[Corp. Watch] Yelp - or yipe: From flash mobs to the trash mob

[Corporation Watch]

Yelp and the Business of Extortion 2.0

  Bay Area business owners say Yelp offers to hide negative
  customer reviews of their businesses on its website -- for a price

By Kathleen Richards

(East Bay Express, Feb. 18) -- 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 website 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 [of the page] legitimately, or if the [Yelp] rep  
moved them to the top."

	"You don't even know if [the review] is someone who legitimately  
doesn't like your restaurant," he continued. "... 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 [positive] 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 website'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  
co-founder 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" (not his real name), 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," he said.

	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 website 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). But it's  
still 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,"  
he continued. "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 website, 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 chronology, 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 website 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? In an  
interview, Chief Operating Officer Donaker said it is all a big  
misunderstanding.

	"Do I think that [Yelp] sales reps call are saying, 'We'll move your  
bad reviews'?" he asked. "No. But I think it could be true -- when you  
get to pick your favorite review and put it to the top, if I said it a  
little different way, it might sound a little nefarious."

	Donaker conceded that Yelp could do a better job of training its  
sales team to be "crystal clear about what you get and don't get." He  
also offered a more cynical answer to the question of why so many  
businesses accuse it of extortion.

	"Change isn't good for everybody," he said. "The vast majority of  
dentists and salons are getting a lot of benefit out of the New World  
Order, but there are some who aren't benefiting from it and like it  
the way it used to be. Maybe customers weren't happy, but they could  
market their way out of it."

	The advertisers and advertising prospects interviewed for this story  
weren't merely responding bitterly to harsh reviews on Yelp, however.  
That's because Yelp doesn't allow just anyone to advertise on its site.

	In order to advertise, businesses need at least a three-star rating  
and a "significant number of reviews," Ichinose said. Consequently,  
every person interviewed for this story was favorably reviewed by a  
majority of Yelp reviewers.

	Former Yelp advertiser Mary Seaton said she took the company up on  
its offer to move her negative reviews if she advertised. Seaton, the  
owner of Sofa Outlet in San Mateo, California, paid $350 a month for  
six months about a year ago.

	During that time, Seaton said, her negative reviews were removed and  
old positive reviews showed up. "There was one negative review, but  
they pulled it down and then it came off," she said.

	After her contract was up, Seaton said, a negative review appeared  
that contained lies. When she asked her sales rep, Katie, about it,  
Katie responded, "We don't get involved with that. We're not  
mediators." Seaton said at that point she chose not to renew her ad  
contract.

	One San Francisco merchant said a Yelp sales rep rearranged the  
reviews on his restaurant's page to entice him into advertising. Greg  
Quinn, general manager of Anabelle's Bar and Bistro in San Francisco  
(168 reviews, 3.5-average star rating), said that around January 2007,  
a Yelp sales rep was trying to get him to advertise.

	Quinn said he subsequently noticed that some of his negative reviews  
had moved further down on the page. "It was clearly ... a sales  
tactic," he said, adding that the rep called him up and asked, "'Did  
you notice what I did? Well, we can keep doing that for you'."

	Quinn said he ultimately turned the sales rep down, and told Yelp's  
latest sales rep to never call him again due to "the lack of  
reliability of the reviews and the narrow demographic."

	"She said, 'I'm very sorry you feel that way.' And I said, 'It's not  
how I feel; it's fact'."

	Another East Bay business owner said that in January of 2008 he was  
approached by Yelp sales reps offering to move one- or two-star  
reviews of his business if he advertised.

	The owner, who we'll call "Joe," said he initially toyed with the  
idea. His two businesses have more than 200 total reviews; one  
averages a three-star rating, the other averages four stars.

	"At one point, I finally said to them, 'This doesn't sound too  
local'," Joe said. " 'This is the voice of the people, and you're  
manipulating the voice'."

	"She got her manager on the phone to respond to that. 'No, not at  
all, we've been doing this for years. We're not eliminating your bad  
reviews, we're shifting them around. We do that anyway, we move them  
around anyway. This is just to your advantage'."

	But Joe wasn't impressed. "I said, 'This sounds like the Mafia -- I'm  
paying you off to make me look better. I'm not comfortable with this'."

	Business owners are also disturbed that some negative reviews are  
written by paid Yelp employees. When the company first launched in  
2004, its staff wrote many reviews on the site.

	And to this day, Yelp hires "scouts" or "ambassadors" to write  
reviews -- especially when they enter new markets. CEO Stoppelman  
himself has written nearly 800 reviews.

	It's not immediately apparent which reviews are written by paid  
Yelpers until you click on a user's name to get to their profile page,  
where they might display a "scout" or "ambassador" badge.

	In some cases, businesses that received negative reviews from paid  
Yelpers were also asked to advertise. San Francisco's Elite Cafe,  
which advertises with Yelp, received a two-star review by a paid Yelp  
ambassador, as did Anabelle's Bar and Bistro.

	In both instances, the negative reviews appeared after Yelp sales  
staff asked them to advertise. Both business owners were unaware that  
a paid Yelper had written a negative review of their business.

