Giving your one-star company a five-star review could cost you dearly. According to the New York Times, New York regulators have announced that 19 companies are paying $350,000 in penalties for posting misleading and fake reviews on sites like Yelp, CitySearch, and Google.
Investigators discovered New York companies contracting with online reputation management firms to pay “customers” located in Bangladesh and the Philippines a dollar per positive online review. In other cases, real customers were bribed with $50 gift certificates to give their business a five-star rating. While faux rave reviews for a sub-par restaurant may seem relatively harmless, regulators also cited instances of dentists, lawyers, and even an ultrasound clinic inflating their reviews.
It’s not surprising sites like Yelp, despite efforts to curb misleading reviews including posting restaurants’ public health grades, have been invaded by fakers. Big ratings mean big business. According to a 2011 Harvard Business School study, a one-star increase in Yelp reviews boosted revenues by 5% to 9%. New innovations, like Facebook’s Graph Search, are trying to avoid this pitfall by highlighting reviews by people you know and trust. In fact, this prompted one New York consultant and angel investor, Peter Shankman, to publicly bet Yelp would fail by August 2015. If the industry can’t shut down the fakers, he may be right.
[Image: Flickr user roboppy]