The last few days, we have seen a flurry of controversy around the local business rating community Yelp.com, a popular and influential online community where visitors can rate local merchants such as restaurants and bars. The allegations? That Yelp will remove or hide negative reviews for companies that advertise.
This story touches a lot of small businesses. In addition to reaching about 19.5 million consumers per month, Yelp tends to dominate Google search rankings for names of local businesses in cities that they cover, often making a Yelp reputation the first impression a consumer has of a business. If a favorable Yelp reputation is in fact for sale, it puts tremendous pressure on all local merchants to pay up so as not to fall behind their competitors. And if the allegations are true, it raises ethical concerns about the company.
The Background
On February 18, the obscure East Bay Express published a 4,500 word article called "Yelp and the Business of Extortion 2.0," outlining allegations from anonymous and named local business owners who reported that Yelp salespeople offered to move or remove negative reviews if their company would pay $350 per month in advertising.
The article struck a chord. By February 20, the story had been picked up by major publications such as The Wall Street Journal, CNET News , The Register, Financial Times, and many more. There has also been a blizzard of activity in the blogosphere, and on Twitter.
Yelp's CEO, Jeremy Stoppelman, has also been active in disputing the story. He posted a terse denial of the East Bay Express allegations on the Yelp blog on February 20th, followed up with another post called "9 Myths about Yelp" clarifying some issues related to the controversy and used his personal Twitter stream extensively to interact with those posting about the controversy.
In Defense of Yelp
First, let me put a couple of things out in the open. I am far from unbiased here. I have a clear conflict of interest in that my own company RateItAll, also offers a local business rating service. On the other side of the coin, I have spent a good bit of my career championing the consumer review space and am personally familiar with the conflicts that can arise when trying to balance advertisers' best interests with those of your user base. As both a quasi competitor to Yelp, and as a believer that they are providing an immensely valuable service, I will do my best to present both sides of the story.
First and foremost, I suspect that the recent attacks on Yelp have not been entirely fair.
Local businesses often -- and understandably -- take negative feedback extremely personally. This is their livelihood that is at stake, and it's hard for many businesses to understand how a negative review from an anonymous person might suddenly start showing up as the first result in Google for a search for their business name. For these folks, the stakes are very high, and owners can get personal in a hurry.
My company is contacted frequently by irate merchants regarding negative reviews. We've had local business owners threaten us bodily harm, offer to bribe us to remove negative reviews, cheat shamelessly to boost their rating, call my personal cell phone hundreds of time per day, and quite often, threaten lawsuits. The more extreme merchants seem to think that sites like RateItAll and Yelp were created for the sole purpose of destroying their livelihood. They often don't understand the read/write aspect of the Internet. They don't understand that a negative review can actually serve to build credibility. They don't see their exposure on our sites as a marketing opportunity. And they certainly don't want to hear any nonsense about consumers being entitled to share negative opinions.
All they see is a search on Google pointing at unfair allegations from an anonymous person that is hurting their livelihood.
Given Yelp's traffic, traction, reach, and influence, I can only imagine the volume of enraged merchants they must deal with. When I read much of the coverage of this current controversy, I sense some of this same emotional outrage that I've seen personally from merchants upset about a negative review. That Yelp is a grand conspiracy to extort businesses into paying up, and if they don't pay up, Yelp will put them out of business.
I find this hard to believe.
Yelp is a blue chip company, backed by blue chip investors, run by smart people. They have global, long term ambitions. It's simply not in their best interests to run an extortion racket. While allowing businesses to pay to remove negative reviews might improve short term revenue, it wouldn't be long before Yelp's credibility with consumers was shot. Yelp surely understands this.
The Pressure of High Expectations
Like every other start-up that is living off of investors' cash, Yelp is under tremendous pressure to get to profitability. Unlike many other start-ups however, Yelp has raised so much venture capital ($31M total), that it's not enough for the company just to become profitable -- it needs to get profitable with revenues that justify its valuation. With valuation estimates of $200 million on Yelp's most recent financing, Yelp likely needs to achieve annual sales in the mid to upper hundreds of millions of dollars to give its investors a shot at a decent return.
There are not many online advertising supported businesses driving that kind of revenue.
With this sort of backdrop, it's not hard to imagine Yelp executives setting aggressive sales targets. And in my experience, aggressive sales targets beget aggressive sales tactics. If this is the case, I expect that this controversy will encourage Yelp management to tighten control of its salespeople, and that we will see more measured and transparent sales tactics in the future.
