September 7, 2015 | In: Technology

YELP – A Stock that Lost Over 70% of Its Value in the Last 12 Months

A friend of mine running a profitable cigarette business in the United States called me on the phone and told me that he had bad reviews on Yelp, and that he called them and asked them to remove those reviews. Their answer was “Sure – but you’ll have to pay us to hide these reviews”. My friend asked my opinion on whether to pay Yelp or not for something they officially ban (manipulating reviews) – at that time, it struck me that Yelp’s business model is based on extorting money from small businesses in order to remove bad reviews. Not only that, I seriously doubt that those bad reviews are actually written by real people (since the true identity of the reviewer is not revealed, and I suspect that these reviews are written by Yelp’s employees).

Here’s how I think Yelp’s business model is based on:

  • Yelp’s employees add a company to their directory.
  • Other Yelp employees badly review that company.

  • A Yelp employee calls the company (if the company doesn’t call first), and tell them that they have a bad review that can be removed for x amount of money.

  • The (usually small) company unwillingly pays the money.

Of course, Yelp has its own stinky advertising as well, but it doesn’t bring in as much money as extorting money from poor small companies. Yelp’s main business model reminds me of the story of the Swiss thugs that used to extort money from the the poor citizens for protection (from them, of course) back in the 13th century. Of course, whatever I think, Yelp’s business model is worth about $2 billion now, even after taking into consideration the 70% dip in Yelp’s pricing during the past 12 months.

You see, Yelp with its current business model is more of a scam and less of a business: generic bad reviews written by anonymous people such as the members of their Elite Squad (who are unsurprisingly conveniently located in the same city, and who are all girls in their late teens/early twenties and who are seemingly partying all the time) who may or may not exist and who may or may not have had any experience with the place that they’re reviewing with the sole purpose of extorting money form poor, hard working Americans and Canadians who are the real backbone of North America.

This business must go and people should completely ignore their reviews as they mean nothing. A review written by someone who doesn’t want to reveal his true identity on a website that is notorious for its shady practices amounts to nothing.

Oh, and by the way, YELP, as a stock, has no future, so avoid it like the plague. Unless, of course, you would like to short it.

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