Have you ever written a fake review on Yelp, Amazon or the App store to help promote a friend’s restaurant, new product or app? Did you think that it was’nt a big deal and that your comment wouldn’t hurt anybody? If so, now is the time to reflect and change your habits.

What is at stake:

There are two reasons explaining why fake reviews are dangerous for online businesses, whose models rely on trustworthy assessments of products and/or services:

1. Fake reviews kill transparency: by providing fake comments, one essentially removes any element of honesty and trust, which is at the cornerstone of ecommerce businesses. Take Amazon for instance. A fake product review creates friction in the supposedly seamless transaction process by providing false pieces of information. Amazon ends up with unaware customers, who might just end up purchasing subpar products.

 2. Fake reviews limit network effects: Amazon’s value proposition is offering an independent and neutral third party platform to sellers and buyers willing to do business with one another. If that platform becomes crooked and biased, and if sellers can effectively push their products with paid reviews, one can easily imagine online shoppers leaving the platform for better sources of information. Fewer shoppers, fewer sellers, fewer transactions, and in the end, a weakened market place platform with no network effects.

The Amazon police:

In an effort to cut down the risks associated with such threats, major online businesses that rely on ratings and reviews to operate have pulled out the big guns. Amazon is the best example:

Since April 2015, Amazon has launched a very aggressive campaign against fake review providers. It started by filing suit against the operators of buyazonreviews.com, buyamazonreviews.com, bayreviews.net and buyreviewsnow.com. Before these sites were taken down, they allowed any interested Amazon seller to buy fake 4-5 star customer reviews in order to boost sales. As for the sellers who commissioned fake reviews, Amazon banned them as well.

Yesterday marked the second step in Amazon’s crackdown of fake reviews and in its fight against those who create a poor ecosystem. This time, Amazon went directly at those using Fiverr.com to buy and sell Amazon reviews. In a nutshell, Fiverr is an online marketplace that allows users to offer small tasks and services for USD 5. Services include writing, editing, or programming, among others. With the help of Fiverr, Amazon spotted over 1,100 fraudulent individuals and sued them all with the hope that this will send a strong signal to those who try to play around its terms of service.

What more can be done:

With that said, small businesses do not have Amazon’s strike force and it is often too expensive and inconvenient for them to file suits. How can these smaller players combat fake reviews? I see a few ways smaller players can fight fraud from flourishing:

  • Make the review writing process more demanding by asking a series of personal questions that can help identify writers. This can help remove robots from writing the reviews.
  • On one hand, manually filter reviews and remove fake looking ones. This is time consuming and not perfect though. On the other hand, create algorithms that detect fake reviews.
  • Identify dishonest sellers, writers and tag them publicly as such on their profile. Run a zero tolerance policy for everyone to see. Yelp, through its consumer alerts program, along with TripAdvisor among others, are using this technique for instance.






By: Edouard Delvaux

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Yelp 2.0

At Yelp’s inception, very few believed it would garner the success it has today. Most shrugged their shoulders and said: “who needs another review website after Citysearch?”

But Yelp has thrived, even though profits are still in the red some 8 years later revenue has been growing north of 60% every year. The Company has authenticated a review within a social network platform and successfully attracted ads revenue. The emergence of mobile applications has since accelerated their mobilization, attracting monthly unique visitors of 120 million. The initial success in my view is largely attributed to their dedicated focus on growing a small group of fanatic reviewers who then helped build an aura of review experience (e.g. review on review) and in turn drew more visitors and merchants to its platform. Another benefit of targeting the casual, frequent reviewers is that Yelp avoided paying for professional reviews which would have made it hard to scale.

Today’s Yelp relies heavily on mobile monetization such as personalized and location-based advertising. With close to 40% of its ad impressions served on mobile devices (as of Q3 2013), the Company should prioritize on further penetrating this channel through display ads including potentially charging higher impression rates. In order for mobile display ads to materialize as a key growth driver, however, much remains to be done with demonstrating the ROI economics to merchants. Many are still skeptical about the ability to effectively measure sales conversation through Yelp. Anecdotally, mobile users have used the app as an integral step in local purchase cycle where a recent study done by Nielsen suggested when consumers find a local business on Yelp, 89% make a purchase within a week. Interestingly, Google in its recent earnings calls announced weaker than expected ad revenue and the analysts believe they have gone to Yelp and Facebook.