I believe that in the long run, Yelp will emerge a stronger company due to this controversy.
In my next article, I'll discuss why this controversy should serve as a wake up call for small business owners, and provide specific pointers for how they can maximize the positive impact of online reviews.
1) you set up a business account
2) you get some reviews and they are listed in one order
3) you see some strange adjustment in the order but think nothing of it
4) you get a phone call yelp within days (mind you it takes a while to get reviews and no phone calls from yelp during that time)
5) you decline their expensive advertising, or even ask to "think about it"
6) then you see your reviews rearranged again
7) your good reviews start getting deleted mysteriously (when they had been there for a while)
8) you call to inquire and they give you some bs about their mysterious and elusive algorigthm
9) more reviews come off and some negative ones could appear
10) congratulations, your hard long hours to get you to a 4+ here at yelp and anywhere else has been downgraded to a 3 in only a month here.
If you have a business account at yelp, start screenprinting, keep a log and recording correspondence. It will come in handy one day.
You are correct Mr. Coburn in saying that it is difficult for a business owner not to take things personally and to get defensive. I understand. But I have taken the time to write to every reviewer thanking them and have even made corrections to my business based on their comments.
What I don't like about Yelp is their dirty business dealings. YES, they take away 5 star reviews. YES, they lower your star rating after you decline "sponsorship", YES they move your negative reviews forward. It is mean-spirited. It is immoral. It is unethical.
On Feb.12, I informed "Holly" (no last name given) from Yelp that I would not be paying their fee. On February 15, my stars were lowered form 4 to 3 1/2. On Feb.28, I had 52 reviews, thirteen of which were 5 star reviews. Today, March 3rd two of those 5 star reviews are gone.
I am a business owner who resents Yelp's unfair way of doing business. NO, the Yelp controversy is not overblown!! I hate Yelp!
If BizOwner says NO to advertising then:
"Number-of-Stars-for-business-owners" = "Number-of-Stars-for-business-owners" - 1/2 continue
- Days = Days +2
Find One-Star review: make One-Star review the First Review
- Days = Days +3
If Five-Star review posted, wait 2 days, remove review
Oh yes, it's their algorithm all right, but they set it up to screw business owners!
Well, that's certainly fair - if you're talking to the Yelp folks who control what's going up - and coming down - from the screen. Folks being harmed don't know they need to print those screenshots until they're gone. Poof.
Are the stories anecdotal when actual businesses all cite the same experience? And not just the experience of having favored reviews placed first for advertisers - that's a gimmick that savvy readers will quickly understand.
No, too many businesses also cite the experience of having favorable reviews removed once they've refused to advertise.
That's manipulation. That's not so clear to even savvy readers. And that has the actual effect of causing harm. That's crossing a line.
And when a company knowingly allows harmful action to be taken against a business - in what appears to be a systemic fashion - that company can be held liable. It's only a matter of time before that happens.
As for Yelp, I think you'll eventually see those screenshots. I don't think folks will send them to you. I think they'll file them in a civil complaint.
And on that, I'd put some good solid money. Yelp is going to eventually pay for manipulating reviews in a way that is actually causing harm to real people.
So hang on to your seat, Lawrence. You'll see plenty of screenshots before this story is finished.
Until someone shows me screenshots or some comprehensive, non-anecdotal study demonstrating that there is a clear pattern of advertisers receiving preferential treatment beyond a single "featured review," i'm just not going to believe that Yelp would risk their entire existence squeeze a bit more monthly revenue out.
One piece of the story I didn't cover is the "algorithm as a defense" angle Yelp has been taking. I think there are some flaws with their argument here that maybe I will cover at another time.
We all new it in the tech industry.
You ALWAYS placed an ad with the magazines that were going to review your stuff in the same mag.
Doesn't quite explain, though, how you think that Yelp is a blue chip company and, thus, exempt from criticism.
Have you been paying any attention at all lately to what's going on in American business?
Blue chip, dude, means nothing. And expecting that folks should trust them just because they're big, well, that's just nonsensical.
Yelp has serious issues of conflict of interest. What they're doing through their salespeople may very well be legal. But it's still wrong.
And one of these days, some business folks who've seen reviews manipulated by a the salesforce of a "blue chip" company are going to take legal action.
Because it might be legal, but it's not right to hurt someone's business by manipulating the truth. One of these days, a civil case or two will spell the end of Yelp.
Gambling with issues of liability might have become accepted by the "blue chip" companies you favor, Lawrence.
But those days are coming to an end.