On Tuesday, crowd-sourced review website Yelp filed for its IPO, seeking to raise $100 million dollars.
Yelp expects to make its debut as a publicly traded company in 2012.
Here are some numbers from their S-1 filing with the SEC.
Of the 22 million reviews have been written so far on Yelp, most have been for restaurants and retail stores, each commanding 23 percent of Yelp reviews. The average reviewer takes more than 100 words to describe their experience with a business. Of the 27 million local businesses in the United States less than 2 percent (529,000) are on Yelp.
The reviews aren't falling on deaf ears. Sixty-four percent of people said they go online to find customer reviews, according to Yelp's S-1, and 87 percent said that these reviews influence their purchases. Yelp also claims that businesses are moving their advertising dollars online, although in 2010 businesses spent $113.6 billion on offline ads and only $19.6 billion on online ones.
The filing acknowledges that Yelp may have a hard road ahead saying, "We have incurred significant operating losses in the past, and we may not be able to generate sufficient revenue to achieve or maintain profitability." Specifically, Yelp has an accumulated deficit of $32.1 million. The review site incurred a loss of $7.6 million in the first nine months of 2011, a smaller loss than 2010's $8.5 million.
Deficits aside, Yelp's revenue is growing. In 2008 their net revenue was $12.1 million, in 2010 it was $47.7 million, and in just the first nine months of 2011 it's already up to $58.4 million.
Where does this revenue come from? Yelp's main cash source comes from businesses and brands that buy ad space on the site. In 2011, $40,325 came from local businesses and 12,653 came from brands. The remaining 5,402 came from other sources including partnerships and Yelp Deals, the company's daily deal service.
Yelp also relies heavily on unpaid search traffic. Of the 61 million monthly unique views that Yelp gets, over 50 percent come from Google. As the filing states, "Our success depends on our ability to maintain a prominent presence in search results for queries regarding local businesses on Google." The filing goes on to accuse Google of bogarting Yelp's traffic: "[Google] has promoted its own competing products, including Google's local products, in its search results." Yelp points to this as a possible risk, saying that if Google continues to engage in this behavior it "could have a substantial negative effect on our business and results of operations."
Yelp has steadily increased its advertising and marketing spending from just over $10,000 in 2008 to over $38,000 in the first nine months of 2011.