Author: Paul Gurney

When “Wisdom of the Crowds ” gets manipulated

YELP!, you’re in deep trouble. There’s growing momentum for a class-action lawsuit against the review website. And Yelp co-founder Jeremy Stoppelman is dismissive of complaints. It adds up to a major blow for hubris.

The lawsuit alleges that Yelp runs an extortion scheme in which the company’s employees call businesses demanding monthly payments, in the guise of “advertising contracts,” in exchange for removing or modifying negative reviews appearing on the website. The plaintiff, a veterinary hospital in Long Beach, California, asked that Yelp remove a false and defamatory review from the website. In response, as set forth in the lawsuit, Yelp refused to take down the review. Instead, the company’s sales representatives repeatedly contacted the hospital and demanded a roughly $300 per-month payment in exchange for hiding or removing the negative review. Similar examples of Yelp’s unscrupulous sales practices have been widely documented in the press, including in The Wall Street Journal, The San Jose Mercury, and a series of articles recently appearing in The East Bay Express.

Source: http://yelpclassaction.wordpress.com/2010/02/23/yelplawsuit/

and read more at BusinessWeek. The article quotes how “Yelp’s revenue comes from restaurants, hotels, and other businesses that typically pay $300 a month to advertise on the site, which 25 million people visit each month, according to research service Compete. It’s a promising model.”

This is why our GrapeMojo.com will never sell ads on its website — if the subjects of your content (wine lovers, makers and sellers, in our case) are also its primary source of advertising, the conflicts of interest are bound to appear.