Just as we get news of some consolidation in the local content market in the UK, some news of expansion, too: Qype, the Yelp of Europe (and Yelp’s closest competitor in the region), today announced that the number of places reviewed on its site has reached 860,000, with the number of monthly unique visitors now at 25 million. It claims that this makes it the biggest reviews site in the region, about five times bigger than its closest competitor, the U.S.-based Yelp.

And while companies like Groupon are trying to move beyond the daily deal to become the platform for local commerce, Qype is doubling-down on the concept, expanding its own deals offerings with a free service to attract more local businesses to the concept.

Qype is selling this newest class of daily deals — available from next week in Germany and then rolled out “rapidly to the UK and France — as part of its “Platinum package”. Businesses pay a fee for a premium listing on Qype’s site, and in addition to that they are given the ability to send out a free daily deal through the site’s QypeDeals service. By free, Qype means the business gets to keep all of the revenues for purchased deals — rather than paying Qype a commission on each.

QypeDeals is the product of Qype’s acquisition of Cooledeals a year ago, CEO Ian Brotherston tells me. “This is now the completion of the process of fully integrating that business,” he says.

Over the last year, Qype has moved beyond offering basic user-generated reviews of restaurants, events and other local businesses, and has been growing the number of services it offers to business users. Revenues from advertising on the site has grown by 500 percent in the last year, Brotherston says.

Brotherston says that this move for more monetization is inevitable as reviews businesses like its own and Yelp’s continue to mature.

He also points out that this trend may have been part of the reason behind UpMyStreet getting sold on to Zoopla: “It seems to reflect a view that if you are in the local space now, you need to be monetising,” he says. “I always felt that UpMyStreet had good, interesting data, but was never sure how they made money – whereas Zoopla had a much stronger monetization proposition. Local businesses need to provide great data to consumers within their area; but they need to be real businesses as well.”

As for Qype, the number of paying business customers on its books is now 400,000 and is growing by 10,000 each month, and revenues have grown by 93 percent. Brotherston says that Qype is on track for similar growth this year, too — but the company is not yet profitable, and doesn’t report revenues in actual terms.

There are some other significant numbers that Qype is hitting, however. Qype these days says that it is seeing some 25 million unique visitors monthly to its site. And its mobile business now contributes one-quarter of all its revenues: its mobile apps are now installed on some four million devices — about six times as many as Yelp has in Europe. Mobile is also becoming an important platform for users to contribute to the site, too: some 30 percent of reviews are now written from mobile devices, the company says. Its user-generated reviews are continuing to expand, with a new one posted about every 30 seconds across some 166,000 cities and towns in its database.

“The reality is that we are becoming a full-service provider for our small to medium businesses,” he says. That is being driven by QypeDeals but also includes other kinds of business promotions on both its web and mobile sites.

Brotherston says that a lot of the interest in its own deals service comes from businesses that tried Groupon or another service but have found it lacking in functionality: businesses, he says, “want to have more control over how, when and what they promote through deals. [Our] approach gives them more control and is more efficient for us.”

Under QypeDeals, businesses can create a single a one-day deal, and can specify details like the number of deals available. The only requirement, Qype says, is a minimum discount of 50 percent. Subsequent deals after the first are not sold on commission, either: businesses are instead charged on a fixed fee basis, Qype says, regardless of how many get sold.

In its first ever earnings report as a publicly-traded company, Yelp said it earned $27.4 million in revenue in the first quarter, up 66 percent from the $16.5 million it made in the same time a year ago.

However, the company more than tripled its net losses, mostly on rising costs associated with supporting a larger sales staff. It lost $9.8 million, up from the $2.7 million it lost in the same time a year earlier. That loss of 31 cents per share was about double what analysts had estimated. Analysts had predicted a loss of 15 cents per share, according to a Bloomberg survey.

Looking at the sheet, Yelp’s loss expanded mostly on sales, marketing and administrative costs. Sales and marketing costs rose to $18.8 million, up from $11.3 million the year before. On the earnings call, the company said much of this headcount growth came from international expansion, which it has yet to fully monetize. In the first quarter, Yelp launched in 11 new markets, eight of which were international.

General and administrative costs also more than doubled to $10.7 million, up from $3.6 million. But this was mostly from a stock-based compensation charge of $5.5 million related to the IPO.

All this considered, Yelp is still very much in growth mode, with an expanding footprint on both the desktop web and on mobile. Yelp’s average numbers of monthly unique visitors grew 53 percent to 71.4 million. Mobile usage is also up to 6.3 million unique devices per month.

“From a monetization standpoint, we think mobile is better than what we have on the web,” said Yelp chief executive Jeremy Stoppelman on the earnings call. He said the advertising the company has been running in the app is more lucrative than it is on the desktop web.

Like in its initial IPO filing, Yelp broke down how its revenues are split between local and brand advertising. The company said it brought in $21.4 million in local advertising, $4 million in brand advertising revenue and $1.9 million in other services. On the call, Stoppelman pointed to new partnerships with brands like Mercedes Benz.

Last year, Yelp earned more than 70 percent of its revenues from local advertising (like the improved profile pages that small businesses can pay for). It earned another 21.2 percent from brand advertising. For all of 2012, Yelp says it will bring in between $128 and $132 million. That would be up 54 percent from the $83.3 million it brought in last year.

Although they spiked a little bit after earnings went out, markets are now ho-hum on Yelp’s news. The company’s shares are down 0.7 percent in after-hours trading to $23, giving Yelp a market capitalization of $1.39 billion.

Here’s the release. We’ll be updating quickly.

