Yelp’s practices sound to some like extortion by David Lazarus at the LA Times

A merchant is told by Yelp that for a fee, troubling ads on the site can be made to go away. A Yelp spokesman says what was meant is that the merchant ‘could buy out the ad space on your own page.’

 

Yelp just can’t stop living the thug life.

Five years ago, I asked whether the popular review site was a shakedown racket for merchants. I quoted a number of small-business owners who said Yelp had threatened to run negative reviews more prominently if they didn’t pay for advertising.

Jeremy Stoppelman, Yelp’s chief executive, told me at the time that the San Francisco company doesn’t strong-arm merchants. He blamed talk of shakedowns on disgruntled business owners spreading “false rumors.”

I guess this is another one of those.

Rick Fonger, 62, decided a few years ago to end a career in journalism and move from Canada to Alhambra, where he opened a jewelry store.

“I’ve always been interested in gemstones and gemology,” he said. “It was just something I wanted to do.”

To give his shop, called 58 Facets Jewelry, a little social-media boost, Fonger spent about $300 a month advertising on Yelp. “It worked OK, not great,” he said.

After six months, he decided to shift his limited marketing budget to direct mail. He canceled his Yelp ad in February.

The very next day, Fonger said, a Yelp employee called to say she wanted to help. She pointed out that competitors’ ads were now appearing above the reviews for his store.

“She said that for $75 a month, she could make those ads go away,” Fonger recalled.

He responded that this sounded a lot like extortion.

“She said she could understand why I’d think that,” Fonger said. “But she said they do it to everyone.”

As if that makes it OK.

“It certainly sounds like extortion,” said Kevin Dean, president of WSI Net Advantage, a Fremont, Calif., Internet marketing firm.

“If Yelp just sold the ad space to someone else, fine,” he said. “But to then call up and offer to make the ad go away for a price, that seems like an unscrupulous business practice.”

I’ll pause here to say that I think Yelp is a flawed but valuable consumer tool. I take the reviews on the site with a grain of salt, but it’s a great place to get a quick pulse reading of people’s opinions about restaurants, stores or other businesses.

That said, Yelp is a for-profit business itself, and it makes the bulk of its money from neighborhood merchants. About 83% of the companies nearly $71 million in revenue in the most recent quarter came from local ads.

This gives Yelp a powerful incentive to turn the screws on small businesses as much as it can.

Vince Sollitto, a Yelp spokesman, said that when the company’s rep told Fonger that she could make competitors’ ads go away for $75 a month, what she meant was that “you could buy out the ad space on your own page.”

He said Yelp is doing the same thing that phone books do: selling ads that accompany related business listings.

The difference, of course, is that the Yellow Pages never told businesses they could pay extra to get rid of someone else’s ad.

By offering this service, Yelp has introduced a more cutthroat approach to marketing, with itself as the broker for whose pitch is seen first by users of the site.

When I checked out the Yelp listing for Fonger’s shop, an ad for a rival jewelry store appeared near the top of the page, undermining the influence of the nine five-star reviews that had been posted by customers.

Sollitto said he was surprised that Fonger likened the company’s practices to extortion. He said Yelp is “all about connecting local businesses and consumers.”

I asked how offering businesses a chance to pay a monthly fee for erasing a rival’s ad was different from websites that post people’s mug shots from arrests and then charge a fee to take them down.

Sollitto seemed offended that I’d even make such a comparison.

“Yelp has created a platform for sharing information,” he said. “It’s a discovery engine for small businesses.”

And maybe he believes that. The reality, however, is that Yelp has created an online venue at which a merchant’s competitors can post negative reviews and run their own ads.

Yelp then makes money by charging to downplay others’ negative reviews and to keep rivals’ ads away.

You know the old chestnut about succeeding in business by finding a need and filling it? Yelp succeeds in making a problem and then taking people’s money to solve it.

This strikes me as an unfair business practice. But, so far, Yelp has weathered various lawsuits challenging its policies. “Their claims keep getting dismissed for lack of any fact-based evidence,” Sollitto wrote last year on Yelp’s blog.

I’m no lawyer, but I know a racket when I see one. Anybody who calls to say that you now have a problem but that they can make that problem go away for $75 a month isn’t your friend.

Dean, the marketing consultant, said that Yelp is a fact of life for small businesses and that challenging the company’s policies is going to be “a fight you’re not going to win.”

Instead, he advised companies to focus on Google and other online resources, and not lose sleep over any shenanigans Yelp might pull.

That’s probably wise. But it doesn’t excuse bad business behavior.

I asked Fonger how Yelp’s tactics differed from, say, Tony Soprano’s or Michael Corleone’s.

“Well,” he answered, “no one’s come by to break my legs.”

Then he thought about it a moment. “At least not yet

 

Yelp’s tactics feel ‘nefarious’ and ‘fishy,’ even if they’re legal

It could be said that Yelp creates a problem for businesses and then offers to fix it — for a price.

