Is Yelp a Boon or Bust For Small Business?

The a-ha moment behind Yelp came courtesy of a persistent cold. Co-founder Jeremy Stoppelman came down with a cold he couldn’t shake, and couldn’t find a recommendation for a Bay Area doctor. He knew that his friends and neighbors must have opinions, and in seeking a way to harness their advice like a natural resource, Yelp was born.

Part online guide to local businesses, part social network, Yelp has built an incredibly loyal user base since its launch in 2004. The 21-city network has emerged as one of the most visited review sites on the Internet, with 13.5 million unique hits last month, by Google (Stock Quote: GOOG) analytic’s count. A large part of Yelp’s appeal comes from the way users, who call themselves Yelpers, can interact and create online identities through the site. “When you think about what makes Yelp special, I think that from the outset, it was that we focused on the user,” says Stoppelman, Yelp’s CEO. “As we built out Yelp we thought about it as this soapbox for people who had opinions that they wanted to share.”

For the small businesses reviewed by Yelpers, those many soapboxes can be both a boon and a burden. While Yelp may serve as a default web page for businesses without their own Web site and offer great exposure, the terms of use can feel stacked in Yelpers favor when proprietors receive negative reviews.

But Yelp is starting to recognize the need for small businesses to address claims. In April, Yelp created a special type of account for business owners, giving them a way to communicate with users privately, so as not to publicly fan the flames of a negative review. Then in June, the company purged a group of user accounts suspected of being set up only for the purpose of promoting friends and colleagues’ businesses. Still, some business owners have been left feeling like targets, lacking public recourse when they’re slammed online.