April 18, 2013
Sean Killian
Sean Killian
Master Marketer

Yelp is a local business review and directory site with an impressive 100 million monthly visitors and upwards of 10 million unique mobile device users. With such an enormous following, local businesses have been put in the unfortunate position where one subpar visit could have serious long-term consequences to the establishment’s need for a vibrant and happy customer base.

Since reviews have the ability to seriously affect a company’s in-store traffic, business owners sometimes go to extremes to protect their online reputation. In November of 2009, a Yelp reviewer received a knock on his door from a bookstore owner in San Francisco. The owner was irate over a negative review the home’s resident had posted earlier that week related to his bookstore. Long story short: the police were called, the bookstore owner was arrested, and a restraining order was obtained.

Do Yelp Reviews Actually Affect Customer Decisions

In 2012, two UC Berkeley economists set out to understand the effect of user-generated ratings on customers’ decisions. The economists utilized Yelp reviews from restaurants in San Francisco and cross-referenced the information with online reservation data. The results found that an increase from 3.5 to 4 stars was associated with a 19 percent increase in the sellout rate for 7:00pm reservations. They therefore concluded that, “while there is incentive for restaurants to make their own fake reviews to rig the ratings, a rich set of robustness checks confirm that restaurants do not manipulate ratings in a confounding, discontinuous manner.”

The “robust checks” the study cited are a reference to Yelp’s review algorithm. Reviews are filtered using an automated process to check the review’s legitimacy. When a review is deemed illegitimate, the system will push it into a filtered review section whose access point is a small, barely discernible ‘Filtered’ link at the bottom of the reviews page.

Yelp Review

Unhappy Local Businesses

Business owners have voiced their displeasure with Yelp’s filter system because the hidden section often contains some of the more highly-rated customer reviews. Since the method used in the filtering process has not been made public, individuals assume nefarious intentions. Unfortunately for Yelp, several local business in the past few years have accused the company of extortion - claiming a Yelp employee contacted them via phone and requested specific sums of money in return for review manipulation.

The internet provides an abundance of information regarding this controversial topic; some even highlight the point that, “Unless you pay Yelp $300 a month, they will filter out the positive reviews your business receives and sometimes, only the negative ones will be prominent.” At least, that’s what article after colorful article seems to be saying. Business owners who have been exposed to the offer say they are simply contacted via phone by a Yelp employee who offers to remove their bad reviews for a certain fee. The notoriety has even permeated throughout Yelp’s forums (see here, here and here).

Yelp’s response to the uproar has been to simply deny it outright. They tell business owners that they “misunderstand how the site works.” Indeed, in 2010 their VP of communications noted that, “The allegations stem from confusion over how our review filter works to protect consumers from fake, or shill, reviews and businesses from malicious reviews from competitors.” They also state that these claims are “false” and that they “ignore empirical evidence in favor of conspiracy theories.” Moreover, Yelp seems to have a penchant for attributing these technical oversights to their imperfect algorithm, which they predict could be “strange and unsettling to some businesses” because “sometimes legitimate content can get caught.”

This is pretty serious business. So serious, in fact, that Yelp has actually been taken to court over this multiple times over the past few years—but in 2011, San Francisco U.S. District Judge Edward Chen ruled in favor of Yelp on grounds that “Yelp’s choices for which user reviews to display on the site are protected by the Communications Decency Act.” This decision effectively put an end to all legal disputes regarding Yelp and their purported extortion tactics.

So, has Yelp ever attempted to extort local businesses across the country, or are we being led on by their negatively reviewed local business owners who are simply looking for any opportunity to discredit the social directory giant? As time goes on, look for new individuals coming forward with accusations of wrongdoing, but be sure to do your own research on the local business and realize they may just have an ax to grind.