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Embattled Yelp denies claims of extortion, sues North Vancouver man

Future of Yelp

Too much power? A Harvard Business School study from 2011 estimated that one star on Yelp can increase a business’ revenues by as much as 9%.A North Vancouver man who has been allegedly running a profit-making fake review-writing farm was hit by a lawsuit from Yelp, filed on September 19th in the BC Supreme Court. The case is a symptom of the new reputation economy, in which “likes”, bogus Twitter followers and potted reviews have serious implications for a business’s bottom line.

Yelp’s senior litigation lawyer Aaron Schur said, “We hope that this lawsuit will help raise awareness of the illegality of such false testimonials, and show consumers and businesses alike that Yelp takes seriously any attempt to deceive the public through fake reviews. We hope this dissuades others from taking similar misleading measures in the future.”

On September 23, New York State Attorney General Eric T. Schneiderman revealed the existence of a year-long undercover operation called “Operation Clean Turf” (a reference to the practice of “astroturfing”, or the buying and selling of fake online testimonials). Schneiderman’s office created a fake yogurt shop in Brooklyn and then set about approaching companies whose chief business is the mitigation of online reviews. It brought charges against 19 of them.

One of these companies, Webtools, even had a style guide of sorts, offering its freelancers advice on how to avoid being caught out by the algorithm of yelp.com. “Make them sound like personal cases, this is important. Do not make them sound like an advertisement. Do not make them sound the same.” it said.

The 19 companies settled with the Attorney General’s office for approximately $350,000, in exchange for neither an admission nor a denial of wrongdoing and a promise to cease writing fake reviews. “This investigation into large-scale, intentional deceit across the Internet tells us that we should approach online reviews with caution,” said Schneiderman in a press release.

Is Yelp a bit of a protection racket? Or do online review services, such as Google+ Local, TripAdvisor, Foursquare and Yelp, provide a valuable service to consumers trying to make up their mind about where to eat dinner or take a vacation?

Although charging these companies and going after opportunists like the man (so far referred to as John Doe) in North Vancouver is a start, it all raises the question: Is Yelp a bit of a protection racket? Or do online review services, such as Google+ Local, TripAdvisor, Foursquare and Yelp, provide a valuable service to consumers trying to make up their mind about where to eat dinner or take a vacation? What the practice of astroturfing, and online reviewing in general, certainly does is move the goalposts on what used to be called false advertising.

While companies like Yelp certainly are not running the classic model of a protection racket, in which a thug walks into a shop and menacingly speculates how nice it is and what a shame it would be if anything were to happen to it, there’s no question that the gist of the business model is that one’s online reputation fluctuating a percentage point up or down has a real impact on a business’ income. A Harvard Business School study from 2011 estimated that one star on Yelp can increase a business’ revenues by as much as 9%.

In April, the LA Times ran a profile of San Francisco shop, Bai Thong Thai, which had hung a sign in its window pleading, “Stop the bully. Boycott Yelp.” The restaurant had a disappointing 3-out-of-5 star rating on Yelp, and decided to approach the company because it knew the negative reviews couldn’t possibly be coming from its regular customers. “We asked Yelp. We were told ‘perhaps if you paid to do Yelp ads, we could help with this.’ We earn our good reviews. We will not pay bribes to Yelp to post them.”

Yelp, meanwhile, has categorically denied that it extorts small businesses. It says third party research and the court system has debunked these theories.

Yelp’s review system depends on an algorithm built to weed out suspicious reviews and also on the construction of an online “community” of regular reviewers who themselves develop followings and a kind of Yelp credibility. Reviewers with a profile photo and a critical mass of reviews and followers are more likely to see their reviews shoot to the top of the pile, while Yelp’s algorithm is likely to flag a review posted by someone with only one or two reviews to their name and no photo (in other words, an actual person who felt compelled to put in a good or a bad word on their service experience at an actual business).

It is in Yelp’s interest to nurture the value-rich reviewer, the one with lots of followers and a reputation of their own to cultivate. But is this version of the hive mind doing much beyond encouraging narcissists at the expense of someone who just wants to leave their anonymous two cents?

Getting creative with the monetization of its database of reviews and reviewers is essential, though, to a decade-old company that has yet to turn a profit. The occasional reviewer who merely wants to write in passing “I ate here. It was good. Five stars.” is of no value whatsoever to Yelp’s own survival.

With story after story piling up of Yelp effectively shaking down small business owners in exchange for favourable ratings and companies overtly offering small businesses a means of correcting unjust ratings fluctuations, it becomes more difficult to regard online reviews as anything like an accurate reflection of reality. Maybe it’s time to become your own gatekeeper again, and to follow your nose.

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Comment

  1. Hmmm, looks like Pavol was able to troll here. [sarc] I only trust links left in the comments section[/sarc] . smh.

  2. Yelp is a really unfair system. It’s a shame somebody with a grudge can do so much to damage a business whether they are right or wrong but the business can’t even solicit actual customers to write reviews to counter balance without yelp deciding they aren’t real and filtering them so no one sees. Fake reviews are another thing, but if somebody who actual is a regular patron of the business writes something it should count! Apparently the business has to pay for VIP status in order to get that treatment. I’m with the restaurant owner in the article. I will not be extorted or pay for testimonials.

  3. If Yelp were so great the big corporates would be filling their boots. You have to ask yourselves ‘Why not?’

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