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Reviewing A Problem With Reviews: Yelp (YELP), Angie’s List Inc (ANGI) and More

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People lie; it’s a sad fact of life. When you create a system that doesn’t require anyone to stand behind their words, people lie even more. In fact, people do all sorts of really bad things when there is no accountability. This is a big problem for, Inc. (NASDAQ:AMZN) since it has been called out for the truthfulness, or lack thereof, of its reviews by The New York Times. However, it’s also a big issue for the World Wide Web as a social system.

Yelp Inc (NYSE:YELP)We’ve All Read Reviews

If you’ve been to Amazon to look at anything; you’ve probably taken a glance at the product’s reviews. You know for a fact that the product description is going to be jaded to the positive, but actual customers often have a different take on a product. Their efforts to share their opinion can help clarify the purchase decision, especially if they speak to concerns lingering in the back of your mind.

Such reviews can be wildly valuable, in fact. There are web sites that are solely about reviews and virtually nothing else. Yelp Inc (NYSE:YELP) is a great example. The company makes money off of advertising, but it gets people to visit its site by hosting reviews of restaurants and other establishments. Who doesn’t want to know if a restaurant they’ve seen but never been to is any good? This is also the logic behind Google Inc (NASDAQ:GOOG)’s Zagat business.

People value what others say about a product. The difference between Yelp and Zagat, however, is that Zagat’s business was built on people editing the reviews it received to create a composite picture of a restaurant. Was the end result necessarily true? No, but there was a better chance that less reputable reviews would be weeded out. That isn’t how most review sites or tools work online. Amazon’s site, which is probably the largest review site on the web, is just a list of reviews. No editing, and, for the most part, no screening.

Some have tried to use a pay wall of sorts to weed out untruthful reviews. For example, Angie’s List Inc (NASDAQ:ANGI) uses a subscription model. It also tracks the identity of reviewers and claims to monitor the reviews to weed out suspicious ones. Much like Consumers Reports magazine, the idea is that by having customers of Angie’s List provide the funding a major incentive to allow erroneous reviews is removed. Moreover, by making people pay to see and write reviews, you get more honest results.

Can’t Trust Good Reviews

One abuse of the review system that has been pointed out is people positively reviewing their own products and services. Or, worse, paying others to provide positive reviews. A blurry line is when people just ask for reviews—does soliciting reviews bias the information since no one is going to ask a disgruntled customer for a review?

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