Logic behind Yelp’s about-face

Jeremy Stoppelman, a Harvard Business School dropout, co-founded Yelp in 2004 with fellow PayPal alum Russel Simmons. The website’s model is simple: Consumers, by reviewing restaurants, salons, spas, etc., provide the content. Businesses, by purchasing sponsorships, provide the revenue. Social networking features allow users to create communities in person as well as online.

With millions of visitors each month and a database of more than 6 million reviews, San Francisco-based Yelp has become a formidable competitor to sites such as Citysearch and Yahoo Local.

Buoyed by $31 million in funding, the company was sailing along -- not profitable, but growing.

And then in February, a story in the alternative weekly East Bay Express accused Yelp’s salespeople of offering to downplay bad reviews in exchange for sponsorships. The headline called it extortion.


Yelp denied the charges, but the piece unleashed the pent-up angst of business owners who felt that Yelp’s system was inherently unfair. Never mind that 67% of all reviews award four or five stars. Why, businesses demanded, were they not given the opportunity to respond to unfair or malicious reviews? Yelp, a Web 2.0 darling, found itself in an unaccustomed position: on the defensive.

Stoppelman, 31, has insisted that enabling businesses to rebut bad reviews could have a chilling effect on amateur reviewers.

“People are going to have conversations and they’re going to say what’s on their mind,” he said in a March interview. “And some of those conversations will be controversial. But the question is, do you believe it’s better for society to allow those conversations, or do you believe we should step in and not allow controversial speech?”

But last month, Stoppelman caved. Yelp introduced a feature that allows for riposte. Stoppelman explained the decision in an interview.

So what changed?

I don’t think anything really changed. We had considered building this feature a year before. . . . We thought, it’s risky, but the noise level from business owners rose. And we are in a deep recession, which doesn’t help things.

Business owners were focusing on the negative reviews, so we started thinking, what’s the risk vs. the positive upside of adding something that makes business owners feel like the site is more fair?

How’s it working out?


The first week or so, I was watching it very diligently. I did see the occasional comment that ran afoul of our guidelines and did get pulled -- a name-calling contest or what have you. Maybe there were snide remarks in the review and the business owner came back with snide remarks.

Do you think this move will change the bumpy patch you’ve been having?

We are in a recession. Negative reviews hurt emotionally -- whether it’s through the press or on Yelp. Business owners feel now that it’s more fair because you have the opportunity to share your side too.

In the situation where it’s irreconcilable -- two different people with two different takes -- consumers can see both sides.