	Ichinose insisted that Yelp does not use negative reviews as leads  
for its sales staff. But she affirmed that reps do have access to the  
complete profiles of sales prospects through the company's database.

	"Leads are determined purely by the reputation of that business," she  
explained. "Any sort of timing beyond that would be coincidental."

	Negative reviews are not the only bait that Yelp employees apparently  
use to attract advertisers. Some business owners believe Yelp sales  
reps remove positive reviews when they refuse to buy an ad.

	Robert Gaustad, co-owner of Bobby G's Pizzeria in Berkeley, said that  
about a year ago a Yelp sales rep offered to "move good reviews to the  
top to make us look better."

	Since declining to advertise, approximately 15 to 20 of his  
restaurant's reviews -- mostly positive -- have been removed for  
reasons he can't figure out. Gaustad said his complaints have gone  
unheard, but that a Yelp sales rep told him his complaints would be  
heard if he advertised.

	In an e-mail from salesman Ethan Davidoff, which Gaustad read to this  
reporter, Davidoff told him that if he paid for an ad, "you will have  
access to an account manager who will help keep your page up-to-date  
and ... you will never have to ever wait again to talk with Yelp about  
your listing and issue with reviews."

	A San Francisco wedding photographer relayed a similar story. About  
two years ago, a Yelp sales rep contacted her to advertise. The  
photographer -- we'll call her "Mary" -- declined the offer.

	But the sales rep was pushy; Mary said she received about three phone  
calls and as many as ten e-mails per week asking her to advertise.  
Still, she declined.

	"All of a sudden my reviews started disappearing," she said. "I  
called them up and said, 'I'm a little curious why my reviews are  
disappearing.' They said, 'Well, people stop reviewing, we take them  
down.' ... I talked to the clients -- they're still actively reviewing."

	"Ellen," who only agreed to be interviewed if not identified by name,  
owns an Oakland business with more than 20 Yelp reviews, and averages  
a 4.5-star rating.

	She says she began to receive solicitations to advertise soon after  
her business began receiving positive customer reviews. But she  
declined.

	"The prices were cost-prohibitive," she recalled telling the sales  
rep. "I can't pay $300 a month when I pay $90 for Google AdWords.  
After that, reviews started to disappear."

	When Ellen questioned her sales rep as to why some reviews had  
disappeared, the rep told her reviews can be taken down based on the  
company's algorithm. Reviewers must follow certain guidelines to post  
a legitimate review, the rep replied.

	"They had to have pictures, friends, be part of the community," Ellen  
recalled the rep telling her. But Ellen says the reviews that were  
removed fit the profile of acceptable reviews.

	Ellen turned down the offer again, and more reviews disappeared. She  
says she's now down to 50 percent of her original reviews. "Just today  
I got three more e-mails from Yelp. They're aggressive. ... But it's  
blackmail."

	Of course, none of these business owners could say for sure whether  
the disappearance of positive reviews was an intentional strategy or  
mere coincidence. Yet the claims don't appear to be far-fetched given  
the experience of other business owners.

	Yelp suggests in its Terms of Service that it moves and removes  
reviews at will, without explanation:


> "Yelp reserves the right (but has no obligation) to remove or  

> suppress User Content from the Site at its sole discretion for any  

> or no reason and without notice or liability of any kind, including  

> without limitation, the suppression or removal of User Content that  

> Yelp deems untrustworthy or in violation of the Terms of Service or  

> guidelines for reviews, photos, or talk threads."


	COO Donaker said there are three reasons why reviews might disappear.  
First, they could have been removed by the reviewer who wrote them.

	Second, the reviews could have violated Yelp's terms of service by  
containing second-hand experiences or hearsay, personal attacks, lack  
of relevance, plagiarism, or a conflict of interest such as an owner  
praising their own business or trashing that of a competitor.

	Third, reviews could disappear as a result of the company's  
"automated review filter." Donaker says he's not exactly clear how the  
filter works, but that the software looks for "suspicious patterns,"  
such as "rants and raves from friends and competitors."

	Yelp reviewers also can flag reviews that seem suspect, and Yelp's  
customer service staff then reviews them.

	So is it legal for Yelp to do all this? Probably, according to Matt  
Zimmerman, senior staff attorney at the San Francisco-based Electronic  
Frontier Foundation.

	"As a general matter, websites are allowed to present information  
however they want, so there's nothing inherently illegal about that,"  
he said. But denying they do this could get them in hot water, he added.

	"I suppose a disgruntled business could bring an unfair-trade- 
practices-type lawsuit of their terms of service, but it has to hinge  
on whether they're saying one thing and then doing something else.  
That's the only way there could be any legal action.

	 The same would be true if a paid Yelper had written the review, he  
said.

	"Business owners who pay Yelp.com may feel like victims of extortion,  
but offering to remove derogatory reviews after the fact probably  
doesn't fit the legal definition of the crime of extortion," wrote  
Mark Hathaway, a white-collar criminal defense attorney who practices  
in California, New York, and Washington, DC.

