founder Russell Simmons look less like startup execs than members of an indie rock band in the photo associated with the CNN Money article:

Credit: David Yellen

2 Responses to “Yelp: We Were Sued Because of Funding”

  1. Will Scott Says:

    Greg,

    I’m sorry but when you read that piece in full it looks like it was written by a Yelp PR person and not a real journalist.

    It had all of the Yelp talking points:
    – Review filter is what helps us identify the true yelpers
    – Presumed guilty reviewers until they contribute enough UGC to be deemed worthy
    – Citysearch = Spammy Evil

    I’ve spent enough time with Yelp team members to feel good about the people but I this article reinforced all that I think is wrong with the company.

    There’s an arrogance and elitism born of the snarky start-up which gives these guys a false sense of security. Plenty of companies have raised 100 mil + and still gone the way of pets.com.

    Will

  2. Greg Sterling Says:

    Agree that there were no competing voices in the piece and that’s not great journalism.

    There are some disturbing emails and rumors connected to the suits that I’ve been seeing but they’re hearsay.

    Agree that the $100M doesn’t guarantee success. The Internet is an unstable place and brands come and go. One day you have 60 million users the next . . . (see MySpace)

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