of cheating, and we had to deal with it. The way
most people cheated is stupid. They would give
it a highest possible rating, lowest possible cost.
And then they would use the same words like,
“best meal I ever ate” or “terrific, wonderful.” If
you looked at them or had editors look at them,
you would know which ones were out of whack
and eliminate them. Later on, we had a variety
of ways of checking by computer.
ZAGAT MOVES TO
DIGITAL AND TAKES ON
As readers migrate online, Zagat launches a
website, and in February 2000 secures $31 million (for a 25% ownership stake) from General
Atlantic Partners, Kleiner Perkins Caufield &
Byers, Allen and Company, and others—just two
months before the dotcom bubble bursts. The
company, now valued at $125 million, reportedly employs 75 staffers, rolls out a nightlife
guide helmed by one of the couple’s sons, Ted
(who becomes president before leaving in 2007),
invests in Open Table and another now-defunct
online reservation service called Foodline, and
strikes deals with companies to display its content. Tim and Nina also hire the company’s first
outside CEO, Amy McIntosh, a former senior
manager at Verizon who leaves after less than
a year and a half, putting the couple back in
charge of the company.
Myhrvold: Unfortunately, one of the things the
Zagats had going against them is that their company was based in this hick backwater town that
didn’t understand technology called New York
City. New York City has never been strong in tech.
Nina: We launched our first site in May of 1999.
But prior to that, we had been leasing content to
tons of companies [including American Express,
AOL, CompuServe, Pathfinder, and Prodigy]. We
decided that our business model should be consistent in that we were paid-for books, [so] we
should charge for our content online.
Tim: People were [initially] paying $3 a month or
$25 a year [for a web subscription]. I think at one
point it was close to half-a-million people. The
ability to do voting online saved us something
like $10 per surveyor.
Nina: People kept telling us that this was the most
incredible time, that everybody wanted to invest
in companies like ours, and [wondered] why we
weren’t looking into [outside investment] at all.
Doug Mackenzie, partner emeritus, Kleiner Perkins; founder and partner, Radar Partners: They
were the first that I’m aware of—or certainly one
of the first—user-generated content companies.
They had a strong following, obviously, with the
consumers but also with the reviewers.
Tim: We just said we wanted to continue to do
what we’re doing and expand.
Myhrvold: I actually spent a lot of time strat-egizing with them [about] who they would take
money from, what they would do. Ultimately,
they took the $31 million from a bunch of venture
capitalists, and I put in some money.
Tim: We were lucky because we hit it at the top of
the boom. We probably would never have gotten
the same deal six months later.
Myhrvold: I also do research on dinosaurs.
[This] was a mass-extinction event for internet
Nicholas Negroponte, cofounder, MIT Media
Lab; investor, Zagat: Timing could not have
been worse for investors, but excellent for Tim
WEB 2.0 RISES,
SPAWNING BLOGS, YELP,
AND PLENTY OF OTHER
As it generates new guides, for golf courses
and movies, Zagat maintains its paywall, even
as rivals offer reviews for free based on an
ad-supported business model. Tim and Nina
remain at the helm, and in 2008, with the company’s annual revenue at a reported $40 million, they ponder selling, something they decide
against following the bankruptcy of Lehman
Brothers and the ensuing financial crisis. Controlling costs by issuing surveys online, but beset
with competition, Zagat expands to cover more
than 90 cities by the decade’s end.
Entin: We had numerous free competitors who
presented a considerable challenge for consumer
attention with the likes of Yelp and MenuPages.
We built out our own, similar kind of menu-processing and data-entry system so that we
could offer menus.
Zach Brooks, founder, Midtown Lunch blog:
When I moved to New York in 2005, there was
this blogging thing that started to happen. People
were [bringing] cameras to their meals and taking
photos. And obviously, being able to go online to
see photos of that food became super compelling.
Entin: It was challenging. We had a strong
brand. There was real revenue coming in from
subscriptions and sponsorships. But at the same
time, there’s all this competition. I don’t know if
that led to some turnover.
Myhrvold: It took a while to get a good technology base for people posting reviews. It’s not like
the Yelp code in its early days was some miracle
of computer science. But it was better than what
the Zagats fielded in that era.
Ashley Hayes, sales manager, Yelp (2007); community manager, Google Places (2010–2012):
[Yelp CEO] Jeremy Stoppleman built this index
of all these local businesses thinking that it was
the index itself that was going to be something
that people wanted, but it transitioned when he
started [learning] that people were actually writing reviews and enjoying it.
Michael Luca, business administration professor, Harvard: The fact about content generation
on the internet is that the more things you make
somebody do, [the steeper the] drop-off in [their]
willingness to contribute. Having a simple 1 to 5
with [an open comment area] where people can
do their own thing would get a lot more content
than having people fill out separate boxes.
Tim: The last thing in the world I would have
wanted to be was Yelp. The idea that you [had
to scroll from] everybody who loved it down to
everybody who hated it and figure out where
you came out on the spectrum, I thought it was
Michael Anderson, agriculture and resource
economics professor, UC Berkeley: There may
be a desire to make it easier for users to glance
and say, “Hey, three-and-a-half versus four stars,
that’s a pretty easy comparison.” But that’s going
to have an impact on [some] restaurants.
Waters: It’s a fast, cheap, and easy world. . . . Every
time you make a decision about where you want
to eat, you’re supporting a whole set of values.
Entin: The company tried to sell itself around
2008, with Goldman Sachs doing the deal.
Ruth Reichl, restaurant critic and food editor for
the L. A. Times and The New York Times (1984–
1999); editor-in-chief, Gourmet (1999–2009):
At Gourmet, we even talked to them at one point
about acquiring it. They were too far behind in
their understanding that the internet was going to make them obsolete. They hadn’t ramped
up enough to make it worthwhile spending a
Peter Georgescu, chairman emeritus, Young &
Rubicam, and informal company adviser: They
weren’t looking to cash out. They were looking to
find a partnership. That’s why I think they didn’t
rush into a financial relationship at that time.
Nina: We did talk about [being open to offers] but