For Business' Sake, Yelp Needs New Owners

Yelp, the popular reviews site, needs a new owner, one that can bring credibility and quiet allegations that it spins reviews in order to extort advertising money from the businesses reviewed.

While I can't say whether the new claims are true, they certainly bring Yelp's reliability into question. The company, however, denies the allegations, contained in a class-action lawsuit filed Tuesday in Los Angeles.

Back in December, there was news that Yelp had been purchased by Google. I hoped that would help Yelp solve whatever problems it has and return credibility to its reviews. My sense is that Yelp does have a problem and I generally find the claims against the company to be reasonably credible. Of course, I could be totally wrong.

As businesspeople, we are increasingly finding ourselves held hostage by Yelp and other review sites, where a handful of disgruntled customers, or competitors pretending to be customers, can damage a hard-earned reputation.

It may be that customers are sophisticated enough to take the good with the bad and average the reviews out. I don't think so, but owners and employees can definitely take a negative Yelp review more seriously than it probably deserves. Customers may do so, too.

Further, Yelp reviewers are self-selected and represent, I believe, atypical customers. I only post on Yelp about places--restaurants, usually--that I either really love or where I had a bad experience.

Integrating Yelp into my Google account might encourage me to do more rating as I visit different places, increasing the number of middle-of-the-road ratings I'd give. If other users followed suit, Yelp might be a more representative sample of customer experience.

Alas, this Google integration was not to be as Yelp reportedly walked away from the $550 million deal, which is a lot more than I'd give for Yelp.

As I said, Yelp denies the allegations, and had this to say in a short post to its Official Blog:

"You can see for yourself: thousands of businesses that advertise on Yelp have both negative and positive reviews. Despite these counter-examples to the contrary (virtually no advertiser on Yelp has a perfect reputation), extensive media explorations that end inconclusively, and the absence of any actual evidence to support this theory, this unfortunate and untrue meme has taken on a life of its own."

Short of current or former employees willing to validate the claims of Yelp's accusers, media inquiries will end inconclusively. The inability to find such people, however, tends to support Yelp's denials.

It is difficult for an independent company to what Yelp does.

As an advertising-based business, it is easy to imagine--rightly or not--why Yelp might want to massage its reviews to make its advertising more sellable. If Yelp were funded solely from user subscriptions--like Consumer Reports--Yelp would immediately become more credible.

Likewise, it would help if Yelp had a corporate parent for whom messing with the reviews wouldn't be worth the potential downside. Google would have been such a company, Microsoft another, but after that the list is pretty small.

Nevertheless, business owners would be far better off if Yelp were to change its business model or find an owner for whom the company would be but a sideline.

(I would be interested in hearing about any self-defense tactics against bad Yelp reviews that readers may have discovered. Please send me an e-mail using the link below.)

David Coursey has been writing about technology products and companies for more than 25 years. He tweets as @techinciter and may be contacted via his Web site.

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