Revenue was $27.4 million in the first quarter of 2012, reflecting 66% growth in revenue from the first quarter 2011

Cumulative reviews grew 59% to 27.6 million

Average monthly unique visitors grew 53% to 71.4 million*

Active local business accounts grew 117% to 27,300

Net loss in the first quarter of 2012 was $(9.8) million or $(0.31) per share, compared to a net loss of $(2.8) million, or $(0.19) per share, in the first quarter of 2011. Adjusted EBITDA for the first quarter of 2012 was a loss of approximately $1 million, compared to a loss of $880,000 for the first quarter of 2011.

“We are very pleased to report our first quarter as a public company,” said Jeremy Stoppelman, Yelp’s chief executive officer. “We were particularly excited to launch 11 new Yelp markets in the first quarter, including Sydney and Stockholm. With more than 80 Yelp cities around the world today, consumers are yelping about their favorite local businesses in record numbers and we look forward to continue expanding our platform around the globe.”

“Our initial public offering added $114 million to our balance sheet, adding strength to our financial foundation as we look to continue investing in our rapid growth and increase the value we deliver to our communities and local businesses,” added Rob Krolik, Yelp’s chief financial officer. “The number of active business accounts has more than doubled year over year, and we have seen engagement from local business owners increase proportionally as they realize the positive economic impact that results when business owners have a constructive dialogue with their customers.”

Business Highlights

New market expansion: Yelp launched 11 new markets in the first quarter, including Antwerp, Brussels, Oklahoma City, Perth and Hampton Beach, increasing the total active markets worldwide to 82.

Yelp Mobile: Our mobile apps were used on approximately 6.3 million unique mobile devices on a monthly average basis for the quarter. Our development team released a total of nine updates for Yelp’s iPhone and Android apps in the first quarter. Enhancements to the user experience included new features such as the release of photo feedback, new search filters (filter by what’s hot/new and by businesses with deals) and the ability to view business owner replies.

Distribution partnerships: Mercedes and Lexus integrated Yelp into their in-vehicle infotainment systems. Combined with Yelp’s BMW partnership announced in December, these relationships underscore the value that Yelp content provides to consumers on the go. OEMs are now working quickly to ensure that Yelp reviews are within reach from the dashboard.

Yelp for Business Owners: Yelp introduced a new set of dashboard metrics to make Yelp’s business owner accounts even more insightful. The most notable improvement is the integration of mobile metrics which enables a business owner to track how many people placed a call to a business, mapped directions, purchased a Yelp Deal and/or uploaded photos.

Yelp Deals: Yelp Deals continues to grow. More than 25,000 businesses offered deals to their local community in the first quarter.

Business Outlook

As of today, Yelp is initiating guidance for its second quarter of 2012 and full year 2012 revenue and adjusted EBITDA guidance.

For the second quarter of 2012, revenue is expected to be in the range of $29 million to $31 million. Adjusted EBITDA is expected to be a loss in the range of $(500,000) to $(800,000).

For the full year of 2012, revenue is expected to be in the range of $128 to $132 million, representing growth of 54% to 58% compared to the full year of 2011. Adjusted EBITDA is expected to be breakeven to slightly positive.

Finding a good restaurant – even in a city you’ve never been to – has never been easier. Thanks to Yelp, Urbanspoon and its various brethren, a good place to eat is generally just a few clicks away. What if you want to find a restaurant with a very specific atmosphere, though? Say you’re in the mood for a pizza at a relaxed place where the noise level is just right for a good conversation? Chances are, Yelp won’t be of much help there, but the newly redesigned Hoppit is putting these kinds of searches at the core of its service. The New York-based startup describes itself as the “world’s first ambience search engine for restaurants and bars.”

The service is now available in 25 cities and offers desktop and mobile web apps. Its apps for Android and iPhone should launch in early May.

To get started, you simply tell Hoppit where you are and what you are looking for. You can use keywords to search for specific places and dishes, but you can also just tell the service what kind of atmosphere you are looking for (classy and upscale, hipster, romantic, swanky and posh, etc.). From there, you can restrict your searches by cuisine, neighborhood, atmosphere (fireplace, dimly lit, view) and noise level. The site also aggregates food and beverage deals from Groupon and Gilt City.

To aggregate all this data about these restaurants, Hoppit uses what it calls “state-of-the-art natural language processing technology and related algorithms [that] take into account a consumer’s preferences and provide personalized search results.” For the most part, this works really well, though I noticed that while Hoppit will happily show you search results for virtually any town and zip code in the U.S., its filters don’t actually work in most of these places (the full-blown service is only live in 25 major cities, after all).

So if you are looking for that perfect French restaurant with a wine bar and exposed brick for your next date, give Hoppit a try.

Remember Highlight? That app that everyone thought was hot stuff back at SXSW? I used it for a few days and then deleted it, discovering quite quickly that the app, despite some utility, was an absolute battery hog. But what Highlight did was prove that, given the proper scenario, check-in works and is important. What frustrates me most, however, is that we keep doing it wrong.

Take this new app, Chkin.at, for example. It allows you to check-in at various websites and to become King of a certain page, thereby giving you certain conjugal rights with the ladies of your Kingdom (not really). Rather than dismiss it outright – it kind of works, but it spurred this little rant – I’ll note that it, like so many other apps, suffers from that fatal flaw: the check-in.

This is not a new complaint and it won’t be the last time someone grumbles about the current state of discovery-style apps. The main problem is always compliance, and it’s a problem familiar to doctors, dietitians, and researchers. Your app requires the user to offer up a bit of information. You can do it in a number of ways, the least efficient being the voluntary check-in (even with the promise of reward). Slightly more efficient is the “discussion” check-in used by devices like Autom, a diet robot that reminds you to log your food and feelings with friendly chit-chat and anthropomorphized features. Finally, there’s the invisible check-in à la Highlight, one of the better – if fatally flawed – instances of check-in I’ve seen in a while. Highlight was sort of a scavenger hunt for the ego (as are many check-in apps) which is why it got so much press. The folks who yodeled the most about it (TCers included) didn’t want to find other people, they were excited when other people found them.

