EB Express: Yelp and the Business of Extortion / Part 1 or 2

From East Bay Express February 18, 2009 - Part 1 of 2
Local business owners say Yelp offers to hide negative customer reviews of their businesses on its web site ... for a price.
Many feel threatened by Yelp's power to harm their business.
The phone calls came almost daily. It started to get creepy.
"Hi, this is Mike from Yelp," the voice would say. "You've had three hundred visitors to your site this month. You've had a really good response. But you have a few bad ones at the top. I could do something about those."
This wasn't your average sales pitch. At least, not the kind that John, an East Bay restaurateur, was used to. He was familiar with Yelp.com, the popular San Francisco-based web site in which any person can write a review about nearly any business. John's restaurant has more than one hundred reviews, and averages a healthy 3.5-star rating. But when John asked Mike what he could do about his bad reviews, he recalls the sales rep responding: "We can move them. Well, for $299 a month." John couldn't believe what the guy was offering. It seemed wrong.
In fact, something seemed shady about the state of his restaurant's negative reviews. "When you do get a call from Yelp, and you go to the site, it looks like they have been moved," John said. "You don't know if they happen to be at the top legitimately or if the rep moved them to the top. You don't even know if this is someone who legitimately doesn't like your restaurant. ... Almost all the time when they call you, the bad ones will be at the top."
Usually, John said, he would politely decline to advertise. "Well, thanks," he'd say. "I'll talk to my partner about it." Or, "It's not really in my budget right now." But inevitably, in another week or so, he'd get another phone call. Occasionally, the voice on the other end of the phone would change, but the calls continued. These days, John chooses to not answer his phone when it's from a number with a 415 area code.
John may sound paranoid, but he's got company. During interviews with dozens of business owners over a span of several months, six people told this newspaper that Yelp sales representatives promised to move or remove negative reviews if their business would advertise. In another six instances, positive reviews disappeared — or negative ones appeared — after owners declined to advertise.
Because they were often asked to advertise soon after receiving negative reviews, many of these business owners believe Yelp employees use such reviews as sales leads. Several, including John, even suspect Yelp employees of writing them. Indeed, Yelp does pay some employees to write reviews of businesses that are solicited for advertising. And in at least one documented instance, a business owner who refused to advertise subsequently received a negative review from a Yelp employee.
Many business owners, like John, feel so threatened by Yelp's power to harm their business that they declined to be interviewed unless their identities were concealed. (John is not the restaurant owner's real name.) Several business owners likened Yelp to the Mafia, and one said she feared its retaliation. "Every time I had a sales person call me and I said, 'Sorry, it doesn't make sense for me to do this,' ... then all of a sudden reviews start disappearing." To these mom-and-pop business owners, Yelp's sales tactics are coercive, unethical, and, possibly, illegal.
"That's the biggest scam in the Bay Area," John said. "It totally felt like a blackmail deal. I think they're doing anything to make a sale."
Yelp officials deny that they move negative reviews, although such allegations have surfaced many times before. The issue is even addressed on the web site's Frequently Asked Questions page. Chief Operating Officer Geoff Donaker said advertisers and sales representatives don't have the ability to move or remove negative reviews. "We wouldn't be in business very long if we started duping customers," he said.
But Donaker's denials are challenged by nine local business owners and also by a former contract employee who worked with Yelp in its early days. That person, who is still close to some Yelp employees and only agreed to be interviewed if granted anonymity, said several sales reps have told him they promised to move reviews to get businesses to advertise. "It's not illegal or unethical," he said they told him. "We're just helping the little guy. It doesn't hurt them, it benefits them."
Such tactics may be legal, but they clearly raise ethical concerns. Yelp touts its web site as consisting of "real people" writing "real reviews." The allegations of business owners who have tangled with the company suggest otherwise.
If Yelp indeed suppresses honest reviews in exchange for its advertisers' money, it is cheating users who expect genuine consumer feedback. Conversely, if Yelp demands payment to remove even dishonest reviews, then advertisers are being cheated.
One thing is certain: In both cases, Yelp benefits.
Yelp.com was founded in July 2004 by two young entrepreneurs: Jeremy Stoppelman, 31, and Russel Simmons, 30, who had worked together at PayPal. They conceived the idea during an "incubator" held by PayPal cofounder Max Levchin. The concept was an online city guide with a Web 2.0 mentality, allowing "real people" to write "real reviews" about nearly any type of business — from restaurants to dentists, bars to clothing stores.
