Why Yelp’s CEO Turned Down Google

12 minute read

Jeremy Stoppelman spent his teenage years leafing through business magazines and dreaming of running his own business. Today, he’s at the helm of Yelp, the $4 billion review website that’s quickly become the digital version of the Yellow Pages and now attracts about 139 million unique visitors per month.

Stoppelman sat down with TIME via phone to discuss his less-than-glamorous first job out of college, his job interview with Elon Musk, and why he turned down a buyout offer from Google. Below is an edited version of the conversation:

TIME: Tell me about your first job out of college

Stoppelman: I got recruited off-campus by @Home Networks. That was I believe the first cable Internet provider. I was a software engineer on their network operations team.

TIME: What was that job like?

Stoppelman: No fun. It was a fairly dysfunctional team. We were working on a product that you use to provision new customers as they sign up for cable or Internet. The project had been ongoing for multiple years when I got there. It actually never launched. I actually left there after about four months.

I realized pretty quickly that the team was not super well-managed . . . I just found myself without a whole lot to do after a few weeks. I’d kind of run through all the projects that they had for me, and I didn’t really know how to allocate my time. I figured it was time to start looking for something more exciting.

TIME: So then you went to PayPal, right?

Stoppelman: I started interviewing randomly. It was around late ‘99, early 2000. The dot-com bubble was still very much under way. If you were a software engineer, recruiters were calling constantly, so I just started going out on interviews. I found my way to X.com, which was an online bank started by Elon Musk [that later became PayPal].

I’d never met a 28-year-old successful entrepreneur on his second venture. I’d never met anyone with ambitions like that. He was telling me right then and there that we were going to take down Visa and MasterCard if everything went our way, and he really seemed to believe it. And that was really exciting.

TIME: When you were there at PayPal, there were a lot of people there who went on to be incredibly successful. What were the biggest lessons you learned working with those people?

Stoppelman: It was a group of really smart individuals. One of the things I took away from that experience was how if you give a really talented person a stretch opportunity, how far they could really take that. So few of us had what would be called preexisting experience. We were trying to do things we didn’t necessarily know how to do. Even building a consumer Internet site at that time, that was a completely novel idea.

That team, especially the management team, gave me the opportunity to become the VP of engineering all while I’m in my early-to-mid 20s, which is very unusual I think in corporate America. And I wasn’t the exception. There were a number of people around that organization that were very young but were very high-potential and were given the opportunity to stretch and grow with the company. When I later went on to start Yelp, I tried to make sure that similarly, we gave people opportunities based on the potential they demonstrated rather than just something like, ‘Oh, they’ve done it before.’”

TIME: I know before you founded Yelp, you went to business school for a year then dropped out. What’s your view of school? There are a lot of famous Silicon Valley dropouts.

Stoppelman: There’s no one-size-fits-all. There are certain individuals that are extremely precocious and self-driven, and it doesn’t matter whether they had university or not–they’re going to figure out what they need to be successful. I don’t know that everyone falls into that category, I’d say most people probably don’t. The idea that people don’t need education is obviously preposterous.

I think when Peter Thiel or Max Levchin talk about that school is not necessarily necessary, part of it is to strike a conversation. I think it’s been misinterpreted in the media because it sounds controversial–like ‘Oh, Peter Thiel says you don’t need school.’ He just means there is this belief that a college degree solves all problems. The reality is the data is starting to show all degrees are not created equal. Just going to college and getting by is not necessarily going to guarantee you anything. What really matters is the knowledge and whether you can use that to do something important, useful, worthwhile. That knowledge can be acquired in a variety of ways–it can be acquired in a formal education, it can be acquired on your own. But I think each individual has to decide what make the most sense for themselves.

TIME: Did you always know you wanted to be a startup founder, or did Yelp happen as a surprise or a revelation?

Stoppelman: I guess both. I was always interested from a very early age in computers and software and technology. I was also very early on interested in business and how companies were started. I used to read Fortune and Forbes all the way back in my early teenage years. In Forbes there was a particular section on entrepreneurship and I’d always read the little vignettes about how someone started a small business. I also grew up around the time when all these big names in computing — Bill Gates, Michael Dell, steve Jobs — they were all in the prime of their careers. It was a dream to find my way to starting a company. I always hoped that I would do it, but I also wasn’t sure that it it would all come together. I was kind of plotting my career hoping to be a part of Silicon Valley, but i wasn’t sure if I would be a founder or CEO.

