Can you trust online reviews?

Very recently an upscale hotel in the Catskills created something of an online firestorm when someone noticed an interesting policy posted on their website:

If you have booked the Inn for a wedding or other type of event anywhere in the region and given us a deposit of any kind for guests to stay…there will be a $500 fine that will be deducted from your deposit for every negative review…placed on any internet site by anyone in your party.

$500! The policy went on to state that the $500 would be returned once the negative review was removed, which just makes the whole situation sound like flat-out extortion.

When the story broke, the hotel found its listings on online review sites bombarded with negative reviews and quickly removed any mention of the policy from their site, claiming that the fine was simply a joke they had forgotten to remove from the site years earlier.

The price of opinions

It’s easy to see that imposing a $500 fine for sharing a negative opinion is a pretty rotten idea, but it’s even easier to see how a company might arrive at that point.

Online reviews from regular Joes and Janes can make or break a business. A recent study by the Harvard Business School found that a one star ratings increase on Yelp can lead to a nearly 10 percent increase in revenues. People are increasingly conditioned to look to the internet before making any sort of spending decision and what they find there has an enormous impact on how they spend their money. Yelp alone has over 132 million regular users in 27 different countries.

But just as good reviews can increase revenues, bad reviews can practically ruin a business. That’s why seemingly sane business owners might resort to extortion to prevent negative reviews from finding their way online.

It’s also why a lot of what you see online is a lie.

Reviews for hire

Last year, the Attorney General’s office in New York issued more than $350,000 in fines to a variety of companies found to have stuffed online review sites with fake reviews. These companies would hire freelance writers in foreign countries and pay them somewhere between $1 and $10 per review.

Yelp itself recognizes that at least 25 percent of all user submitted reviews on their site are at best suspicious, and at worst outright fraudulent. They claim to stringently monitor all reviews to ensure that only legitimate reviews are posted. That, however, leads to another potential ethical concern.

You see, most of Yelp’s revenue comes from advertisements – as much as 70 percent of Yelp’s annual revenue is generated by advertising for local businesses. These are the same local businesses, you might notice, that users are trying to gauge an accurate opinion of, based on Yelp reviews.

In 2010, multiple businesses across the country filed a series of class action lawsuits against Yelp. They claimed that Yelp’s business practices amounted to extortion (lot of that going around…) – essentially, if you don’t agree to advertise with Yelp, your reviews may suffer as a consequence.

Where to spend your money?

Of course, there are still a lot of really valuable opinions out there on the internet. And there’s always value in hearing from real users of a service or product. The key is to bring an appropriate amount of suspicion to every review. There are also a few easy ways to spot fake reviews:

  • Check the reviewer’s history. If they’ve posted the exact same review for multiple businesses, that’s a red flag. If they don’t have any other reviews on the site, that’s also a red flag.
  • Pay attention to the language. Even marketers don’t talk like marketers when they’re off the job. If the review sounds like advertising, it probably is.
  • Watch for competitor name drops. If multiple reviews says something like, “This didn’t work at all, but then I got BRAND X and it worked great!” that’s a little suspicious.
  • Filter out overwhelmingly positive or negative reviews that don’t say anything. A five star review that says, “BEST CHILI EVER” and a one star review that says, “WORST PRODUCT EVER” are equally unhelpful.

You want to spend your hard-earned money on things and experiences that are valuable and worthwhile. Online reviews can help you make those important choices, but just remember that not all reviews are created equal. Happy hunting!

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

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