The groundwork is being laid to benefit from the mobile secular trend and the future holds bright for Yelp in my view. Yelp should consider strategic acquisitions that can help drive customer experience such as buying a production and distribution company of viral multi-media products. With large on-going investment Yelp needs to focus on generating cash through the low-hanging fruit such as national accounts which currently make up for close to 20% of total revenue. In the meantime, management should continue to focus on maintaining quality of reviews and protecting consumers from falsified merchant information, an inevitable situation as Yelp becomes bigger.

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New restaurants always hope to attract enough eyeballs on Internet and mobilize as many trials as possible within a short period of time after opening. But current online restaurants promotion windows, typically Yelp and Groupon, don’t help a lot, though they attract many target customers of restaurants.

Yelp is the biggest restaurant review companies in U.S. People go to a restaurant and try the food, then some of them will give ratings as well as detail reviews to this restaurant, from the taste of the dishes to the environment of the restaurant. With the accumulation of the review numbers, potential customers of a certain restaurant can refer to these reviews and get a whole picture of this restaurant. These reviews effectively help them to make decisions and also help the restaurant to attract more new customers if it received lots of high ratings and good reviews. However, Yelp might be not a good eco-system for new restaurants. Considering Yelp as a restaurant markets, those restaurants with lots of favorite comments and high ratings always attract more eyeball and relatively easier to transfer those eyeballs to real trials. And the more people tried, the more will offer ratings and reviews. This virtuous circle helps those established restaurants to be more and more popular. On the other hand, a new restaurant, because lacking reviews and comments, is hard to attract enough eyeballs and mobilize trials. With very little trial, customers who are going to offer ratings and reviews are few. Therefore, new restaurants are hardly to promote themselves on Yelp. They have no way to outperform the established restaurants or even buried by them on Yelp.

Groupon seems to offer a good marketplace for new restaurants to do promotion deals. With very attractive high discount deals, Groupon tends to motivate its customers to try the deals with very low cost. It makes sense for new restaurants, which want to attract customers as quickly as possible after open, to offer those deals to Groupon. But are the customers attracted by Groupon good customers for the restaurants? Think about who are the people who always use Groupon: people who seek for cheap things rather than people who try new things. The purpose for new restaurants to attract as many customers as possible at the beginning is to build the buzz and build the loyalty after customers’ trial. But Groupon customers only care about the deal, not the restaurant. When they finish a cheap dinner, they are going to seek for another one offered by another new restaurant in Groupon. This makes the promotion spending a waste of money. Meanwhile, it is hard for high-quality new restaurants to distinguish from bad one, or even a negative impact on them, because they might not be able to offer a deal as cheap as those low-quality restaurants.

With that said, there is a business opportunity to build a new website that helps new restaurants to promote. If one can find a way to accumulate many effective reviews very quickly and attract high quality target customers, it will attract high-quality new restaurants and high-quality customers and finally becomes a platform for all new businesses and people who would like to try new services.

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It’s a common scenario.  The weekend is here and you’re looking to try a new restaurant.  The problem is that you don’t know which restaurant to try, and you certainly don’t want to pick the wrong one.  Why we attach so much buyer’s remorse to this indisputably low risk decision is a good question, yet it can’t be denied that we do.

Driven by the quest for a guilt free restaurant choice, you head for today’s natural starting point – a quick review of Yelp.  Maybe you also run a quick Google search for “best restaurants in MyCity,” but that search likely brings you back to Yelp anyways.  So, you dig in.

What do you find?  Well, a search for restaurants in Cambridge returns over 40 restaurants with at least a 4-star rating.  Not much distinction there, so you begin to click through a few.  Lots of “I love it” and “best ever’s” are scattered across the occasional “I hate it.”  Still, tough to glean much from that.  Absent the restaurant name on top, the reviews are all essentially interchangeable and are all either incredibly positive or incredibly negative.  Maybe if you focus on Sam L., you’ll find better advice.  Sam L. kind of looks like you in his ¼ inch x ¼ inch photo, and he may even be wearing the same shirt that you own.  He must have similar dining tastes.  Unfortunately though, Sam L. seems to base his star rating more on the perceived attitude the hostess gave him rather than the actual quality of the meal.  No help there.  (click on the “Real Actors Read Yelp” link below for more brilliance from Yelp reviews)

Eventually, you realize that you’re not getting what you’re looking for and leave frustrated.