Yelp creates a page for individual businesses, including address and phone number, like a directory. Then, any person who signs up for a free Yelp account can write a review of the business and rate it on a five-star system.
The site's social-networking capabilities and clever marketing quickly made it popular with young, web-savvy users accustomed to using the Internet to find their goods and services. Launched in the Bay Area, the site has since spread to many major metropolitan areas — including Los Angeles, Chicago, New York, Boston, Las Vegas, and Seattle — as well as England and Canada.
Today, Yelp draws more than 16 million unique visitors to the site each month, according to Yelp spokeswoman Stephanie Ichinose. More than 4.5 million reviews have been written so far, and the company has raised $31 million in funding to date.
Translating that traffic into a viable business model hasn't been easy. According to the Financial Times, the company still isn't making a profit. Yelp relies solely on advertising for revenue: banner ads from national businesses like Monster.com and Toyota, and fees from local businesses, which pay between $300 and $1,000 per month to highlight themselves in search results and enhance their page with photo slideshows and other information.

But while the basic premise of Yelp hasn't changed since its inception, its spirit has changed for the worse, according to "Mark," the former contract employee. "I started with them at the beginning, helping them market and put the word out for the company, and I loved the concept of this," he said, sitting in a Berkeley cafe in December. "I thought the whole thing would be positive and will increase business to a lot of the small businesses, the mom-and-pops."
But Mark complained that in the past two years there has been an increase in negative, trash-talking reviews. "If you don't like somebody for no reason, you can go on there and talk horrible about their place for whatever reason and also encourage close friends to go on there and trash those places." Mark cited a recent case with his own cafe in which a customer who was angry that the business was closed for a private event went on Yelp and accused employees of being unsanitary.
Other business owners describe similar experiences — receiving negative reviews from competitors or customers who are unreasonably angry. John said one of his employees told him that her former employer — a rival restaurateur — had gone on Yelp and written a negative review of his business. "How many other people have done that?" he wondered in an interview. "It's hard to know what's real."
Yelp's web site states that slamming a competitor is grounds for removing a review. But business owners say the company's response to such complaints is woefully inadequate. "We don't get anywhere," Mark said. "We're just one little restaurant in the middle of 500,000 restaurants that they review, or more than that. They don't have time to respond."
Last April, in response to a litany of complaints, Yelp began allowing business owners to sign up for a free "business owner account." It enables them to track how many people view their page, update their business' information, and send messages directly to a reviewer (although reviewers can choose to disable this feature).
Still, it's up to business owners and not Yelp to resolve disputed reviews. In a November e-mail from a Yelp employee in response to a local business owner's inquiry about why a positive review was removed, the staffer wrote, "While we can't evaluate individual cases or re-instate specific reviews, we certainly appreciate your feedback and are continually striving to improve the user experience."
Given the economics of the Web, Mark believes Yelp has no interest in curbing illegitimate reviews. "They needed more people to go on the site; they needed to promote the site; so they can't stop it," he said. "They don't want to stop it and create any problems for themselves. So they just let it open and try to get as many people on as they can." Mark said he stopped working with the company after several years because he didn't agree with the direction it was headed in.
Here's what advertisers receive, according to an e-mailed sales pitch that a local business owner sent to this newspaper. They can highlight a favorite review to appear at the top of the page about their business. They also show up first in search results for similar businesses in their region (for example "coffee" near "Alameda, CA"). Ads for that business appear on the page of local competitors, while competitors' ads do not appear on their page. Owners can post photo slideshows, add a "personal message" about their business, and have the ability to update info on special offers and events. They also can find out how many users visit their web site, update their page, contact Yelpers who've reviewed their business, and have access to an account manager who will help "maximize" their experience with Yelp.
But aside from a single "sponsored review" at the top of the page, the order of all other reviews is based on a secret Yelp algorithm, spokeswoman Ichinose said. The order is mostly due to recency and reader votes for certain reviews as "useful," "funny," or "cool." But Ichinose said there are other factors, including how frequently reviewers contribute to the web site and "what kind" of review writer they are. "It's a number of different things we don't disclose," she said. "To be explicitly clear, the algorithm is an automated system. There's no human manipulation of that. ... If we were to start doing that, that would erode the trust we have with consumers."
Yelp officials strenuously deny that the company moves negative reviews for advertisers. So how to explain all the stories?
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