Yelp

Magic AI

Yelp

Local advertising. Yelp is free for consumers and free for businesses to claim their listing.

Revenue comes from selling advertising products to local businesses — sponsored listings that appear at the top of search results, enhanced profiles with photos and call-to-action buttons, and Yelp Ads that target users searching for relevant businesses. Approximately 95% of revenue comes from local advertising, making Yelp essentially an ad platform for small businesses.

The company also earns from Yelp Reservations, Yelp Waitlist, and transaction-based fees on food orders. Revenue is recurring — businesses pay monthly for advertising packages — but churn is high because small businesses often cancel when they don't see immediate ROI.

Magic AI

Magic is building an AI that works like a software engineer, not a chatbot. The goal is a model you can hand a whole code base and a task, and it writes, reviews, and debugs like a teammate.

Their edge is memory. In 2024 they showed off LTM-2-mini, a model with a 100 million token context window.

To put that in perspective, that is about 10 million lines of code the model can look at in one shot, by far the biggest of any model at the time. The plan is to sell this as an AI coworker to companies that write a lot of software.

As of the 2024 rounds, the product was still not for sale.

Yelp

Jeremy Stoppelman got sick after eating at a restaurant and wanted to find a doctor recommendation online. There was nothing useful.

He and Russel Simmons — both former PayPal employees — started Yelp in 2004, originally as an email-based referral system where you'd email friends asking for recommendations. That didn't work.

But they noticed that the reviews people wrote as part of the referral process were the actual valuable content. They pivoted to a review platform where anyone could write reviews of local businesses — restaurants, dentists, plumbers, mechanics, anything.

The social element was key: reviewers had profiles, could be friends, and the best reviewers became "Yelp Elite" with status and perks. By 2008, Yelp had turned reviewing restaurants into a hobby, a social activity, and for some people, an identity.

Google reportedly offered $500 million to acquire Yelp in 2009. Stoppelman turned it down and took the company public in 2012.

Magic AI

Eric Steinberger and Sebastian De Ro started Magic in 2022. Steinberger is an AI researcher who became convinced that the missing piece for a true AI software engineer was memory.

Chatbots forget what you told them a few thousand words ago. He wanted a model that could read your entire code base and remember all of it.

They raised a small seed in 2022, then a $23 million Series A in early 2023 led by Alphabet's growth fund CapitalG. From day one the pitch was not a chatbot.

It was an AI colleague that could handle real engineering work.

Yelp

User-generated content created a flywheel: more reviews attracted more consumers, which attracted more businesses, which attracted more reviewers. Yelp Elite Squad gamified reviewing, turning prolific reviewers into evangelists who hosted events and recruited new users.

SEO dominance — Yelp pages rank highly on Google for local business searches, driving organic traffic that costs nothing to acquire. City-by-city launch strategy with community managers in each market building local reviewer communities.

Advertising sales team calling local businesses directly — a labor-intensive but effective model for monetizing the platform. Mobile app became critical as smartphones made "find a restaurant near me" a constant use case.

Expansion into services (plumbers, contractors, mechanics) beyond restaurants to increase addressable market.

Magic AI

Magic's strategy is research first, product later, which is both unusual and expensive. Instead of shipping an app and iterating in public, they raised huge sums to chase a technical breakthrough in model memory.

The headline move was the 100 million token context claim, which got the whole AI world talking. They also cut a deal with Google Cloud in 2024 to build two supercomputers, called Magic-G4 and Magic-G5, using NVIDIA chips, to train bigger models.

Star backers like Eric Schmidt served as validation. The bet is that if the tech is far enough ahead, the product and the customers follow.

Yelp

Google is the existential threat. Google Maps reviews have overtaken Yelp in volume and are embedded directly in search results, intercepting users before they ever reach Yelp.

Stock performance has been mediocre — shares are roughly flat over the past five years while the broader market doubled. The business model depends on selling advertising to small businesses, which are notoriously difficult and expensive to sell to (high churn, small budgets, skeptical owners).

Yelp has been accused of manipulating reviews to pressure businesses into advertising — allegations the company denies but which have damaged its reputation. Review fraud (fake positive reviews, competitor sabotage reviews) is a constant battle.

And the broader shift to social media for recommendations (Instagram, TikTok, Reddit) is eroding Yelp's relevance with younger users.

Magic AI

Magic has raised close to half a billion dollars and, years in, still has no product the public can buy. That is the whole problem in one sentence.

A giant context window is a great demo, but rivals like Cursor, GitHub Copilot, and Cognition's Devin already have real users and revenue. Magic has to prove that more memory actually makes a smarter engineer, not just a bigger number on a slide.

And it has to do that while burning enormous sums on compute against competitors who are already shipping. The clock and the cash both keep running.

Yelp

Business listings and reviews — 265+ million reviews across every local business category. Yelp for Restaurants — reservations, waitlist management, and ordering integrated into business pages.

Yelp Ads — advertising platform letting businesses target users by category, location, and intent. Yelp for Business Owners — dashboard for responding to reviews, tracking page views, and managing business info.

Yelp Elite Squad — gamified community of prolific reviewers who get invited to exclusive events. Yelp Guest Manager — restaurant management tool combining waitlist, reservations, and table management.

Yelp Knowledge Program — data licensing to power local search across third-party platforms.

Magic AI

The centerpiece is Magic's LTM, or Long-Term Memory, model family. In 2024 they unveiled LTM-2-mini, a model with a 100 million token context window, pitched as the key to an AI that can understand an entire code base at once.

The broader product is an AI software engineer, or coworker, that can write and change code across a whole project. The company also announced Magic-G4 and Magic-G5, two supercomputers built with Google Cloud and NVIDIA to train these models.

Much of it is still research rather than a shipping product.

Yelp

Pre-IPO investors included Bessemer Venture Partners, Max Levchin, and Peter Thiel's Founders Fund. Yelp went public on the NYSE in March 2012.

Magic AI

Magic's backers are a murderers' row of AI insiders. It started with a $5 million seed round in 2022 and a $23 million Series A in early 2023 led by Alphabet's CapitalG.

Then in February 2024 came a $117 million round led by Nat Friedman and Daniel Gross, two of the most connected investors in AI. The blowout was August 2024.

Magic raised $320 million with checks from former Google CEO Eric Schmidt, CapitalG again, Atlassian, Jane Street, Sequoia, and Elad Gil. That pushed total funding to around $465 million, all for a company still building toward its first sellable product.