This frustration is something that I’ve experienced often, and I believe it’s experienced by many as online reviews begin to inundate consumer web-based research.  Without claiming to have the full solution, I’d suggest that there are 3 areas of improvement that can provide better reviews to consumers and possibly even propel some interesting innovation in the online review space.  I’ll continue to use the restaurant example, but I believe that these improvement areas are present in a number of other online review services (e.g. TripAdvisor/travel review)…

Making reviews more relevant to me (and to you):  Relevance is an essential dimension to the online experience, and it continues to be addressed across numerous fronts (e.g. search, advertising, deals).  This is an area where you see the big players taking the leading role.  From Facebook likes to Google filtering search results based on your web history, a significant amount of attention (and dollars) has been spent on trying to make the web more personally meaningful to the individual.

That said, there have also been much smaller players that have found positive traction in building recommendation engines of higher relevance.  Stamped (recently bought out by Yahoo in a talent acquisition) sought to allow people to ‘stamp’ things that they liked and share them across their network of friends in a more convenient way than Facebook likes.

However, current efforts within online reviews continue to be primarily focused around associating relevance to things preferred by your circle of friends.  While this is a great first step, I believe that it fails to provide adequate results.  First, your friends have divergent interests, and in the case of the restaurant example, your dining preferences will almost certainly better match a complete stranger (found in a massive dataset much larger than you network of friends) than your best buddy.  The key is figuring who that complete stranger perfect match is.  I believe that big data is a far better solution for an online reviews 2.0 world where preferences can be matched to truly statistically significant comparison sets and deliver much more meaningful reviews and recommendations.

Identifying the proper target and offering objectivity: For the far majority of Amazon reviews, identifying the target of the rating is easy.  It’s the product being highlighted.  However, when rating more multi-dimensional experiences (such as dining or travel), it’s much more difficult to discern what is actually being reviewed and rated.  Sam L. above based his restaurant rating on an interaction with the hostess.  Some may view this as helpful, while others might prefer a more objective review of the quality of the food.  The inherent subjectivity of which dimensions matter most can quickly erode the integrity of the overall rating system.

Just this past week, Yelp released an update to their platform hoping to address this concern more directly.  Yelp is adding menu pages to the restaurants that rate specific dishes while also providing user submitted photos of dishes.  It’s a positive step towards better associating objective ratings with more cleanly defined targets.

Providing more nuanced rankings:  When 40+ restaurants in Cambridge are rated as 4-stars or better, it can be argued that none of those restaurants are actually rated at all.  The consumer is simply unable to make a reasonable distinction between them based on the ratings alone.  Much of this clustering occurs from the polarizing catalyst that encourages consumers to submit reviews in the first place.  Feedback is typically generated from an overwhelming experience, either positive or negative.  The more subtle critiques and comments often don’t inspire the effort to submit a review at all.

One possible way to accomplish more nuanced ratings would be to better segment like-restaurants and force rank the restaurants within each segment across a more normal distribution.  This may generate more enlightening ratings by highlighting the best and the worst pricey restaurants in Cambridge, for example.  Current results tend to skew all ratings for pricey restaurants towards the highest stars, but a force rank would allow the ratings to show the best of the best, and the worst of the best in this instance.



Real Actors Read Yelp

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When I arrived at HBS more than a year ago, I had only vaguely heard of Yelp. By now, I’m a fan, using Yelp to find restaurants, check the quality of dry-cleaners and even to evaluate tourist tours for visiting friends. So while working in London this summer, I almost instinctively went to Yelp.co.uk. However, what I found out is that Yelp’s clout on the Old Continent is not yet as strong as in the US. Instead, I discovered some local competitors of which one stood out: Qype.

