The Trouble with Yelp

The food service industry as a whole has had decidedly mixed feelings about Yelp, the San Francisco-based internet company that provides user-generated reviews about a variety of businesses, including restaurants.

As I wrote last year, Yelp had many owners suspicious because it seemed like the only way to get good reviews to display at the top of a restaurant’s profile was to shell out a monthly “advertising” fee. The fee has been pushed hard by Yelp sales reps and can run anywhere from $300 to $1,000 a month.

Paying the fee allowed owners to choose the top five reviews for their restaurant to display. It seemed most restaurant owners had one of two reactions: resignation at having to pay the fee to avoid bad reviews or outraged, stubborn resistance to being forced to pay to make bad reviews go away.

Over and over again Yelp has denied manipulating bad reviews in order to generate sales of their advertising packages to small businesses. And still to this day the suspicion remains among many inside the restaurant industry and out that Yelp just isn’t squaring with the subjects of their reviews on how the process really works.

Yelp’s decision to walk away from a $550 million dollar offer from Google late last year didn’t help the company’s image any either. The inherent trust most people place in the Google brand could have gone a long way towards clearing the air with Yelp’s small business customers.

The public relations problems that continue to dog Yelp seem to be a fix of their own making. This is what you get for tangling with the strongest tradition on the internet: fostering the free flow of ideas a
nd information. Companies like Google, Wikipedia, and Facebook have succeeded because they opened up access to information and placed few filters on how that access was used and digested.
Yelp’s business model seems brilliant, even revolutionary on paper: collect user-generated reviews about local small businesses and then sell the opportunity to manage those reviews back to the businesses being reviewed. But the approach flies in the face of what the internet has been all about since its inception. It would be like Google selling celebrities “advertising” memberships to have bad stories about them pushed down in the rankings on search results pages.

Yelp’s leadership probably thought they were just following a Google-esque model: get businesses to pay for top search results. After all, Google’s pay-per-click advertising is what has transformed that company into a multi-billion dollar operation.

But there is a key distinction here: Google’s paid listings come from a positive motivation – businesses wanting to sell products or be seen for specific keywords. Yelp’s model comes from an inherently negative motivation: get people to stop saying bad things about you on Yelp. No wonder they have an image problem.

The class action lawsuit against Yelp everyone’s buzzing about these days seems to be the natural culmination of a long-term problem the company has had dealing with its customers. Regardless of how the suit turns out, the basic flaws of the Yelp model will remain. And that is a lesson any business can benefit from.

Greg McGuire blogs about the foodservice industry at The Back Burner, which is written by the employees of Tundra Specialties, a company specializing in restaurant equipment and food service supplies.

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