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The Perils and Promise of the Reputation Economy

By: Anya KamenetzTue Nov 25, 2008 at 5:00 AM
Yelp founders Russel Simmons, left, and Jeremy Stoppelman, with Darwin

Who are you gonna believe?: Yelp founders Russel Simmons, left, and Jeremy Stoppelman, with Darwin | photograph by Dan Escobar

It's not easy doing business in the reputation economy.

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While Urbanspoon draws on an existing blog community, Yelp exploits the "power law distribution" of the Web 2.0 world: 10% of the users on a site typically create 90% of the content. Yelp rewards active Yelpers; they can use the site as a more local, targeted Facebook, creating profiles and getting online kudos for writing a "useful," "funny," or "cool" takedown of, say, their dentist. Some get asked to join the Yelp Elite Squad, earning them a mark of status on their posts and invites to company-sponsored outings.

To outsiders, Yelp's gatekeeping can seem a little, well, elitist. For example, Stoppelman won't disclose who gets asked to join the Yelp Elite or why. "Top secret," he says. The site's bots are also rigged to demote reviews by those who write only one or two; the theory is that they're more likely to be fakers. "From a reader perspective, the less you contribute, the less valuable you frankly are to the community," Stoppelman says. "The more we know about you, the more we can trust you."

Well, what if the more I know about Yelp, the less I like it? In the end, a site that's trying to profit from the reputation economy needs to find a way to welcome all comers, repel the weirdos, and cultivate potential regulars -- just as in any offline business. Y'all come back now, ya hear?

From Issue 131 | December 2008

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Recent Comments | 16 Total

December 2, 2008 at 12:12am by Adryenn Ashley

I had a few 5 star reviews, all stating verifiable results of what I had done for their business. I earned the reviews. Yelp's reason for deleting those who weren't review trading...? Conflict of interest! That we might not be able to downgrade a good review because we are in a networking group together. I see the reasoning and after much discussion with Jeremy agree with the logic. But to delete us without warning, call us spammers, claim we were review trading when clearly I

December 2, 2008 at 12:22am by Adryenn Ashley

Georgetown law professor Rebecca Tushnet did not read the lawsuit and assumed that the suit would be for user generated content. Oops! A little research would have shown that the suit has merit and is specific to the actions of Yelp.

December 3, 2008 at 6:38pm by Brian Sharwood

This is a great article about the power and perils of review sites. Our company faces similar challenges as many of the companies listed above being the largest free home reno review site out there. Home improvement specialists, not being the most online savvy group, have a hard time understanding the power of the social network, yet take great pride in their work. A single bad review not only hurts their reputation, but is often a personal affront to their skills and talent individually. A challenging place for a review directory.

December 5, 2008 at 9:48am by Bhupesh Shah

Part of the risk of being "out there" is a greater number of people can evaluate what you bring to the table. I have found that over time, the ones that are habitually negative and offer little value get filtered out of the soc nets. If the sites build customer relationships, they will have the support to counter those that are full of "hatorade".

December 6, 2008 at 1:50pm by Brian Sharwood

Our stats show that on a 0-10 score for the home builders and contractors on our site, 20% are below 5, and the remainder above, with most of that being 10s. Quite likely because the companies themselves are sending their clients to the HomeStars site and asking for the reviews. We think 20% is a good number, but its a good internal debate.

December 9, 2008 at 6:32pm by Anya Kamenetz

Professor Tushnet did understand the details of the potential suit. As I wrote, "the landmark Communications Decency Act of 1996 grants immunity to site operators whether or not they police content." That means Yelp would likely be immune to charges that they damaged anyone's business by taking down reviews.

December 17, 2008 at 1:19am by Mat Kennedy

Ratings and reviews will continue to grow in importance. I reference your story in a recent post on my blog:

http://www.pay4rides.com/2008/12/reputation/

Our business and personal reputations will greatly influence the trust of any new business partners.

January 7, 2009 at 1:34pm by Alessandro Magnino

I've really liked this article.
"Reputation economy" is supposed to grow very fast: take a look at the impressive results of this recent survey by Universal McCann: http://www.universalmccann.com/Assets/when%20did%20we%20start%20trusting...
I'm personally involved in an Italian project based on the "reputation economy" called http://www.gliaffidabili.it (meaning in English "The Reliables") and we're facing similar challenges as the ones highlighted in the article.

February 5, 2009 at 3:34pm by chris clark

Great article- This illustrates some fundamental issues for peer-to-peer sites which are here to stay. I co-founded The Senior List (www.theseniorlist.com) a consumer driven site focused on matching consumers and senior services. Our site also has a "review & rate" function.

If we see a particularly bad review we do a couple of things; 1. verify the person is for real, 2. Verify that their complaint wasn't written in the heat of the moment, and 3. Will try to moderate where we can. We are in the process of adding a "business owner response" mechanism that I think will be very helpful as well.

Just my 2 cents... Chris

February 5, 2009 at 3:39pm by chris clark

Great article- This illustrates some fundamental issues for peer-to-peer sites which are here to stay. I co-founded The Senior List (www.theseniorlist.com) a consumer driven site focused on matching consumers and senior services. Our site also has a "review & rate" function.

If we see a particularly bad review we do a couple of things; 1. verify the person is for real, 2. Verify that their complaint wasn't written in the heat of the moment, and 3. Will try to moderate where we can. We are in the process of adding a "business owner response" mechanism that I think will be very helpful as well.

Just my 2 cents... Chris