How Online Reviews are Affecting Local Businesses

For restaurant and small business owners, a bad review in the local paper was bad enough. Now they have to worry about bad reviews online. Review web sites form an entire subcategory, and since reviews turn up when users search, they can contribute to making or breaking a business. This article not only explores the trend, but shows why it’s a cause for concern, especially in the case of Yelp.

If you’re a restaurant or small business owner, negative reviews are the last things you’d want to read about your establishment. Thanks to the Internet–where everyone’s a critic–these are the kinds of reviews being published online and viewed by millions of people searching for local eateries and businesses on Yelp , a hybrid social networking, user review, and local search site with over 31 million users worldwide. Successful establishments who don’t have much to worry about can make light of their bad reviews, but for small, struggling establishments online user reviews can make or break their business.

Online reviews have become a powerful tool that create new hot spots and make businesses boom, but bad reviews can close establishments and deliver a major blow to income, popularity, and the number of new customers and referrals an establishment gets. Because of sites like Yelp, small businesses are being forced to navigate a new and unfamiliar world: do they ask their customers for positive reviews? Do they write reviews of their own establishments? Is there anything they can do to get rid of bad reviews that plague their business? It’s complicated for many, and to make matters even worse, there’s evidence that suggests Yelp extorts businesses to make bad reviews go away.

Balancing the Needs of Businesses and Users

In 2009 the New York Times wrote an article that shed light on many of the concerns expressed by small business owners whose Yelp pages had received bad reviews that they felt were unwarranted. Oddly enough, Yelp itself is in a precarious predicament. The San Francisco-based company must seamlessly balance the needs of the businesses featured, many of whom happen to be advertisers on the site, while also allowing its users to safely and anonymously say anything their heart desires.

So what’s the problem? There’s no telling who’s writing the reviews and whether or not they’re genuine. Yelp operates under the premise that reviews are truthful and, according to the company, this can be proved by looking at an establishment’s Yelp listing. If a business has similar ratings, reviews, and comments from multiple sources, it must be true, right?

At the time the New York Times article was first published, Yelp had made some changes to please business owners, but still refused to investigate reviews that local establishments felt were inaccurate. To this day, any company who receives a review cannot respond to it on their Yelp site, whether it’s good or bad.

To appease business owners, whose ads contribute to a majority of Yelp’s revenue, the site added Yelp for Business Owners in April of 2009. This new feature enables businesses to edit their company profiles, post special offers, and privately e-mail reviewers.

One of the biggest issues of contention for Yelp, or rather, where the real trouble began, was when reviews, good and bad, began disappearing.

Yelp has always remained rather tight-lipped as to how they determine which reviews appear on the site, which has led many users and businesses to question the company’s integrity. It’s not an idle question, either, because of how strongly Yelp reviews can affect a company’s business.

The NYT article referenced a San Francisco woman named Fawn Pierre, a puppy training business owner who received a large portion of her clients from Yelp. Pierre had three five-star reviews on her site, and when they disappeared out of the blue one day, she grew very concerned for her business. After contacting Yelp for an explanation, she was referred to a page on the Web site that said “reviews normally come and go from a business’s page.”

According to Yelp’s co-founder and chief executive Jeremy Stoppelman, Yelp’s spam filter “scans for fishy reviews, such as those that seem to have been written by a malicious competitor or a business owner’s friend. The filter is often overly vigilant, in some cases removing legitimate reviews,” he said.

This is especially problematic for small business owners such as Pierre, whose five-star ratings were given by unbiased, paying customers. She told the Times, “Here I am, a person with only five-star reviews and I’m upset — there’s something going on here,” she said. “It makes me wonder: Do people who pay get a better deal; do their reviews stay up longer?”

Stoppelman contends that Yelp does not move negative reviews for advertisers and applies the same ranking system to all companies on the site. The executive believes that much of the confusion may come from the fact that advertisers on the site, many of whom pay between $300 and $1,000 per month, “are allowed to choose which review shows up at the top of their profile page and block ads from competitors. For other businesses, the first two listings a reader sees could be an ad for a competitor and a one-star review.”

According to the East Bay Express, a Bay Area weekly newspaper, Stoppelman’s response to allegations such as Pierre’s are too convenient, and what’s going on at Yelp is actually much more troublesome. Early last year the paper published an explosive piece , which asserts that Yelp customer service representatives routinely call business owners and attempt to persuade them to pay $299 a month in exchange for Yelp’s service of removing all negative ads from their business’s listing.

According to the article, entitled “Yelp and the Business of Extortion 2.0,” some business owners were getting calls almost daily from Yelp. One restaurateur, who chose to remain anonymous out of fear of Yelp further damaging the reputation of his business, said Yelp employees would call informing him of how many visitors he’d had to his site in the past month and then would offer to remove some of the bad reviews that had recently popped up for a fee of $299 a month.

According to the Bay Area restaurateur, something seemed shady about 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," he 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."

This was something that was echoed by dozens of business owners the paper interviewed, with six saying Yelp sales representatives promised to move or remove bad reviews if they advertised on the site. Other business owners claimed that positive reviews disappeared and negative ones almost magically appeared just after they declined to advertise on the site.

According to the article, “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 even suspect Yelp employees of writing them.” Yelp admits to paying some employees to write reviews of businesses that are solicited for advertising and has admitted to one case in which a business owner who refused to advertise received a negative review from a Yelp employee, but beyond that the company denies all allegations brought forth in the East Bay Express article, though these aren’t new allegations by any means.

In fact, Yelp has received similar allegations so frequently that it’s even been addressed in the company’s Frequently Asked Questions page, and according to Chief Operating Officer Geoff Donaker, “Advertisers and sales representatives don’t have the ability to move or remove negative reviews." He notes that “We wouldn’t be in business very long if we started duping customers.”

Despite their denial, many business owners aren’t giving up and have even filed lawsuits against Yelp. Several small businesses recently filed a class action lawsuit accusing the site of extortion. According to the New York Times, “The suit claims that Yelp will remove negative reviews and reinstate positive reviews for paying advertisers and says that business listings on Yelp.com are in fact biased in favor of businesses that buy Yelp advertising.”

In order to make some of the bad publicity go away and to alleviate some of the concerns these business owners have, the company has decided to make two significant changes as of April of this year. According to the Times, from now on “readers will be able to click on a link to see reviews that Yelp filtered out and advertisers on Yelp will no longer be able to post their favorite review at the top of the page.” Whether or not this will help Yelp and its soiled reputation remains to be seen.

The Trend Continues

Yelp certainly isn’t the first user-generated review site, and it won’t be the last. Chances are that when people are allowed to write reviews completely anonymously online, trouble will follow, as it has for Yelp.

The increasingly popular Foursquare game and phone app now enables users to review and recommend local establishments and sites such as Angie’s List, which enables its users to review and find doctors, search for a contractor, and locate other service professionals are part of an increasing number of review sites that give the power to the people. Let’s just hope that power doesn’t get abused.

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