IP/Internet/New Media Blog

By Galen Gentry
PC Magazine reported that two law firms have filed a class action law suit against Yelp for allegedly extorting advertising payments in exchange for removing or modifying negative reviews appearing on the site. The named Plaintiff is a veterinary hospital in Long Beach, California. The plaintiff claims it asked Yelp to remove a false and defamatory review and in response the company sales representatives repeatedly contacted the hospital and requested that it advertise with Yelp in exchange for hiding or removing the negative review.

What is interesting is that the allegations in the complaint are not new. On February 18, 2009 The East Bay Express, a free weekly publication, based in Oakland, California published an article entitled “Yelp And The Business Of Extortion 2.0”

In the article The East Bay Express stated that interviews with dozens of business owners revealed several people were promised that negative reviews would be moved or removed if the business would advertise by Yelp sales reps. Further in another six instances positive reviews disappeared after owners declined to advertise.

Web 2.0 is all about user generated content. That business model, pioneered by Google, is used more and more as the cornerstone of the marketing efforts of businesses large and small. Yelp is a popular website which posts user generated content in the form of reviews of small businesses such as restaurants, dry cleaners, nightclubs, tire stores, and the like. Yelp attempts to monetize the content by obtaining advertising contracts from businesses which have been reviewed on the site. Yelp’s business model is not unique (Avvo.com has a somewhat similar site for lawyers) but it is one of the biggest players. Negative reviews on Yelp, particularly if a business has a small number of reviews, can really impact sales.

Last year Yelp’s CEO Jeremy Stoppelman responded to the article in the East Bay Express saying that claims of manipulation of reviews result from the fact that the businesses do not know how Yelp’s proprietary review algorithm works.

Yelp is hugely popular. It seems unlikely it would engage in wholesale extortion. It doesn’t need it. User generated content is the key to Web 2.0 and Generation X likes Yelp. Perhaps individual Yelp employees in their zeal to make a sale may have promised more, much more, than they could deliver.