Sunday, April 4, 2010

How Yelp really works

Yelp has the motto, "Real people. Real reviews" posted prominently at the very top of their site, but little do most people know that this is a for profit organization, and not every review is as unbiased as one thinks.

Here is my own personal Yelp review from an industry insider.

As with many other social media based networks, they depend greatly on their users to "patrol" the reviews.  Even eBay claims ignorance on the counterfeit items that are for sale on their site.  Millions of trusting users go to these sites hoping for a honest review and a real product at a good price and many times end up with downright counterfeit items and horrible experience.  Neither eBay nor Yelp cares about any legal ramifications of those poor reviews because they cannot be sued for it, so why spend the extra money making sure that the information is accurate and correct, and not slander?

At the end of the day, we can't really blame them.  Yelp is a for profit company out to make a buck and their investors wealthy, they will do what they can to earn that money as long as the perception of unbiased review remains.  This is also another reason why they throw so many parties for their "Yelp Elite" members.  Funny thing is most of these individuals know nothing about what they are contributing in order to receive those nominal benefits.  These "Elite" members both toot their reviews offline to drive traffic to the Yelp site as well as offer endless, unique, organic content that keep Yelp ranking high on almost any local business search.  They make millions for the company, and in return they are thrown a bone here and there.  In fact, Yelp has minimal editorial staff which costs a significant amount of money to manage and maintain (think newspapers and how horribly they are doing now).

In addition to the trickery above, people should also realize that end of the day, Yelp is a Yellow-pages on steroids, Yellow-pages 2.0, whatever you would like to call it.  They turn a blind eye to business who advertise directly with them and alter their algorithm to individuals that refuse.  For example, if I advertise my chiropractic business and pay yelp to have me be one of their "sponsored listings", I will show up when users of Yelp look for other practices.  Of course, Google, Yahoo, and MSN/Bing all operate under similar principals, but Yelp has it more integrated, which is another way of saying it's hidden.  Yahoo used to do the same thing in the past with their "paid inclusion" program, where companies can pay to have their results show up in "organic" placements.

Without going into the details, just think about how well having the banks self regulate themselves turned out to be.  Understandably, any maliciousness with Yelp would not end up with a Government bailout, but it does amount ultimately to distortion.

This is not to say that Yelp is a service you should not use, just be aware of what's going on and the company's ultimate goal (to make money) as you're using their services.  Here are some guidelines I suggest you follow next time you use Yelp.

  1. Ignore anything that says or suggests they are "sponsored listings".  People/companies are paying to show up on top.  The rankings are not a function of user ratings, but how deep the advertiser's pockets are.
  2. I generally ignore reviews of services/stores/restaurants/companies with reviews of 50 or less.  I have been to too many places rated 4-stars on Yelp with that type of review to only find out the food is sub par.  The reason is Yelp can be gamed. They are not heavily internally edited and depend on users to police the reviews.  In other words, owners of restaurants, their employees, and their friends and family can be asked to go on Yelp and write them spectacular reviews.  This amounts to advertising, not real user experience. 
  3. The more review they have the more realistic the experience would be.  
  4. Use the "rating details" next to the stars to see the aggregate demographic of all of the ratings.  Then look at some of the top reviews and some of the worst.  As a general rule of thumb, unless a restaurant is spectacular, there will always be more "bad" reviews than "good".  People who are pissed at something are more likely to want to vent and share their bad experience.  I have also heard down the grapevine that although Yelp does not directly change their algorithm, they would try to promote the better reviews higher up for listings where the client pays for, but they can also promote the bad reviews higher up on the list for clients that have repeatedly refused to sign up to be a sponsor.   If you see a 4-star restaurant with hundreds of reviews where the first 5-reviews are below average, be suspicious of Yelp.
With the suggestions above, you should be able to easily navigate past most of the monetization bullshit Yelp has put you through and better use Yelp as a tool to help yourself make the right decisions.  

Again, to all you Yelp Elite Members out there, just understand that although you feel like you are part of a very small, elite, and special group that police the service, like any online forum, you are doing your job for the status and essentially for free while the company is making the bank.  Similar concept occurs in most workforce, it's like those times in your life at work where you get a "title" promotion but no salary increase.  Have you seen how many "Vice Presidents" there are in bank branches?  And do they really make as much as the real company VPs up top?  Something to think about. 

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