Last week, Yelp Inc. (NYSE: YELP), the local business search engine firm, announced several major changes to its policies. These changes include increased transparency in how reviews for businesses on the site are listed, as well as the removal of the "Favorite Review" feature.
Currently, the company is facing class action lawsuits claiming that they used paid reviews to extort advertising revenue from businesses. Yelp's founders may now be wishing they'd accepted Google's half-billion dollar buyout offer and made all this their problem.
Yelp's system automatically filters reviews and disregards those it deems to be spam or one-off retaliations or otherwise irrelevant. Until now, the company has been very close to the vest about how that algorithm for filtering works. Now, with both filtered reviews being available for viewing (though they still do not factor into the overall score for a business), and with Yelp's short video explaining more of the process of how their filtering works, things may change for the better.
The story of how the lawsuits and the policy changes affect Yelp have flooded the Web as various commentators have considered different angles on the situation. What has not been considered very much is the effect these actions will or will not have on Yelp's raison d'être: customer loyalty and trust.
A business like Yelp is based almost entirely on the trust that its users have in the honesty of the site's content. The reviews on Yelp are, in the main, written by regular people who've visited local businesses and want to tell others about their experiences . Before the new policy change, some advertising (specifically the Favorite Review listing) could easily be confused with user-based reviews on the site.
This gave rise to the lawsuits, eventually, and is an obvious problem for Yelp's branding strategy, which hinges on the perception of its users that the site’s content is trustworthy.
“Yelp's success was built on the very notion that consumers trust each other's input more than they trust brand messages,” says Patrick Barbanes, a branding expert. “It's ironic that through their actions Yelp did not anticipate that their brand itself would become less trusted, which now threatens the entire fabric of their site."
While to many it would appear that Yelp might have risked its brand to increase revenues, it's possible that the company did not realize the threat it had created. Have they moved rapidly enough to mitigate that threat and restore user perception before it is too late?
That question will ultimately be answered by the site's 30+ million users, of course. Websites like Yelp tend to have high user loyalty, so it is likely that it will weather most of this storm. The concern is that while current users might stay loyal, this could change how prospective users will view the Website.
For Yelp, increased competition is coming quickly over the horizon. Location-based applications are gaining in popularity and have the potential to make inroads into Yelp's market share. Apps like Foursquare are already doing something similar to Yelp, though in a simpler way. So is Yelp's damage control working?
Willie Morris, an online brand strategist, thinks that the move that Yelp has made is a good one. “By increasing their transparency, Yelp brings themselves down to a more personal level with the consumer by saying, 'Look, here we are, we want to help, check out what we do.' Ignoring the impending class action suits, this is a solid step forward for Yelp and something that other companies could learn from."
Morris may be right.
For any business whose model is based so heavily on consumer perception, problems like those facing Yelp are not easily overcome. Just rumors of a class action suit for violating that user trust can destroy the company's reputation.
— Craig Agranoff is an entrepreneur and national social media consultant as well as a published specialist in online reputation management and monitoring.