Check-in becomes valuable when we don’t notice it. But invisible check-in requires deep hooks into the mobile device’s operating system. For example, FindMyFriends on the iPhone is just about perfect because it lets you find people without forcing them to Tweet that they’re behind a Denny’s smoking banana peels. The app, instead, knows where they are by using micro updates sent to a central server. Google already supplies similar functionality through Google Latitude and there is currently an API available.

This, in turn, sets privacy advocates on edge because, in a sense, the app is telling people where you are without your explicit knowledge (although not without your explicit permission.) You give up a freedom to gain a bit of functionality.

It seems the best apps are those that offer check-in after the fact. Yelp, for example, offers Foursquare-like check-ins but also just leaves you alone if you don’t want to use that service. More important, Yelp creates a valuable dialogue between the user and the service in that they don’t let you publish reviews right from the app or, presumably, right from the location. This, in turn, forces a more ruminative approach to restaurant reviews.

Most check-in apps get it wrong more than they get it right. If I have to do anything other than enter a room to use a location-based service, someone is doing something wrong. Here’s hoping someone really figures out the sweet spot between volunteering information and “streaming” it live before we all get so engrossed in checking, plusing, liking, and tagging that we forget to live our lives.

[Image: alpturk33/Shutterstock]

At TechCrunch Disrupt NYC last year, Gauri Manglik, Mike Lewis, and Orion Burt launched SpotOn, a recommendation engine in app, which served its users suggested local businesses based on their friends’ activity on Foursquare, Facebook, and more. The co-founders quickly found, however, that its customers were using the app more as a social networking tool than for its recommendations. So, based on user feedback, the team changed directions and built a new app, today called Fondu.

Manglik describes the new service as “Twitter meets Yelp for restaurants,” in that the team wanted to solve Yelp’s noise problem not with more noise from Twitter, but by targeted, friendsourced recommendations. In other words, a review written on Yelp goes into a community directory, meaning that the recommendations you peruse likely come from people you don’t know, and most users want to skip past the noise right to their immediate network when looking for a new place to grab a bite. Thus, with Fondu, you only see reviews from your friends, or the most popular reviews that have been one-upped by the Fondu community.

What’s more, Fondu has officially launched a redesign that, among the new features, shows that the app is getting serious about search and discovery. The redesign includes a new search and discovery tab to replace the old “Popular” tab, which allows users to search for anything from “sushi” to “dive bar” and view relevant nearby reviews, prioritized by those written by friends. For those who remember SpotOn, the new discovery feature also resurrects a map mode that enables users to swipe through destinations on an interactive map.

Fondu users have written over 20,000 reviews of restaurants across the world (with the majority focusing on New York, San Francisco, and Seattle), and now every review on Fondu has a “bookmark” button that allows one to save the review to their own bookmark list, which is also viewable on Fondu’s map mode. This means that, as users move about town on the go, they can see the places they have saved that they either wanted to try for the first time or couldn’t wait to try again. Users also now have easy access to this list and the map of their bookmarks on the app’s “Friends Feed.”

The new Fondu also boasts the ability to snap photos to include as context in those bite-sized reviews, whether it’s a photo of the food itself, the ambiance, or company, along with the ability to recommend restaurants directly to friends and family. After visiting a bar that you know your best friend will love, for example, users can simply add them in the “recommend to friends” section, which works even if they aren’t on Fondu. Users can send recommendations through email, Facebook, or Twitter.

Fondu isn’t just making its users happy though—the team has also begun partnering with restaurants like GustOrganics in NYC that are top-rated among its users, taking a cue from Zagat and others by offering restaurants the chance to display those top-rated stickers in their windows. Of course, this is all well and good, but there is plenty of competition for user attention in the foodie app space. Google’s $151 million acquisition of Zagat means that the company will be playing an important role in Google’s SoLoMo strategy, but while Zagat has plenty of brand recognition, the app is still priced at $10, so there’s plenty of room for free apps to undercut it price-wise.

That still leaves the immensely popular Yelp, as well as apps like IAC’s Urbanspoon, which offers some similar features to the fast-growing app, and Food Finder. Matchbook also offers a nifty bookmarking feature, with some great deals to boot. Plus, there’s Tasted Menu.

So, in the end, it really comes down to price, design, and whether or not your friends are actually using it. Fondu wins on pricing, and it looks great, but it’s still lacking a bit in the last area. Yelp is a monster in terms of reviews and it’s great for finding places quickly, within reach, but Fondu can beat Yelp in terms of ease of use, its reviews are succinct and more likely to be about restaurants you actually care about. There’s still plenty of room for a new personalized, friendsourced foodie app to be successful, but those friends have to be there (and be active) for it to win on the user experience front.

For more, check out Fondu on the App Store here and at home here.

H/t Hunter Walk and articles from Leena Rao, Colleen Taylor, Henry Blodget, and Om Malik.

Disclosure: If it’s not obvious, these are not the actual star rankings from these authors.

For Yelp, this has been a very good day.

The restaurant review site was received exceptionally well by Wall Street during its first day as a publicly traded company, closing at a price of $24.58 per share, up a full 63 percent from its $15 IPO price. Yelp shares traded at strong prices all day, hitting a high of $26 per share and never falling below its $22 opening price.

It’s a warmer reception than we’ve seen with some other recent web IPOs: Shares of Zynga, for example, dipped below the IPO price within the first minutes of its stock market debut back in December. The fact that Zynga was solidly profitable at the time of its IPO while Yelp is still operating in the red just goes to show how unpredictable the stock market can really be, and how many things are at play when the market is determining a company’s value.