Among the frequently asked questions on Yelp’s website, there’s this: “Will Yelp remove or reorder bad reviews if a business pays for sponsorship?”

And the answer: “No. You can’t pay us to remove or reorder your bad reviews — it’s just that simple.”

It’s not that simple, at least if you listen to the many small-business owners who say Yelp routinely uses bad reviews and competitors’ ads as leverage to get merchants to cough up some cash.

 

“They continually harass you and strong-arm you to get you to pay for their service,” said Randy Boelsems, 64, who runs a boating supply company in Fountain Valley.

Have a consumer question? Ask Laz

 

And if you don’t play ball, he said, it’s likely that negative reviews about your company will be featured more prominently than positive ones.

Such criticism isn’t new, though it appears that Yelp has found new ways to lean on business owners. Earlier this week, I wrote about an Alhambra jeweler who said that after he canceled his Yelp ad, a saleswoman for the site contacted him to warn that competitors’ ads would now appear with his listing.

“She said that for $75 a month, she could make those ads go away,” Rick Fonger, 62, told me.

A Yelp spokesman, Vince Sollitto, defended this practice by saying merchants are being offered the chance to buy out the ad space accompanying their reviews.

Looked at another way, though, it could be said that Yelp creates a problem for businesses and then offers to fix it — for a price.

Kurt Snider, co-owner of a Solana Beach video production company, also was told by Yelp that if he wanted a rival’s ad off his listing, it would cost him.

“It’s unfair and unethical,” he said. “It should be illegal.”

Yelp has faced a number of lawsuits over its practices. They have been dismissed for lack of evidence, a company spokeswoman said.

In a 2011 decision, U.S. District Judge Edward M. Chen in San Francisco ruled that Yelp is protected by the federal Communications Decency Act when it decides which reviews to feature on its site.

The 1996 law shields websites from being sued for the content they publish, such as Nazi memorabilia offered for sale on eBay or hate speech in a discussion forum.

“From a small-business angle, is what Yelp does distasteful?” said Erik Syverson, a Los Angeles lawyer specializing in Internet law. “Yes,” but that doesn’t make it illegal.

Antone Johnson, a San Francisco lawyer who formerly worked as vice president of legal affairs for the dating site eHarmony, offered a similar perspective. He used words like “nefarious,” “crafty” and “fishy” to describe Yelp’s practices.

“It doesn’t pass the smell test,” Johnson said. “But I don’t see a statute that they’re actually violating.”

I spoke with a number of small-business owners who related stories about Yelp demanding payment to remove malicious reviews or being uncooperative in addressing false claims.

Illustrating the power Yelp has over merchants, some asked that their names not be used. They said they were afraid of making their relationship with the site even more troublesome or of drawing attention to negative reviews that Yelp has refused to take down.

A Southern California real estate appraiser pointed me toward a review claiming that he sent an unlicensed trainee to appraise a property, which would be against state law. He said that when he explained to a Yelp rep that this simply wasn’t true, the rep declined to do anything and refused to put a supervisor on the phone.

Chris Monks, 32, said he used to pay Yelp $300 a month to advertise his New Haven, Conn., moving company. Then he switched to the $75-a-month plan, which at least kept competitors’ ads off his listing.

After he canceled that in January, Monks said, “suddenly past negative reviews reappeared and all the good reviews disappeared.”

I checked out the Yelp listing for his company, 2 Young Studs Moving. There were four recommended reviews — a five-star review from February, a one-star review from 2012, a two-star review from 2011, and a five-star review from 2009. A mixed bag.

However, if you click on Yelp’s link to “reviews that are not currently recommended,” you’ll find some more negative reviews and then page after page of five-star reviews from recent years. It’s as if all the good reviews had been deliberately buried beneath the bad ones.

Yelp says it has no control over how reviews are played on the site. It says automated software chooses which reviews to recommend and which ones to downplay, and “treats advertisers and non-advertisers exactly the same.”

I asked to speak once again with Sollitto, Yelp’s vice president of corporate communications. A senior PR manager, Kristen Whisenand, asked what I wanted to discuss and then emailed me a statement.

“Not sure what’s left to explore here,” she said of allegations that Yelp is trying to extract money by running competitors’ ads on businesses’ listings. “Yelp disagrees and thinks it’s a perfectly standard advertising practice.”

She also reiterated that Yelp doesn’t play up bad reviews if a merchant doesn’t advertise and that lawsuits against the company have been dismissed “because they fail to present any fact-based evidence.”

Whisenand passed along this quote from Sollitto: “Yelp has increased consumer empowerment and disrupted the traditional landscape for local business advertising. Some businesses understand the opportunity this affords them; some businesses do not appreciate the challenges that brings.”

And one business — Yelp — doesn’t seem to care what other businesses are saying on a consistent basis, that they feel muscled by the site and treated unfairly.

Yelp’s own Yelp listing gives the company 2 1/2 stars overall. But, perhaps because Yelp is a Yelp advertiser, the first review you see is a glowing five-star homage to the service.

And there’s no ad for a competing review site.

David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

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