Yelp has a problem that threatens its credibility: 16% of its reviews are fake, according to a report title Fake It Till You Make It by Michael Luca and Georgios Zervas. Fake yelp reviews are written by freelance writers in Bangladesh, the Philippines and Eastern Europe, and are paid $1-10 per review. They are also written by the businesses promoting themselves and attacking competitors. The report comes almost simultaneously with a $350,000 settlement announced by New York Attorney General Eric Schneiderman punishing 19 companies for fake reviews.
While one has to always suspect that sites like Yelp are being gamed to some degree, the 16% number is disturbingly high. Yelp is big enough that one would think that a few fakes wouldn’t matter. For example, a popular pizza place in my area has 2924 Yelp reviews, so a few bad reviews by a competitor would be a drop in the bucket. It takes a business sector of Yelp review fraud to get up to 16%, which, in the case of the pizza place, would be 468 fake reviews.
What's worse, that 16% is probably too low. That's the number picked up by Yelp's algorithms, but there are certainly some fake Yelpers that slip under the radar. According to the report: "There is considerable anecdotal evidence that this type of cheating is endemic in the industry."
Yelp outlaws paid reviews, but the practice is not always easy to police. For now, try to ignore the most extreme reviews (fake Yelp reviews are almost always 5 stars or 1 star), and give more credence to people using their real name. Crowd review sites like Yelp, Rotten Tomatoes and Angie’s List are one of the great gifts of the internet, but the incentives at play create a big potential issue with fraud.