To fight back against fake testimonials, Yelp has developed sophisticated… (Justin Lane, European Pressphoto…)
SAN FRANCISCO — Judging from recent reviews on Yelp, the Center for Counseling, Recovery & Growth was the place to go to turn your life around.
The Torrance center racked up 14 coveted five-star ratings on the popular review site for its "warm and friendly therapists" and "beautiful offices." Many of the testimonials made similar points, sometimes in nearly identical language.
That was no coincidence. Acting on a tip, Yelp uncovered what it dubbed a "review-swapping ring" composed of members of a South Bay business networking group. Yelp said it was a coordinated effort by members to boost their ratings by posting glowing reviews about one another's businesses.
Such backslapping highlights a major challenge for Yelp and other online review services: how to keep business owners from gaming a system that by its nature is open to manipulation.
Yelp stripped the suspect reviews from its site last month and sent emails to members of the group — known as South Bay BNI — informing them that their behavior was out of bounds.
"This was a sophisticated effort to bolster the reputation of members of this business networking group through five-star reviews," said David Lee, Yelp's user operations manager. "Reviews that have a bias lead to a poor consumer experience."
Members of South Bay BNI defended their reviews as legitimate.
"We didn't think we were violating any guidelines," said Rosanna Savone, a debt settlement attorney and member of the networking group who had all 10 of her five-star Yelp reviews wiped out. "There was no secret mission to outsmart Yelp."
But concerns are growing about the authenticity of online ratings. People making comments often don't give their full or real names; others don't disclose their relationship with the business they're reviewing. That can allow business owners to pad their scores with rosy testimonials from friends, family, even themselves. Some pay so-called review mills to churn out positive statements. Others have trashed rivals with negative comments.
As many as 4 out of 10 online reviews are phony or biased in some way, said Bing Liu, a computer science professor at the University of Illinois in Chicago who develops software to detect fake reviews. Liu said the challenge for Yelp and other review sites is in keeping pace with the latest tactics. "It's going to be a problem forever because the incentive is too high," he said.
That's because peer reviews carry tremendous weight with consumers. Customer feedback on sites such as Yelp, Amazon.com and travel site TripAdvisor have changed the way people research and shop for products and services. Such comments are the first thing many people check before trying a new restaurant or booking a hotel. And highly rated businesses on services such as Yelp also get a boost in Google rankings.
For businesses, this kind of marketing is powerful — and cheap. They can reach thousands of potential new clients without spending a dime.
Founded in 2004 and based in San Francisco, Yelp has become one of the Web's most popular repositories for reviews. Its users have written more than 27 million pronouncements on businesses they've visited, posting comments on their experience and giving an overall rating of one to five stars, with five stars being the top score. The better the reviews and ratings, the higher the business ranks on Yelp, ushering more business through the doors.
Yelp earns revenue by selling ads to local businesses. The company went public in March and posted sales of $83.3 million last year, up 74% from 2010. But it has yet to turn a profit. The company lost $16.7 million in 2011 and $9.6 million in 2010.
To keep growing and achieve profitability, Yelp must deliver ratings and reviews that consumers trust.
"If people don't trust the reviews, then they won't go to Yelp and then Yelp won't be able to generate any traffic or revenue," Citigroup analyst Mark Mahaney said. "That's pretty key."
To fight back against cheats, Yelp has developed sophisticated algorithms to root out phony testimonials. And it employs a team of staffers whose job it is to detect fraudsters. The company also relies on tips from its users who flag reviews that appear to be bogus. Yelp's policy also bars members of networking groups from reviewing one another because of the conflict of interest.
Members of South Bay BNI — a chapter of an international business networking group based in Upland — said they were unaware of that ban when they hatched their plan to buck up one another on Yelp.
Founded by multimillionaire author Ivan Misner, BNI operates on the principle of "givers gain." By sending business to others, the reasoning goes, members will get business in return. Like other entrepreneurs in the digital age, its members increasingly rely on the Internet, not just face-to-face schmoozing. Favorable online reviews have become even more crucial as businesses feel the pinch of the ailing economy.