Yelp managed to grow from 0 to 25 million active users in just 3 years and then eventually became a $898 million company.

How?

Here are the key elements for their success:

1. In 2003, 2 friends Jeremy Stoppelman and Russel Simmons applied and got accepted by a business incubator MRL Ventures.

2. Jeremy got the flu and wanted a recommendation from friends on where to go for treatment and no one had any insights.

So he created a simple email-based referral recommendation service called Yelp to solve his problem.

3. Founder of MRL Ventures, Max Levchin, liked the idea and provided $1 million in initial funding.

4. Turned out initial users of Yelp didn’t like to ask friends for recommendations. The idea didn’t work out and the service stuck.

5. One day, the founders analyzed data and discovered that the quite hard to find features “Write a Review” and “Real Reviews” became really popular.

So they decided to focus on them 100%.

6. In February 2005, they pivoted and relaunched as a social recommendation web-service with the 2 key features.

They also decided to launch their service city by city. Firstly, they focused only on San Francisco.

7. While competitors waited for anonymous reviews to come in, Yelp focused on building an elite community of reviewers with profiles, friends, and accolades.

7.1. They offering special recognition to users who are 1st to review a business.

7.2. They let other users give kudos for reviews that are useful, funny, or cool.

7.3. The most engaged Yelp users were awarded “Elite” status.

7.4. Turned out people really liked receiving recognition for their reviews and created even more quality reviews.

Result:

+ 6 times more people wrote more than 1 review on Yelp compared to competitors.

+ They created real quality reviews.

+ Visitors adored Yelp for that and recommended Yelp to their friends.

+ Yelp grew to 12,000 active reviewers.

8. Yelp’s growth was noticed and they raised $5 million in funding from Bessemer Ventures.

9. They doubled down on growing their Elites:

9.1. They organized regular Yelp Events where Elites got first-chance to RSVP.

9.2. And events just for Yelp Elite that offered free food and drinks and swag.

9.3. They hired Community Managers who helped provide incentive and community validation and support.

9.4. They made it challenging to maintain Elite status — users had to maintain both the quantity and the quality of their new reviews.

Result: By 2006 they grew to 100,000 active reviewers.

10. While competitors would bow to advertiser pressure to remove negative reviews, Yelp made it a point not to.

Result: Yelp became known as the place to get real, unfiltered information about local business.

11. Yelp made Search Engine Optimization a priority.

Result: high-quality reviews and in-depth profiles generated an endless traffic from Google.

12. By the summer of 2006, the site had one million monthly visitors.

13. Their growth was noticed and, in November 2006, they raised $10 million from Benchmark Capital.

14. They decided to scale to Los Angeles.

15. In order to grow faster, they started to pay $5 for reviews on the new markets.

Result: low quality reviews. The idea failed.

15.2. So they got back to their Elite community and used them to source new reviewers in new cities.

16. Local businesses noticed that reviews on Yelp significantly increase their sales. So they started to ask their visitors to write a review on Yelp.

16.1. Yelp doubled down on this fact and gave businesses Yelp stickers and embeddable review widgets for their websites.

Results:

+ New wave of viral growth.

+ Widgets generated a ton of quality backlinks = Traffic from Google Skyrocketed

17. By 2007 their audience grew to 25 million users.

18. Then they just scaled their success to new cities, grew, got noticed by bigger investors and in 2012 they filed for an IPO. The company was valued at $898 million.