Yelp's Online Reviewing Mafia

The $500 million website Yelp grows on the strength—and grumpy volume—of its Elite food critics

Lucovic/REA/Redux

By David Sax

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Outside the Project One gallery in San Francisco's design district, a young woman dressed as an ice cream sundae is standing beside the velvet rope. Inside, a throng of young professionals binge on free wine and brownies as they're feted by a man dressed as a cupcake and another as a gingerbread cookie. This so-called Sugar High soiree is not a child's birthday party. It's an exclusive event honoring one of the foodie world's most influential sects: the Yelp Elite Squad, the search website's cognoscenti.

In the strange, exclamation point-laden netherworld of online restaurant reviewing, the Elite are a chosen people. They're selected each year through a clandestine Skull and Bones-like process that evaluates the quality and extraordinary quantity of their Yelp.com review writing and their popularity among the San Francisco-based company's millions of users who rely on the site's recommendations to pick, among other things, a lunch spot, after-work bar, or client dinner joint. Adding to its aura, Elite status is proffered by a governing body known as The Council, which is also shrouded in mystery. Says Andrea Rubin, Yelp's vice-president of North American marketing: "We don't share how it's done."

Yelp also refuses to divulge the total number of Elites worldwide, but industry estimates put the figure in the low thousands. It's a motley crew of tastemakers from St. Louis to Lyon—students in their twenties, marketers in their thirties, housewives in their forties, engineers in their fifties, venture capitalists in their sixties, and one 89-year-old great-grandmother living in Los Angeles. Together, this restaurant-reviewing mafia has the power to build up businesses—and take them down. "It's a huge force to reckon with," says Brandon Arnovick, the owner of Mission Minis, a San Francisco cupcakery. "These people are beyond just hobbyists." Says industry analyst Jeremiah Owyang of the Altimeter Group, a San Francisco market research firm: "They're the new Zagats."

The Elite tribe was founded in 2005, a year after Yelp's inception, to gain influence over the restaurant business and encourage user-generated content. Yelp co-founder Jeremy Stoppelman and then-brand manager Nish Nadaraja wanted to reward the site's most prolific reviewers and spur them to continue to draw traffic—without, of course, actually paying them. So they granted these voracious users "elite" badges on their profiles and access to parties—most of which, of course, Yelp got someone else to pay for.

Events, now held monthly, are generally underwritten by local businesses hoping to market themselves to the Elite. They range from winery tours to 4,000-person Yelpapaloozas (coming this summer to the Bay Area) to goofy parties where people dress up like cupcakes. "It's counterintuitive for an Internet business to bring people together offline," says Greg Sterling, a San Francisco-based Internet analyst. "Bringing these people together in the physical world was smart, because it strengthened the community." And it's worked like a charm—albeit for a certain personality type. "The primary perk is getting to go to the parties," says Becca Shansky, a retired member of the New York group. "Free booze and food, plus you get to see all your friends and geek out about restaurants. It's an incentive to stay involved, as we're obviously generating content for Yelp at no charge."

This free-labor mind trick has helped bolster the company's geographical expansion—its key source of revenue growth—as it attracts new users and adds to the number of restaurants reviewed. In the past two years, Elite Squads have been launched in Paris, Toronto, London, and Vienna, and in less renowned culinary capitals such as Pittsburgh, Calgary, and Leeds. In all, there are more than 60 Elite Squads throughout North America and Europe. "The nucleus of Yelp is that community," says Nadaraja, who is no longer with the company but retains a share of equity. "Anything coming in—advertising, sponsors, etc.—is all based on that." Silicon Valley firm NeXtup Research recently valued Yelp at more than $500 million.