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Yelp's Day in Court

Shares of the consumer review website Yelp (NYSE: YELP  ) are falling today, after the Federal Trade Commission said it has received more than 2,000 complaints about the company during the past five years. Now, a case involving a local business hurt by an anonymous Yelp review is going to be heard in the Virginia State Supreme Court. Is it time for Yelp to make some serious changes?

In this segment from Thursday's Investor Beat, host Chris Hill and Motley Fool analyst Jason Moser take a look at the "rock and a hard place" situation facing Yelp today. On the one hand, traffic to the site, and the resulting revenue from advertising, depends on the idea that consumers are honestly informed from all angles by the reviews they read on the site. On the other hand, the power of a negative review on Yelp and its ability to crush a business far outweighs the benefits of receiving a positive review. With no system of checks and balances in place to screen for which reviews are undeserved, businesses can be needlessly damaged by Yelp's current system.

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  • Report this Comment On April 04, 2014, at 1:07 PM, sanoran wrote:

    Imagine if I wrote a review of the Yelp founder, stating that he raped a 14 year old girl and then sodomized her. Rest of us read this review and start treating the Yelp founder as a sex-offender. Then we offer the Yelp founder a chance to hide this review in exchange for a fee. That is Yelp's business model.

    In USA we are innocent until proven guilty. Yelp uses the US constitution as toilet paper as it routinely allows small businesses to be judged without any proof, ... and then sell protection to that poor small business.

    Yelp is an extortion company. According to it's founder 'businesses' are its last priority, although businesses pay every penny of it's income.

    Yelp manipulates reviews, targeting small businesses, then the Yelp salesman calls, offering to hide the bad reviews for 1000/month, ... and the poor small business owner is helpless, -he cannot fight back and is frightened, so he pays.

    Selling 'protection' from bad reviews is the old school mafia protection racket, ... in a new digital format.

    It is just a matter of time before a clever lawyer can bring a class action law suite against Yelp and end this horrible company.

    Good news is that most people seem to be catching on to Yelp's extortion game.

  • Report this Comment On April 04, 2014, at 1:23 PM, MtnGirl46 wrote:

    I agree with sanoran. YELP started out with good intentions, I believe. But now their reviews are worthless. Several restaurants in my town got negative reviews posted by competitors or their families and friends which totally discouraged tourists from going to them. The reviews were fabricated lies for the most part. Then those restaurants that were maligned posted bad reviews of the original poster's restaurant so that all the establishments in our small town review so badly no one would want to eat anywhere here. The sad part is that almost all of them are good places to eat with very reasonable prices and they are not fast food joints but privately owned businesses. I no longer rely on YELP for information. I don't even go there anymore. I go to the establishments FB page and read reviews there. They are more reliable.

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Chris Hill

Full-time host of the Motley Fool Money radio show, MarketFoolery podcast, and other things. Part-time connoisseur of movies, basketball & fine bourbon.

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9/1/2015 4:00 PM
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