The context for the birth of Yelp was Craigslist was really dramatically impacting the newspaper industry by taking away the classifieds business. As we [at Max Levchin’s startup incubator] looked around for older media businesses, we saw the Yellow Pages as something that really hadn’t yet been transformed by the Internet. The one thing that stuck out was word of mouth was the best way to find local businesses. If we could find a way to capture that and bring it online, that would be a really powerful idea.

Finally, we were having a lunch conversation and I was saying to [Yelp co-founder Russell Simmons], if you ask me a question, I would always be willing to respond with a recommendation. We decided we’d build a question-and-answer type service for recommendations. We built that and launched October 2004, and it really didn’t work as we expected. It was just a little bit too complicated.

But buried in there was a way to write your own review without being asked a question. It turned out that when people would find that feature, which was really added as an afterthought, people would just write five or 10 or 15 reviews in one sitting. That one little clue led us to refocus the site and by February 2005 it was really starting to work and people were having a lot of fun sharing their opinions of local businesses.

TIME: That’s interesting, because I think many people assume a founder has a really great startup idea and it just kicks off from there. Is there more trial and error involved in launching a startup than people might expect?

Stoppelman: Yeah. Most of the time, when you come up with an idea, and you think you’ve got it all figured out, when you launch in the market, you always learn something about what works and what doesn’t. Very often you do have to adapt your idea and be willing and able to adjust accordingly. I remember in business school my professor said most successful startups do change direction in a fundamental way early in their life, and if they don’t, the odds are actually that their startup isn’t going to succeed.

TIME: I know a few years ago you guys were close to being acquired by Google. Now you’re a public company instead. Can you talk about how you shifted gears?

Just about every year starting in 2005, Google would come to us and say they wanted to buy us. They were never actually serious until 2009. We engaged in that conversation because obviously Google is extremely powerful, so when they come calling, you answer their calls. In thinking about Yelp and what it could be, it felt like leveraging the resources of a Google would allow Yelp to expand rapidly worldwide, which is something we were just getting started on.

Of course, once we started that conversation, there were cascading effects. Other people found out that Google was interested in the company and that stirred up other interest. Before long there was another offer at an even higher price. At that point I really felt like the whole conversation was getting away from me. We were getting out of having a conversation about what would be best for the future of the company and more into what would be the best outcome financially. I felt like we built this company over several years, it’s going really well, there’s no fundamental reason for us to sell.

So at that moment, it just felt like really the right the thing to do to maximize the value of the company but also maximize the impact Yelp would have was to shift gears and just commit to going on the independent path and take it public.

TIME: It seems like you guys are always dealing with a tension between your different constituencies–the restaurant owners, the reviewers, the regular users. How do you balance the different needs of these people?

Stoppelman: If we were to lean toward a constituency, it’s towards consumers, because ultimately Yelp is not useful if you can’t rely on its reviews. If it’s not useful to consumers, then no one’s going to use the app, you have no audience, and then you have no audience to business owners.

If you think about it that way, as Yelp you kind of have to lean toward consumers, protect consumers and make sure they’re going to the best local businesses possible. But we also do really care about business owners and Yelp is a huge boon to business owners. Yelp is word-of-mouth amplified, so if they’re doing a great job, that good news is going to travel that much faster thanks to Yelp and its community.

TIME: What do you say to those restaurant owners who say the way Yelp filters the scores is unfair or who claim advertising influences scores?

Stoppelman: There’s never been any amount of money . . . that you could pay to manipulate your rating or change reviews. That’s been validated by third parties–a Harvard Business School professor did a statistical analysis to demonstrate that.

The conspiracy theories still exist, and I think the fundamental reason they exist is because Yelp creates an accountability that didn’t exist before and it’s uncomfortable. Whenever you have a company that changes the rules of the game, you’re going to have people that don’t want to get with the program. They’ll say what they’ll have to say to try to discredit the thing that’s causing them stress.

But fundamentally, I think most business owners, and especially the really good ones, get it. They get that this is an incredible opportunity for them to take useful feedback and improve their businesses. I totally understand that it can be stressful–the fact that you’re always accountable, always on the record, so to speak. But it’s a very powerful tool for expanding and growing your business as well.

TIME: Is there any other advice you might have for would-be entrepreneurs?

Stoppelman: I think I might have originally borrowed this from Elon [Musk]. When I was in business school, I was thinking about doing something entrepreneurial after, and he said something to the effect of, “make sure that it’s something that you are happy doing for a really long time.” Call it 10 years plus–like thinking about it day-in, day-out, in the shower, et cetera. Because fundamentally, building a great company takes time. If it’s not something you’re passionate about and enjoy thinking about all the time, you’re not going to make it down that hard road. So choose wisely.

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