Reputation Bank Yelp's Problem With Its Own Reputation

(image from Internet Deformation Blog)

The recent legal dispute between Yelp and a veterinary hospital in Long Beach has once again highlighted the clash between local business review site Yelp and local business groups under an intense media spotlight, because this is not the first time Yelp was accused by businesses of manipulating reviews for financial gain. Yelp, as a business, is thriving by providing an objective account of local businesses’ reputation, and has thus has become a trustworthy “reputation bank”. It stores and spreads the impact of reputation with new social media technology. And we all know that among all businesses, the business of banking is one that is based fundamentally on reputation. In this sense, there is no doubt that as a "reputation bank", Yelp itself should be much more cautious about their own reputation, and handle their monetization process with more care and thoughtfulness in the future.

The objectivity and fair treatment of people's reviews is a promise Yelp has made with its large army of volunteer reviewers. As stated by Clay Shirky in his book Here Comes Everybody, this kind of mutual agreement and mutual expectation between the website and its users, called a "bargain", along with the promise and tools provided, are the three essential elements that make an online communities work. The founder of Wikipedia Jimmy Wales has made a bargain with Wikipedia’s contributors that the wiki platform will forever be free and available source of knowledge for people, and he later adopted the GNU Free Documentation License to reassure contributors of this original bargain.

I can totally see how Yelp began with a legitimate promise to its reviewers that the site would summon the collective strength of all its Yelpers to improve the services of local business and hold them accountable; it also utilized a set of effective tools, such as open online forums for public comments that other users could quickly jump into and contribute to, and features that established social ties and recognition between members, thus encouraging contribution to the community. The bargain was also legitimate: Yelp would objectively use its Yelpers' contributions for a good cause, and even though Yelp is a profit-driven firm, this implicit expectation of them to place this cause as their top priority above pure financial gain was also a bargain written into their original "contract" with users.

Yelp was doing a good job in the past and built up their good reputation as a trustworthy destination for reviews of local businesses by keeping up with the three elements. But if it decides to breach this bargain with its users, and place their financial goals ahead of objectively displaying reviews, that would likely ruin Yelp's credible reputation, and could lead to catastrophic consequences if contributors and users who base their decisions on trusting Yelp feel that trust has been breached.

At the same time, this fierce and public collision between local businesses and a reputation-storing/spreading bank like Yelp has also called much attention to how local businesses should handle the impact of this new generation of reputation-rating. Where prior e-commerce ratings by customers on sites like Amazon and eBay only affected other e-commerce participants, buyers, and sellers, Yelp’s reviews are directly impacting businesses whose primary day-to-day transactions occur offline and didn’t necessarily choose to participate in e-commerce. In the next blog post, I will discuss how local business should respond to this new wave of impact from the electronic reputation storage and spreading system and actively build their positive reputation in the virtual world.