By Chris Lane
By Jeff Balke
By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
But now he's broke.
Who's to blame? He says Yelp, the megapopular Web site that allows users to rate and discuss thousands of businesses from Los Angeles to London. Cult-like followers and insistent ad reps conspired to ruin him.
"I want them to fix the damage they did to my life," he says. "I'm out my entire life savings. I lost $185,000, and I have a mortgage to pay."
Mehana claims Yelp, which averages more than 30 million visitors every month, deleted positive reviews and highlighted negative ones in a behind-the-scenes campaign to force him to buy advertising. His story has been echoed around the nation since February 23 when a Long Beach animal hospital sued Yelp, charging "extortion." Since then, hundreds of firms have claimed the San Francisco company tried to extort money for ads. Their complaints have drawn coverage across the English-speaking world, from The Wall Street Journal to England's Guardian.
Yelp vehemently denies those claims, noting ad reps have no power over placement of reviews. Yet on April 5, the company acknowledged the issue. It added links to deleted comments and took away paying members' ability to place positive evaluations atop their profiles. "[There's] no connection between advertising and content," one of the company's two über-hip founders, Jeremy Stoppelman, said.
But that move failed to placate Yelp haters — including scores who claim to have been victimized like Mehana. They say the changes are just window-dressing. What's more, the list of plaintiffs against Yelp is growing, says Jared Beck, one of the four lawyers who filed the suit. So far, ten businesses have signed on. And more than 500 proprietors have called to report chicanery by the Bay Area darlings.
"Now we hope we'll get wholesale changes to Yelp's business practices," Beck says.
Yelp was founded in 2004 by two ambitious PayPal employees: the Harvard-trained Stoppelman and Russell Simmons, a software genius. They launched the site around the same time Facebook began sweeping through college campuses and tapped into the hunger for user-generated content.
The company, which has yet to turn a profit despite astounding popularity, created profiles for businesses from restaurants to drugstores to car washes and then allowed users to post reviews and ratings. By 2008, it had expanded to more than a dozen U.S. cities, Canada and the British Isles. Last year, it topped $30 million in revenue. In December, Stoppelman and Simmons even rejected a $500 million buyout offer from Google.
But in February 2009, East Bay Express, a former sister paper of Miami New Times, in Oakland, reported six local business owners' complaints that Yelp sales reps tried to strong-arm them into "memberships" of $300 or more a month. Beck, a Harvard man like Stoppelman, and a classmate in San Diego, Gregory Weston, filed suit against the company. They termed it a class action, though at first there was only one client: Cats and Dogs Animal Hospital in Long Beach. Three weeks later, Beck added nine more businesses: a bakery in Chicago; a restaurant in Washington, D.C.; an appliance repair service near San Francisco; and others.
"All these people who are running their own businesses are taking the time to call us up and tell us their stories," Beck says. "And they all line up."
When Stoppelman announced the changes to Yelp's business model earlier this month, many observers painted the response as throwing in the towel. "Yelp Surrenders Payola War, Loses Easiest Shot at Profit," Gawker crowed.
Bob Gutgsell is skeptical. He has worked for two decades in San Carlos, wedged between San Francisco and San Jose, to build a niche repairing expensive appliances. He works on the kind of high-tech imports many repair companies won't touch.
About two years ago, Gutgsell found an angry review on Yelp and responded online to try to right the problem. Soon a Yelp sales rep phoned. "The lady was sincere and cordial, but I didn't like the business model," Gutgsell says. "It didn't seem fair to me." She called repeatedly. He politely declined each time. Then, he says, positive reviews began disappearing and negative ones crept up his profile. He's still doing reasonably well financially, but he decided to join Beck's suit.
"This is about the principle. I'm not in it for the money," he says. "What I do want is to see them shut down entirely. That might not happen, but certainly we could see some legal standards set."
Across the country, in Somerville, Massachusetts, Grover Taylor first ran afoul of Yelp early last year, soon after he opened Eat at Jumbo's, an eatery catering to MIT students.
The Vermont native began receiving phone calls from a sales rep named "Art," who promised he could remove bad reviews for a $500 membership fee. Taylor responded that Jumbo's ran on word of mouth, so he couldn't afford it. Art threatened that bad reviews would be highlighted and good ones would disappear. That's exactly what happened.
"They're the modern-day Mafia. Maybe they're not holding a gun to my head, but they're playing the same game," says Taylor, who is also a plaintiff in the lawsuit. "It's too late for policy changes to help out. I just hope all this negative publicity finally tarnishes the company."