One of the most interesting business controversies that I have seen in a long time is the growing brouhaha around Yelp, the online consumer review site. This increasingly heated controversy is very instructive about a key aspect of social media (consumer generated reviews of businesses and products/services).

The controversy also shines a big spotlight on how to effectively manage a particularly difficult issue (or how "not to") and make sure it does not spin out of control into a major crisis for your brand.

The crux of the Yelp issue is that a growing number of small businesses (who are central to Yelp’s revenue model when they choose to advertise on the site) are complaining that Yelp sales representatives are a bit too aggressive (even extortionate) in trying to get them to run ads on the Yelp site.

Several businesses have launched class action suits against Yelp, claiming that the company’s sales persons tried to press them to run ads by offering — or threatening — to manipulate reviews. I have read some of the examples of these alleged extortion tactics by Yelp, and they are not pretty.

Yelp claims it is all just a big misunderstanding. They say the small businesses don’t understand Yelp’s algorithmic filtering technology that automatically removes reviews that might be gaming the system. And, Yelp categorically denies that its sales people try to extort small businesses into advertising on the site.

The New York Times recently ran a Q&A with Yelp’s co-founder and CEO Jeremy Stoppelman. The article by Times reporter Kermit Pattison is an excellent summation of the Yelp controversy. It also highlights the serious mistakes that I believe Yelp and Stoppelman continue to make in their handling of this unfolding crisis.

There is no questioning the fact that this is a real and growing problem for Yelp. The CEO may put on a brave face, and essentially blame the problem on a bunch of recalcitrant customers and their ambulance chasing lawyers, but it is a problem nonetheless. In the Times story, Stoppelman even describes what he views as a "conspiracy theory" amongst some of those unhappy small businesses and the media, too. 

(I detect echoes here of the disgraced former Illinois Governor Rod Blagojevich, who stubbornly blamed the media and everyone else for all of his problems. Lots of good that did him!)  

Mr. Stoppelman should realize that the causes of a crisis like this are never that easy to define, or one-sided. When there is this much smoke coming from the direction of your customers, there is probably fire somewhere. To just deny any of your own culpability and try to tough your way through it by claiming everyone else is wrong, is a recipe for disaster. Sure didn’t work for Blago!

I really believe Stoppelman is driving his company toward a similar disaster, but he seems to not know it, or care. Certainly, his overly defensive interview in the NYT article this past Thursday, March 25 underscores the fact that he believes Yelp is totally in the right and that the problem is just a result of a few bad apples in his small business customer base.

In a March 15th Business Week article on the Yelp crisis, CEO Stoppelman was quoted as saying in his blog, "Lady Justice needs a lawsuit filter." Wow, the arrogance of that statement is pretty breathtaking. Stoppelman sounds a lot like some other hubristic business executives (or worse, politicians) who just could not fathom that their company/organization could do any wrong, until it literally blew up in their faces.

Remember, it is almost never the actual cause of the crisis itself that inflicts the greatest damage to you and/or your brand. It’s how you choose to manage the crisis, and especially if you attempt to cover it up in any way. That is reputational suicide.

I actually believe Stoppelman’s explanation about the misunderstandings around Yelp’s filtering technology and how it may remove positive posts that small businesses might want (or asked friends and family to put up there on Yelp). However, I am not sure I believe him when he claims that his sales reps never extort customers into buying ads. The fact is that a small, still unprofitable company like Yelp has to demonstrate to its VC investors that its model is working. Aggressively driving sales is the most important way to accomplish that goal.

Unfortunately, sometimes in the zeal to make the numbers and show your investors that your plan is actually working, your people can cross ethical lines. It happens all to frequently, and not just with web start ups like Yelp. 

For Yelp’s sake, I hope Stoppelman is a lot tougher internally on his sales organization than he lets on in public. His public stance is that "we did nothing wrong..nothing at all." Trust me, in the long run, that is not going to work for Yelp or its CEO.

The other big issue here is the growing social media phenomenon of consumer generated reviews, and how they operate in the context of Internet advertising. The Yelp crisis highlights the concerns that a lot of businesses have about the emerging marketing and advertising opportunities on the web.

In this new Wild West marketing environment, companies and brands very often don’t know what is really working online or whom they should trust.

I have had many clients say to me that they don’t trust search marketing because the minute they open an account, their monthly spend hits their ceiling for the month. And, they don’t necessarily see any additional leads or even traffic for the search dollars they just invested.

It happened to me when I first advertised on Citysearch back when they were a client of my firm THUNDER FACTORY. After winning the business, we established a search account on Citysearch and almost immediately hit our $500 monthly ceiling. The problem was that we saw absolutely zero leads coming in as a result of that search spend, or even a measurable increase in traffic to our website. The same thing happened month after month. I gingerly raised my concerns (or just questions) with Citysearch, and they just gave me the run-around. (BTW, this was happening right when the explosive issue of "click fraud" was front and center in the media.)

Yelp, and all of us who are pushing these new media and marketing channels, needs to make sure that everything they do to advance their model is transparent and beyond reproach. At this point, Yelp has not met that standard. The CEO, Mr. Stoppelman, should try a bit more humility, and less reflexive blame-shifting, in how he is managing this unfolding crisis. He needs to listen a lot more and tell people (especially the media) that he is listening to his customers and doing everything he can do to ameliorate their concerns.

For Yelp, continuing to push the argument that "we’re right and everyone else is wrong," will only result in further straining credulity for its life-blood customers, and ultimately even its 30 million consumers that the company claims happily visit the Yelp site every month.

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