Yelp's practices sound to some like extortion

A merchant is told by Yelp that for a fee, troubling ads on the site can be made to go away. A Yelp spokesman says what was meant is that the merchant 'could buy out the ad space on your own page.'

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Rick Fonger, an Alhambra jeweler, says Yelp told him that troubling ads on the website could be made to "go away" for a price. (Gary Friedman, Los Angeles Times / March 26, 2014)

Yelp just can't stop living the thug life.

Five years ago, I asked whether the popular review site was a shakedown racket for merchants. I quoted a number of small-business owners who said Yelp had threatened to run negative reviews more prominently if they didn't pay for advertising.

Jeremy Stoppelman, Yelp's chief executive, told me at the time that the San Francisco company doesn't strong-arm merchants. He blamed talk of shakedowns on disgruntled business owners spreading "false rumors."

I guess this is another one of those.

Rick Fonger, 62, decided a few years ago to end a career in journalism and move from Canada to Alhambra, where he opened a jewelry store.

"I've always been interested in gemstones and gemology," he said. "It was just something I wanted to do."

To give his shop, called 58 Facets Jewelry, a little social-media boost, Fonger spent about $300 a month advertising on Yelp. "It worked OK, not great," he said.

After six months, he decided to shift his limited marketing budget to direct mail. He canceled his Yelp ad in February.

The very next day, Fonger said, a Yelp employee called to say she wanted to help. She pointed out that competitors' ads were now appearing above the reviews for his store.

"She said that for $75 a month, she could make those ads go away," Fonger recalled.

He responded that this sounded a lot like extortion.

"She said she could understand why I'd think that," Fonger said. "But she said they do it to everyone."

As if that makes it OK.

"It certainly sounds like extortion," said Kevin Dean, president of WSI Net Advantage, a Fremont, Calif., Internet marketing firm.

"If Yelp just sold the ad space to someone else, fine," he said. "But to then call up and offer to make the ad go away for a price, that seems like an unscrupulous business practice."

I'll pause here to say that I think Yelp is a flawed but valuable consumer tool. I take the reviews on the site with a grain of salt, but it's a great place to get a quick pulse reading of people's opinions about restaurants, stores or other businesses.

That said, Yelp is a for-profit business itself, and it makes the bulk of its money from neighborhood merchants. About 83% of the company's nearly $71 million in revenue in the most recent quarter came from local ads.

This gives Yelp a powerful incentive to turn the screws on small businesses as much as it can.

Vince Sollitto, a Yelp spokesman, said that when the company's rep told Fonger that she could make competitors' ads go away for $75 a month, what she meant was that "you could buy out the ad space on your own page."

He said Yelp is doing the same thing that phone books do: selling ads that accompany related business listings.

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