Posted by: Peter Burrows on March 4, 2010
Ever since the Oakland-based East Bay Express published an explosive story called Yelp and the Business of Extortion 2.0 a year ago, Yelp Inc. CEO Jeremy Stoppelman has been dealing with charges that the company has a bad habit of shaking down small businesses. The scheme, say critics, is that Yelp salespeople call small businesses that have been reviewed on the hugely popular business review site, and offer to let them manipulate the reviews if they pay to advertise with Yelp. Some business owners say that when they refused to advertise, they soon began to notice good reviews disappearing or negative ones becoming easier to find.
Now, the grumbling has led to a class action lawsuit. Who knows if the suit has merit, but one thing is for sure: it has refocused attention on the controversy. If the suit goes to trial, Yelp will likely have to disclose more details of its inner workings. While the company has always insisted that advertisers have no control over the reviews that appear on the site (other than the ability to highlight one “sponsored” review they like at the very top of the queue), it has refused to say much about the secret algorithms that determine which reviews appear and in what order.
If Stoppelman is worried, he sure doesn’t show it. In the days after the lawsuit was filed on Feb. 23, he wrote two self-assured blog posts (here and here) in which he confidently explained why he says Yelp is innocent. I wanted to take a deeper dive, to find out what it’s like for the CEO of a company that’s accused of wrongly besmirching corporate reputations to find himself on the hot seat. Stoppelman got on the phone with me on March 2. Here are edited highlights of our conversation.
BW: The class action suit has again focused attention on allegations that Yelp shakes down businesses to get them to advertise. How much is riding on Yelp’s ability to deal with the controversy?
Stoppelman: This [class action] is a reminder of the challenge we have ahead of us, and which we’ve had for the last year. What we’ve built is a system that works really well for consumers. When you read reviews on Yelp, you get a good sense of what’s going to happen when you walk in the door of that business. The challenge is that there are fifteen million businesses in the U.S., and its very hard to communicate with all of them about how Yelp works, and why it works the way it does. That’s an incredible challenge.
BW: There was a time when many people had their doubts about the integrity of search results—about whether search rankings were bought and paid for. A major reason for Google’s success was that it managed to establish consumers’ trust that its search rankings were legit. Do you see any parallels to what’s happening with Yelp?
Stoppelman: I see many parallels. When AdSense was introduced, there was a lot of fear and even belief that Google’s rankings would be affected by whether a site was using [this ad-serving system]. There were many articles written about that, too. Now we all love and trust Google. But when they first began wielding significant power, people got spooked.
BW: Did you?
Stoppelman: When Yelp first took off, our rankings on Google would fluctuate wildly. I remember thinking “we’ve got this [potentially competing] product that is taking off; are they on to us?” There’s just a human tendency to want to explain things as if everyone is paying attention to you, when in reality it was just an algorithm.
BW: But the suspicions about Yelp have been around for more than a year now, and don’t seem to be easing. In fact, they seem to be intensifying. Why was Google able to win that trust more quickly?
Stoppelman: Google mines links (to determine rankings) and we mine reviews. The difference is that Google doesn’t have to show which links it is counting. It can be kept hidden from view. But reviews are written by people (who may notice if their review disappears, reappears or is moved up or down in the rankings).
BW: So how do you get out of the penalty box?
Stoppelman: The biggest thing is to create a product that consumers find useful. As more and more people like something, it becomes harder and harder to have a conspiracy theory about it.
There’s been resistance to every new technology that’s ever been introduced. When books came out hundreds of years ago, there were complaints that it would destroy the oral tradition. Some of those fears were justified, but it didn’t stop the rise of the written word. And books have proven to be incredibly useful.
BW: But there’s no question that consumers find Yelp very useful. The question is whether you are serving the needs of the businesses you need to advertise.
Stoppelman: Our business is about connecting consumers with great local businesses. The world of the past, where businesses could completely control their image, was nice. But overall, are there tremendous advantages for businesses by having power in the hands of consumers? Absolutely. The other day there was a story in the New York Times about a place called Ike’s Sandwich Shop. Yelp made his business; now he has to take reservations because the lines are so long.
BW: So is all the controversy hurting your business? It must make it a lot harder for salespeople to do their jobs.
Stoppelman: No, we’ve been through this before. This is the same press cycle we had a year ago—but now we’re better prepared.
BW: The plaintiff in the class action suit (Long Beach, CA-based veterinarian Cats & Dogs Hospital Inc) says that a Yelp salesman named Kevin repeatedly promised to make negative reviews go away if he would advertise on Yelp. Have you disciplined Kevin for breaking the company’s sales policies, and how many times have you had to discipline or fire salespeople for such transgressions?
Stoppelman: We’ve never had to discipline a salesperson about the issue that was laid out in the lawsuit.
BW: Yelp is well-known for throwing fun, alcohol-drenched parties for top reviewers. Should you be doing more outreach to businesses, too?
Stoppelman: They don’t involve alcohol, but we have hosted ten forums in five cities in recent months. I’ve attended three of them so far. We invite ten to twenty small businesses in the area—some advertisers, some not—to talk about how Yelp works and give feedback. They’ve been surprisingly positive. Business owners realize we’re an important and a low-cost driver of business—especially if they’re paying us nothing (because they don’t advertise).
BW: So far, we’ve discussed what Yelp needs to do to clear up misunderstandings and conspiracy theories. But some people say they understand the business, but don’t like a business model by which you take money from the companies that are reviewed.
Stoppelman: We survey every advertiser that signs up, and one of the things we ask is whether they realize that advertising is not connected to content and reviews. If they say no, they get a call from a salesperson to make sure.
BW: Danny Sullivan, a respected search industry analyst, thinks the only solution is for Yelp to let companies opt-out entirely. That way, only basic information on the company would appear, but no reviews. What not do this? It would go a long way towards proving to businesses that you’re not interested in extorting them.
Stoppelman: Why doesn’t BusinessWeek let me opt-out of having a story written about me? It’s a new generation of people out there (that want to communicate and share opinioins). Some of the content that appears on Yelp might have been created by a newspaper in the past—-say, a review by a restaurant critic. It’s a clear question of free speech. If someone said a reviewer couldn’t write about a particular restaurant, there would be an outcry—how dare he be silenced!