Of course, today is just the first step in Yelp’s new life as a publicly traded company — it’ll be interesting to see how things shake out in the weeks and months ahead. But it’s fair to say that the company’s executives, employees and investors are probably pretty happy with how things have gone so far.

Wow. Reviews site Yelp just saw a huge pop in early trading of its stock on the New York Stock Exchange this morning. Yelp opened at $22 per share, after pricing at $15 last night. Shares, which are listed under the symbol ‘YELP’, are trading up 60 percent from last night’s pricing, putting Yelp’s valuation at over $1.3 billion. UPDATE: Yelp’s stock closed at $24.52, up over 60 percent from the initial pricing.

Yelp offered 7.15 million shares, aiming to raise about $107.25 million. As heard yesterday, the deal is said to be heavily over subscribed. Yelp’s total revenues in 2011 were $83.2 million, up 74.6 percent from $47.7 million in 2010 (and 25.8 million in 2009), but net losses were up to $16.9 million in 2011 — a 74.2 percent increase from a net loss of $9.5 million in 2010. (Adjusted EBITDA losses were $1.1 million).

In 2011, Yelp, which was founded by Jeremy Stoppelman, saw 65.7 million unique monthly visitors for the year (with 5.7 million uniques on mobile), up from 39.3 million in 2010. Yelp users left 24.8 million reviews in 2011, up from 15.1 million in 2010.

UPDATE: Yelp’s stock closed at $24.52, up over 60 percent from the initial pricing.

Tomorrow morning comes the moment Yelp CEO Jeremy Stoppelman’s been waiting for seven years. According to the NYT, Yelp will drop on the NYSE under the YELP ticker tomorrow morning.

Yelp will be offering 7.15 million shares at $15 dollars a share, wanting to raise about $107.25 million in its IPO. The deal is said to be heavily over subscribed, and I’ve heard that some Yelpers were disappointed by the low price — despite the fact that the company is still not profitable and trading at a valuation of more than ten times its earnings revenues.

While Yelp generated $83.3 million in 2011, it also operated at a $16.9 million loss.

Yelp will be the fourth in a series of high profile tech IPOs, with Groupon, LinkedIn, and Zynga all debuting before it to mixed results. Industry giant Facebook is set to wreak havoc IPO in the spring.

Yelp built its ad business by attracting users that know what they want, just not who to buy it from — exactly when ads are most effective. That’s why I find today’s VentureBeat piece by Rocky Agrawal titled “Yelp advertising is a rip-off for small advertisers” to be ridiculous. His sources say Yelp charges a $600 CPM, or 1,000-times the standard online CPM rate.

Yes, these ads are expensive, especially for low-end restaurants. But for lawyers, dentists, jewelers, and mechanics with a high lifetime average revenue per customer, turning someone searching for their services on Yelp into a loyal customer is no rip-off, it can drive big ROI.

Yelp sits at the end of the purchase funnel in the demand fulfillment stage. Users often already have a need for a business’ services and are prepared to spend. They go to Yelp to determine which service provider will get their money. When a user searches for “dentists in San Francisco”, Yelp local ads let advertisers put their own search result with a link to their Yelp profile at the top of the results.

For restaurants, a conversion could bring in $20 to $50 in revenue, and that customer will eat somewhere else tomorrow where they could get hooked. For a high CPM to provide ROI, restaurants need lots of customers to be swayed by their ads and turn into regulars. Yelp local ads might not work for them.

However, for more expensive financial, medical, automotive, real estate, travel, home, and professional services, these stakes are much higher. A single visit from a customer could earn an advertisers hundreds of dollars, their long-term business could be worth thousands, and they’re unlikely to switch if satisfied. If their local ads on Yelp net them just a few or even 1 new customer, they could earn significant long-term ROI.

Agrawal compares Yelp ads to Facebook ads, which doesn’t make sense because Facebook users aren’t actively looking for the service the advertiser is selling. He also says Yelp is overcharging advertisers. It’s only overcharging if the ads don’t produce results, not just because they’re priced much higher than less-targeted display ads.

If you want proof that Yelp provides value to advertisers, just look at Yelp’s S-1 filing to go public. It notes the massive growth and return-customer rate for its local ads business:

from the quarter ended December 31, 2010 to the quarter ended December 31, 2011, the number of active local business accounts increased by 109% from approximately 11,300 to 23,700. Of the approximately 23,700 total active local business accounts for the quarter ended December 31, 2011, approximately 15,800, or approximately 67%, were existing advertisers from which we recognized local advertising revenue in the immediately preceding 12-month period. (Page 56)

Yelp had a 67% return advertiser rate, and that would have been much higher if it hadn’t DOUBLED its local advertiser count in that year. If Yelp ads are such a rip-off, why are advertisers coming back for more? Yelp can’t say because it’s in its pre-IPO quiet period. It shouldn’t need to, though. It charges justifiably high CPMs, and is going to IPO, because its ads appear at the perfect time. And they work.

I’ve heard like a billion people complain about this recently so here goes: When you’re starving you don’t want to read through thousands of Yelp reviews on your phone or download a random PDF from a terrible restaurant website that’s so slow-loading it’s indecipherable. You just want to know where a restaurant is, what it has to eat, and whether or not it’s open.

‘Menu and Hours’, a Kickstarter project, is an app designed just to give you just the menu, hours, contact info and location of local eateries — the antidote to unnavigable mobile restaurant sites and TMI foodie services like Urbanspoon. Brilliant, right?

