New York Attorney General Eric Schneiderman today announced that 19 New York companies had agreed to cease their practice of writing fake online reviews for businesses and to pay more than $350,000 in penalties.  As part of an undercover investigation, representatives from the Attorney General’s office pretended to be the owner of a yogurt shop in Brooklyn and solicited several New York SEO companies for help in addressing negative reviews on consumer-review websites like Yelp, Google Places and Citysearch.com, as part of their reputation management services.

The Attorney General’s office noted that several reputation management companies used IP spoofing to post fake online reviews and some sought to buy online reviews from freelancers located outside the U.S. who would write and post positive online reviews in an effort to evade filters and algorithms designed to prevent fake reviews.

Over the past couple of years there has been increasing focus on the importance of online reviews. A Harvard Business School study from 2011 estimated that a one-star rating increase on Yelp translated to an increase of 5% to 9% in revenues for a restaurant. Cornell researchers have found that a one-star swing in a hotel’s online ratings at sites like Travelocity and TripAdvisor is tied to an 11% sway in room rates, on average.  Gartner projects that by 2014, between 10% and 15% of social media reviews will be fake.

Kudos to AG Schneiderman for trying to clean up the mess! [Read more…]