With Yelp aggressively expanding in Europe these days (already five new country openings in 2012), I started wondering: is Yelp wasting its money trying to grow organically or should Qype head for the exit? After some thinking, I came to realize: Yelp should try to buy Qype, rather than waste time growing organically.

Yelp (78 million average monthly visitors) is on a global level more than three times as large as Qype (25 million average monthly visitors). In Europe however, Qype claims the top dog status with having almost 5 times as many reviews and 6 times as many mobile app downloads in Europe than Yelp. [1] Qype has entered most of its European markets in 2006-2009; while Yelp has been mostly expanding since 2010. [2] [3]

As below graph indicates, Yelp is trying to copy its US success model in Europe, by investing in Community Managers who contact local businesses and thereby aim to drive exponential growth in user reviews.

This will be a challenging task in Europe however.  I believe that the online user review business is a winner-takes-all model, driven by strong cross-side network effects between local businesses and users and high multi-homing costs for local businesses to advertise on multiple user review platforms. Currently, in most European markets, Qype is the dominant player which seems to be best positioned to take everything.

Let’s look at which levers Yelp can pull to expand organically.

A first possible approach is to pick European markets where Qype is not yet active or very strong. Traditionally, Yelp has lagged Qype in entering the largest European markets (e.g. Germany, France, Spain, Italy). As a result, it had to go head-to-head against Qype as incumbent player in those markets. In 2012 however, Yelp has entered the four Scandinavian (Sweden, Norway, Denmark, Finland) and Belgian markets, where Qype was not yet officially present. This strategy could give Yelp the leading position in those markets, but won’t move the needle on the overall front as the mentioned countries only represent ~5% of the European population. Yelp, cash-rich after a successful IPO in early 2012, could also try to outspend Qype in a generally growing market. Yelp indicated plans to spend USD 15 million on international expansion. [4] This amount has to be shared however across Asia, Latin America and Europe. As a result, Qype will likely be able to keep up on spending, even though it has collected a much smaller amount of total funding (USD 22.5 million) since its founding in 2005 than Yelp did. [1]

Another approach is to offer a differentiated offering or focus on a niche of users. For example, Yelp currently cooperates with OpenTable to complement its reviews with restaurant reservations. [5] Qype could easily copy this offering however, for example by tying up with Livebookings, Europe’s largest restaurant booking platform and OpenTable’s key competitor in Europe. [6]. Yelp could also leverage its Yelp Deals (Groupon-like coupon service) offering, but recent results seem to indicate Yelp Deals is not taking off as planned and Qype has a similar QypeDeals offering already. [7]

None of these approaches seem seems particularly convincing. Instead, Yelp could leverage the one certainty of VC-backed ventures: investors want to see cash returning at some point. As Qype is venture-backed since 2005 and has had its latest VC-round in 2010, an exit to a strategic buyer could be one of the best options at this point. Yelp could also look at one of its American peers to get inspiration: eBay tried to grow bottom-up in the late ‘90s in Europe but only became the key player in the online auction marketplace arena after acquiring pan-European iBazar in 2001. [8] Last but not least, Yelp might have to hurry up, as Qype might be more willing to sell itself to almighty Google than Yelp was willing to do so in 2009. [9]

[1] http://techcrunch.com/2012/05/11/qype-the-yelp-of-europe-reaches-860000-places-reviewed-and-expands-its-daily-deals-service/

[2] http://www.sec.gov/Archives/edgar/data/1345016/000119312511315562/d245328ds1.htm

[3] http://techcrunch.com/2012/10/04/anything-qype-can-do-we-can-do-four-years-later-yelp-enters-poland/

[4] http://online.wsj.com/article/SB10001424052970203611404577044412496187308.html

[5] http://bits.blogs.nytimes.com/2010/06/03/yelp-and-opentable-join-forces/

[6] http://techcrunch.com/2012/05/13/europes-opentable-livebookings-eats-up-another-24m-from-balderton-wellington-ekstranda/

[7] http://money.cnn.com/2012/03/02/technology/yelp_ipo/index.htm

[8] http://www.macnewsworld.com/story/7676.html

[9] http://techcrunch.com/2009/12/20/yelp-walks-away-from-google-deal-and-half-a-billion-dollars/

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