“The general idea is that when you’re looking for information about restaurants on your iPhone chances are pretty good you’re looking for the menu, the restaurant’s hours and contact info. That’s it,” says creator Michelle Jones, “You don’t want PDFs, you don’t want to get an icon telling you the site is broken for you because it was built-in Flash, you don’t want to have to click-through ‘splash pages’ just to get the basic information. Even though you might not want those things, they are exactly what most restaurant websites are going to give you.”

It’s true, people really hate restaurant websites.

Jones tells me that if she raises the initial $6K in Kickstarter funding, she’s going to start the first version of the app in her hometown of Louisville (it’s pronounced real awesome in that video above), but if it takes off wants to expand it to Atlanta, New Orleans, Los Angeles, San Francisco, and Minneapolis. “All of those are great food cities and I already have supporters for the project in those cities,” Jones says.

Paris and New York would be good too. Heads up!

Local recommendation site Yelp has finally filed an S-1 to IPO, wanting to raise $100 million. While there is no price per share or valuation designated on the form, reports have held the desired valuation at between $1 billion to $2 billion.

The site generated $58.4 million net revenue in the first nine months of 2011, 80% growth over the same period in 2010. It operated at a net loss however, of $7.6 million. Revenues have grown pretty fast, from $12.1 million in 2008 to $47.7 million in 2010 but as you’ll probably get sick of hearing over the next couple of weeks, it is still not profitable.

The Yelp S-1 boasts 22 million Yelp reviews, up 66% from the prior year, and 529,000 locations represented on the site — up 114% from 2010.

Founded in 2004, Yelp has $56 million in funding from Max Levchin, Bessemer Venture Partners, Benchmark Capital, DAG Ventures and Elevation Partners. The IPO, which will be underwritten by Goldman Sachs, Citigroup and Jefferies, has been long in co-founder Jeremy Stoppelman’s sights — at least since Yelp walked away from a $550 million Google deal in 2009.

Yelp and Groupon are both being sued by a company called Mobile Commerce Framework, an obscure patent troll that earlier filed a similar patent infringement suit against Foursquare.

On April 6, 2010, Mobile Commerce Framework (MCF) was issued US Patent No. 7,693,752 by the USPTO, for reasons unknown to mankind. In summary, this patent describes:

a subscription-based system for providing commerce information for one or more mobile devices for one or more merchants. Some techniques employed feature a subscription-based method for presenting commercial resources to a mobile device.

The method involves receiving mobile device user information relating to a geographic location to locate one or more merchants within a subscription-based shopping network, and receiving mobile device user information relating to a merchant type within the subscription-based shopping network.

According to MCF, Yelp and Groupon – and Foursquare – infringe its patent by creating and distributing mobile apps that can be used by people to obtain information and offers from merchants by searching, based on their physical location and merchant type. Sigh.

Mobile Commerce Framework is represented by Jonathan Hangartner, owner of X-Patents.

Related: Groupon Sues Fellow Group Buying Site MobGob Over 9-Year-Old Patent

Last year, several lawsuits emerged that accused Yelp of extorting businesses to advertise in exchange for positive reviews. Yelp has just announced that a judge granted Yelp’s request to dismiss these suits.

For background, the lawsuits claimed that after declining a request to purchase advertising on Yelp, a number of positive reviews from businesses’ listings on the reviews site mysteriously disappeared, downgrading the company’s rating on the site.

In February of 2010, two law firms, Beck & Lee from Miami and The Weston Firm in San Diego, filed a class action lawsuit in Los Angeles federal court alleging unfair business practices by Yelp. And in 2009, the East Bay Express ran a story basically accusing Yelp of being in the ‘Business of Extortion 2.0′, which covered similar ground. Shortly after reporter Kathleen Richards published the article, Yelp vehemently denied everything and called her piece inaccurate.  A number of similar copy cat suits also emerged.

As CEO and founder Jeremy Stoppelman writes “our automated system applies the same objective criteria to all reviews regardless of a business’s advertiser status. (Just check a Yelp advertiser’s business page — I bet they have a negative review or two; after all, you just can’t please everyone all the time.)

Last year, Yelp made some adjustments to its review process. For example, Yelp removed a feature that allowed businesses that advertised with Yelp to place their favorite review above others. It also let users see reviews that have been removed by its (automated) “review filter,” which is designed to help prevent business owners from posting all too positive reviews of their own company or malicious reviews of competitors.

Yelp also established a Small Business Advisory Council’ whose members have provided the company’s management with “guidance and perspective regarding the concerns of small business owners”.

Stoppelman admits that there are flaws to the system, writing, Additionally, since protecting content integrity is a difficult task, our automated algorithm isn’t perfect: sometimes legitimate content can get caught. This is an unfortunate reality in an environment where some folks are determined to try to game the system, but it is a price we are willing to pay to protect consumers and remain a useful resource.

The dismissal of the lawsuits means that the plaintiffs can’t sue Yelp again. It’s surely a relief to have these allegations dismissed. Now Yelp can go back to focusing on its potential IPO in 2012.

This afternoon the Senate Judiciary Committee held a series of hearings investigating whether Google may be violating Antitrust law. During the first panel of the day, Google Chairman (and former longtime CEO) Eric Schmidt took the hot seat to answer questions focusing largely on the fairness of Google search results, and whether they unfairly favor Google products (you can find our full post on that hearing right here).

During the second hearing, which just ended, a handful of Google critics and competitors made their cases as to how Google has been anticompetitive. One of these critics was Yelp CEO Jeremy Stoppelman, who released a statement last night (embedded below) outlining why he believes Google has abused its market dominance in search. And he provided additional details about Yelp’s relationship  with Google during a series of questions from the participating Senators.