	But while manipulating how reviews are displayed to make people buy  
advertising may not be illegal, it doesn't necessarily feel right.

	"Yelp.com has to be careful that their business model does not look  
like they are asking business owners for protection money from bad  
reviews when Yelp.com controls whether the bad reviews are posted in  
the first place," Hathaway added. "Some business owners may feel that  
the local neighborhood protection racket has just moved to the Web."

	In principle, there's certainly nothing wrong with Yelp soliciting  
reviews about businesses, or with Yelp removing certain reviews. Tens  
of thousands of newspapers, magazines, and online destinations --  
including this newspaper and its website -- write reviews of  
businesses even as their advertising departments are busy soliciting  
those same businesses for advertising.

	Ideally there is no causal relationship between the two -- financial  
considerations shouldn't affect the tone of supposedly independent  
content.

	But if the accusations are true, Yelp is compromising the integrity  
of its reviews to make a buck, which contradicts its identity as a  
user-generated, consumer-first website.

	Quoted in the New York Times last year, CEO Jeremy Stoppelman said of  
his company's priorities: "We put the community first, the consumer  
second, and businesses third." In fact, the evidence suggests that  
Yelp comes first.

	To Jo-Ellen Pozner, an assistant professor in the Organizational  
Behavior and Industrial Relations Group at UC Berkeley's Haas School  
of Business, the whole concept is ethically murky.

	"Yelp appears to be an unbiased, unmotivated website, and this kind  
of rating site operates more on the basis of trust than something like  
a CNET, or for-profit Consumer Reports," Pozner said.

	"To be successful, people have to trust the content that Yelp is  
showing," she continued. "By the same token, it's the Internet ...  
[D]eception is easy and it's almost inevitable. It's clearly not  
ethical."

	"It does seem to be close to extortion if Yelp is actually removing  
positive reviews if business owners don't pay up. Then again, these  
kinds of user-generated sites are also subject to manipulation by the  
businesses that are being reviewed."

	So where should Yelp's values lie? Pozner says stricter controls to  
eliminate manipulation by business owners would make the site more  
trustworthy, but such controls might be inconsistent with the  
company's revenue goals.

	"It's a really tricky spot," she said. "I don't know if I could  
define that in ethical terms. It doesn't make a lot of sense. It's  
difficult to keep the integrity of this kind of model."

	User Foster Kerrison of Pasadena said Yelp's integrity as a user- 
generated site was what first attracted him to it. He said he'd trust  
the site less if he knew that Yelp manipulated its content.

	"That does bother me, because up till now I feel like it's been  
completely -- just all user content," the 31-year-old said. "You take  
it with a grain of salt, but it's all real, it's not altered."

	Is such integrity counterproductive to success on the web? One of  
Yelp's early competitors, JudysBook.com, which launched about the same  
time as Yelp, tried to be responsible in the quality of its content  
and its relationship with businesses.

	According to Jeff Rodenburg, who helped build the Seattle-based  
online review site, the company tried to encourage good user behavior  
and high-quality reviews, and allowed business owners to freely post  
responses to reviews.

	One of the biggest challenges the site faced, Rodenburg said, and one  
also faced by sites such as Google Local and Yahoo Local, was how to  
reduce the enormous cost of its sales effort.

	Getting businesses to advertise required a huge investment in people- 
power. Rodenburg said many web start-ups assumed that local  
advertising dollars would eventually migrate online -- "not if, but  
when," he said. "That never materialized."

	While Yelp has obtained far more funding than JudysBook ever did, the  
company still faces the challenge of living within its means. "If you  
think you can reach profitability through online ad sales, I'm not  
sure," he said.

	In the wake of a recent spate of critical media coverage -- stories  
in the San Francisco Chronicle, Daily Californian, and on [local TV  
station] CBS-5 -- there are some signs that perhaps Yelp is changing  
its practices.

	Interviews with more than a dozen local business owners suggest that  
Yelp sales reps may be wording their sales pitches more carefully  
these days.

	Owners who were approached by Yelp in recent months said they were  
told they could choose one positive review that would appear at the  
top of their page, which would clearly be denoted as a "sponsored  
review."

	And plenty of Yelp advertisers still have negative reviews on their  
pages. "You pretty much have to fight tooth or nail to get a bad  
review moved or removed," said one East Bay restaurant advertiser, who  
wished to remain anonymous. Peter Snyderman, the owner of Elite Cafe,  
said his sales rep never mentioned moving negative reviews.

	In any case, there is scant evidence that the criticism has actually  
hurt Yelp. "We have thousands of advertisers in our program that are  
very happy with what they're seeing," Ichinose said.

	And the number of visitors to the site continues to grow. Pozner says  
that's probably because Yelp's target demographic -- young people and  
college kids -- isn't as sensitive to news of this kind.

	"I don't see it as terrifically damaging unless there was some kind  
of legal action taken," she said.

	When avid reviewer Bill Blackburn of San Francisco was asked whether  
he would still use Yelp even if he knew the site manipulated its  
content to sell advertising, the 28-year-old conceded, "Yeah, I think  
I would."