One of the themes throughout Stoppelman’s testimony was Google’s mandate that if Yelp wanted its review snippets removed from Google’s Place pages, then Google would remove it entirely from its search results as well. This, Stoppelman says, is a false choice, because nobody can afford not to appear in Google search.

Asked how much of an impact being removed from Google would have on Yelp, Stoppelman replied, “about 75% of Yelp’s traffic, overall, is sourced through Google one way or another. About 50% is traffic coming from people who start their search on Google and eventually find their way to Yelp; the other 25% is people qualifying ‘Yelp’ as one of the keywords in their search… If we were not in Google it would be completely devastating.”

(note that this quote was transcribed live, so may be slightly off)

Stoppelman also pointed out the timing of Google’s integration of Yelp reviews into its Place pages, which he says were added immediately after Google’s reported offer to acquire Yelp fell through — and that they were only removed once government inquiries were looming.

Susan A. Creighton, an attorney at Wilson Sonsini Goodrich & Rosati who was defending Google, briefly challenged Stoppelman’s assertions while responding to a question regarding whether Google scrapes data from other sites. Creighton described search text snippets, explaining that consumers like having a line or two of text associated with search results. She says that Stoppelman is complaining about these, and that he’s “talking about micro-managing whether or not Google shows those results”.

Also included on this panel were Nextag CEO Jeff Katz and Thomas O. Barnett (partner at Covington & Burling, and former Assistant Attorney General for Antitrust). It’s worth nothing that Creighton was formerly the Competition Director of the FTC. We’ll post video of both panels shortly.

Chris Dixon begins this episode of Founder Stories with DoubleClick and FindTheBest Co-founder Kevin O’Conner by telling O’Connor that “DoubleClick is probably the closest thing New York has to a PayPal.” Meaning the two companies share an aptitude for hiring employees that go on to start innovative businesses.  Just as Paypal spawned Yelp, YouTube, and LinkedIn, DoubleClick spawned dozens of startups in New York City like Right Media.

With this in mind, Dixon asks O’Connor if he intentionally created an environment that encouraged innovation while at DoubleClick, before going on to ask O’Connor what he considers to be the defining characteristics of successful entrepreneurs.

O’Connor describes his systemized way of spurring innovation.  He lists a few signs of a successful entrepreneur.  A desire for control and the ability to challenge authority are near top of the list. A way to detect the second trait? “Have you told your boss to shove it?”

In the video below, O’Connor discusses his genesis of his latest startup, FindTheBest, a service that offers side-by-side comparisons of everything from cigars to business schools. At the intersection of trying to solve a “big obvious” idea and not finding a site that served his needs, O’Connor began to build what would become the company. He describes it as a “decision engine” to help you make complicated decisions where search falls flat. What dog should I buy? Where should I send my kid to summer camp? What investment adviser should I hire?

Make sure to watch both videos for additional insights along with the first two installments of this interview (Part I and Part II), as well as past episodes of Founder Stories here.

“I have a competition in me. I want no one else to succeed.”

I’m reminded of Daniel Plainview’s admission in There Will Be Blood when thinking about Google.

While the company is still largely beloved by the public, sentiment seems to have turned against them amongst their peers, and even amongst many of the startups around Silicon Valley. While these tensions have been building for months — and even years, in some cases — we’re seeing this on display more clearly than ever now thanks to the patent issue(s).

But why? Why is Google now a villain to many in the industry? I don’t believe it’s because they’re evil, I believe it simply relates to the Plainview quote. Increasingly, Google is trying to do everything. And they have the arrogance to think that they can. And it’s pissing people off.

“Microsoft and Apple have always been at each other’s throats, so when they get into bed together you have to start wondering what’s going on,” Google Chief Legal Officer, David Drummond, wrote this week when accusing those two companies of trying to destroy Android. And he’s right. After decade of being bitter rivals, Apple and Microsoft now seem to have aligned interests. But you don’t have to wonder what’s going on, it’s very apparent: they both hate Google.

The two recently teamed up to screw Google out of the Nortel patents, spending billions to make that happen. And before that, they attempted to do the same with the Novell patents (though the DoJ blunted some of that attack). Next up for the dynamic duo: the InterDigital patents. Apple is definitely exploring acquiring them, and don’t be surprised if Microsoft is right there to help once again, to ensure Google doesn’t get them.

All of this is even more interesting when you consider that it was once Apple and Google who were closely aligned. And it was a common vision that brought them together as well — appropriately, the end of the Microsoft-dominated computing world.

The two got so close, that Google then-CEO Eric Schmidt even joined Apple’s board of directors. And Google was instrumental in helping create some of the early applications for the iPhone (Maps, YouTube, etc). It seemed like the two would team up to take down the carriers next.

Then things got very complicated when it became clear that Android and the iPhone would soon become very direct competitors. The rest has been history.

But while Apple and Microsoft have been the two highest profile Google combatants in recent months, they’re far from the only ones.

At least just as big of a Google antagonist (and perhaps even more so) is Oracle. While the Apple and Microsoft lawsuits against Android threaten to disrupt the platform and/or make it more expensive, Oracle’s lawsuit threatens to destroy it. Oracle is suing Google over the unlicensed use of Java in Android — its core.

If one of two damning emails are allowed to be used as evidence, it sure looks like Google could be in some serious trouble. Those emails appear to extend the idea of Google’s arrogance. As Android chief Andy Rubin wrote in a 2005 email, “If Sun doesn’t want to work with us, we have two options: 1) Abandon our work and adopt MSFT CLR VM and C# language – or – 2) Do Java anyway and defend our decision, perhaps making enemies along the way.”

They obviously chose the latter. And while Sun is no more, Oracle now controls the rights to Java. A very big enemy has been made along the way.

The list continues from there.

Facebook and Google have long been at odds with one another. Now, with Google+ giving Google a significant presence in Facebook’s social game for the first time, tensions are higher than they’ve ever been. While the two sides have been fighting publicly, behind the scenes, it’s worse. This is true even though many of Facebook’s employees are former Google employees. Facebook’s alliances with Microsoft can’t help matters either.

For a long time, Yahoo was Google’s most direct rival. You might think that after Google quickly dominated them in search, there would be peace now. Nope. Yahoo also has no love for Google still to this day. When Microsoft was attempting to buy Yahoo a few years ago, Google was seen as one potential savior. And they almost were, until the DoJ began looking into a potential Yahoo/Google search partnership and Google had to back out. Instead, Yahoo was forced to tie up with Microsoft.

These days, you’ll hear Yahoos complain behind the scenes that Google often just takes ideas they implemented first but never caught on because Google is the dominant player in the space.

Amazon and Google are also increasingly at odds with one another. Amazon is about to enter the tablet space in a big way later this year — and they’ll be doing so with their own flavor of Android. They also have a competing Android app store. And while this may seem like Amazon entering Google’s space, remember that Google went after Amazon first. While Google hasn’t really be able to compete in the cloud storage and services businesses so far, it hasn’t been for a lack of trying.

Out of any of the larger entities in the space these days, is seems like Twitter and Google should have interests that align the most. Like Facebook, many of Twitter’s employees are ex-Google. And while a search deal a couple years ago seemed to pull the two close together, that deal has since expired, and there is no sign it’s going to ever be renewed.

Google has tried to buy Twitter a few times, and Twitter has backed away each time, most recently leaving billions on the table. And while both sides say fairly complimentary things about each other in public still, behind the scenes, again, it’s not good. Many Twitter employees flat out don’t trust Google. And Google+ has exacerbated that situation.

Speaking of failed Google acquisitions, after Google tried and failed to buy Yelp and Groupon, they moved forward on products that competed directly with them. In the process, Yelp has felt Google was actively screwing them in search results. Bad blood galore now.

On the smaller startup side of things, both Color and Path turned down massive acquisition offers from Google. Part of it was because the startups wanted to remain independent, but a large part was also that neither groups of employees wanted to work for Google. Naturally, Google has since been working on products that compete with both — not only Google+, but also mobile apps created through Google’s Slide division.

The list goes on and on. At this point, it would be easier to list tech companies that are completely friendly with Google — because there aren’t many. Again, most won’t speak out publicly about this — partially because Google is still one of the largest acquirers out there and not everyone is Twitter, Color, Path, Groupon, or Yelp, that will turn down hundreds of millions or billions — but if you talk to individuals that work at other companies, it becomes very clear very quickly that there is not a lot of love for Google out there anymore.

In my view, this stems from Google’s desire to do everything — which could threaten the company for other reasons. Once just a search company, they now actively compete with Apple, Microsoft, Oracle, Facebook, Amazon, Twitter, Yelp, Groupon, Color, Path — again, just to rattle off a few.

Obviously, it’s Google’s right to do what they think is best for the company. And certainly they have the money to take on all of these different projects. But the alienation of other companies — many of which were former allies — isn’t helping them. And if any of these Android lawsuits — bullshit or not — go through, or if they fail to eventually obtain the patents necessary to protect themselves, Google could find themselves in serious trouble. And if that happens, will anyone be around to lend them a hand?

At this point, I think there will be more companies waiting to kick them when they’re down.

Increasingly, this is the reality bubbling just under the surface: others in the space look at Google and see nothing worth liking. They see an enemy. As Plainview says to his own son at one point, “this makes you my… competitor.”

When it comes to local commerce, the ultimate prize everyone is going after right now is how to close the redemption loop. The redemption loop starts when a consumer sees an ad or an offer for a local merchant, and is completed when the consumer makes a purchase and that purchase can be tracked back to the offer. If you know who is actually redeeming offers and how much they are spending, you can be much smarter about tweaking and targeting those offers.

Groupon, LivingSocial, and other daily deal sites have created enormous value by pushing the redemption loop the furthest. When someone buys a daily deal, for instance, that translates into cash for the merchant. But for the vast majority of their deals Groupon and LivingSocial do not track whether or not they are ever redeemed, much less the amount each consumer actually spends at the store or restaurant once they show up.

In order to complete the circle and track offers all the way through redemptions, it is necessary to either tap into the payment system or create an alternative way to track redemptions. Different companies are tackling this problem in different ways, but they almost all rely on a shift from emailed coupons to offers delivered through mobile apps.

Next Jump CEO Charlie Kim, who recently partnered with LivingSocial to power daily deals across his commerce network, sees a shift in targeting from broadcasting deals to narrowcasting them. “Blasting out a deal to everyone in New York is not targeting,” he says. “When you broadcast too much in any category, it is just a lot of noise. Email response rates have plummeted for everyone across the industry. What used to be 10% response rates even a year ago, now you are talking the 1% to 2% level.” The constant barrage of emails from Groupon, LivingSocial, and every daily deal copycat is creating user fatigue that is visible in declining response rates.

And that is why mobile is so appealing. If you can send deal notifications to people’s phones based on their exact location and nearby deals, you have the beginnings of narrowcasting. Later on, companies will figure out how to layer on ways to target by income, gender, and other factors as well.

Mobile and local commerce go hand in hand. In a few cities, Groupon is testing out Groupon Now and LivingSocial is offering Instant Deals. In both cases, the deals appear on mobile apps and can be redeemed instantly, rather than having to wait a day for the deal to go live, as is the case with their regular daily deals. The downside of these deals is that Groupon and LivingSocial cannot take advantage of their existing deal inventory and they have to actually provision participating merchants with iPhones and iPads so that they can accept the deals and Groupon/LivingSocial can track them. Yelp is doing something similar where you have to show a redemption code to the merchant from your phone.

Foursquare and Facebook are taking a different approach through their separate partnerships with American Express. Since AmEx is the payment system, it records deal redemptions along with the actual payments. Merchants and consumers don’t have to do anything different from what they normally do. Pay with a credit card and your deal is redeemed. Except it only works if you have an AmEx card and the discount is credited to your account later.

Google is trying to link Google Offers to its Google Wallet, which requires an NFC chip in your phone and an NFC reader at the merchant’s checkout. It has the advantage of working with MasterCard, Citi, and other large payment processors. But it also depends on a brand new technology that will take a long time to become widely available.

The key to closing the redemption loop is definitely payments. Investor Chris Sacca recently told Kevin Rose in a video interview the best reason why Twitter should buy Square is because Twitter has the broadest reach to distribute offers and deals, and Square has a built-in way to track redemption. This was just an off the cuff remark in a friendly chat (Twitter isn’t even in this business yet), but it makes sense.

We are moving from a world of online ads that produce impressions and clicks to online and mobile offers that produce real sales. If the deal companies can figure out a way to actually measure those sales, it could open up local commerce in a massive way that makes what they’ve done so far look like child’s play.

If you talk to Yelp CEO Jeremy Stoppelman, he always likes to point out how many reviews there are on Yelp. It’s a point of pride and competitive differentiation. Even Google Places, which borrows liberally from Yelp reviews, seems to think so.

Today, Yelp crossed 20 million reviews, up from 10 million in March, 2010 (and 17 million last April). The reviews bring in the visitors, and visitor growth tracks pretty closely with the growth in reviews. Yelp hit 53 million visitors in June, according to its own stats.

It took about 6 years for Yelp to get to 20 million reviews. Yelp was founded in 2004, and it took two and a half years to get to its first million reviews (in May, 2007). Then it took roughly another three years to get to 10 million (March, 2010), and then added this last 10 million in a year and a quarter.

Yelp focusses so much on reviews, and trying to get quality user reviews, because everything else can be replicated. With so many places databases popping up, creating a directory of local businesses is easier than ever, but Yelp has always been about the user reviews as a sorting mechanism to find the best places nearby.

Stoppelman is so protective of Yelp’s reviews that he still won’t allow mobile users to upload reviews from their phones because he wants them to be well thought-out. (You can add tips, however, from mobile). They also tend to be lengthier than what you’d get from mobile reviews. At 2.2 billion words overall, that comes to an average of 110 words per review. If he loosened up on that restriction, Yelp could have 50 million reviews in no time.

Foursquare this morning announced distribution partnerships with daily deal providers LivingSocial, Gilt City, zozi, BuyWithMe and AT&T. Missing from the list are Groupon, Yelp and Google Offers.

With these deals, Foursquare is attempting to solve two problems: liquidity in deals and its own lack of a revenue model.

Foursquare already has a reasonable number of deals on its own. How many, exactly, it refuses to say. But I even found one during a stopover in Ketchikan, Alaska. I couldn’t get a 3G signal, but I could get a Foursquare deal.

Foursquare will now distribute the deals to its users on behalf of its partners. At this stage of the mobile deals market, it helps all of the players out there to work together. None of these companies have all of the pieces of the puzzle: Foursquare has distribution, but no local salesforce. LivingSocial and the others have salesforces and some deals but no meaningful mobile distribution.

Without cooperation, you run into the Color problem—you check to see what’s there, see nothing, check again, see nothing and then stop checking. A single purpose deals app will get old quickly. Deals need to be shown where people already are for other reasons.

Foursquare is one of those outlets. The company won’t disclose how many monthly unique users it has, but I would estimate it at 2-3 million, based on typical Internet decay rates of registered users and its recent milestone of 10 million registered users.

However, I see three key challenges with Foursquare deals:

1. Confusion among the various deal types. Foursquare deals already come in many flavors: mayor, newbie, swarm, flash, check in, loyalty and friends. These deals are all processed by the business at point of sale. There are also deals in conjunction with Foursquare’s partnership with American Express at H&M, Sports Authority and Dunkin’ Donuts. With these deals, you pay full price and receive a credit on your credit card statement after the fact. With deal providers like LivingSocial, you have to pay in advance and then redeem the offer. In some cases, you won’t be able to redeem the offer right away—you will have to wait for the deal to close just as daily deals do. For the initial launch, there is no Foursquare wallet. If you buy a deal from LivingSocial one day and enter all your information, you’ll have to repeat the process if you later buy a deal from zozi.
2. Competition with itself. This is a rare case where the company actually makes more money if you use competing products than if you use its products. Foursquare’s excellent deal and loyalty products are free to merchants. The daily deal providers charge merchants and then give a revenue share to Foursquare. (The company does not disclose how much.) For merchants, the best value is to use Foursquare’s in-house products.
3. Competition with the big guys. Because of massive fragmentation, local is very dependent on a large user base. Foursquare’s scale is tiny compared with Google and Facebook mobile app users. Google claims more than 200 million users across its mobile local properties. Facebook has even more mobile users. Google and Facebook could distribute deals for the deal providers just as they do ads online.

There is also competition between Foursquare and its partners. Tomorrow, LivingSocial is offering $1 lunches at more than 100 places in San Francisco to promote the launch of LivingSocial Instant. I asked LivingSocial if those deals will be available through the Foursquare app.

“Tomorrow’s dollar lunch will only be available thru the LivingSocial apps or the LivingSocial website,” replied spokeswoman Maire Griffin.

In other words, LivingSocial would like you to install their app.