20 per cent of Yelp reviews are fake, study shows

How much faith do you put in online service reviews?

A newly released academic report shows that if it's anything close to 100 per cent, you may be in for a surprise.

Up to 20 per cent of all reviews on Yelp.com are potentially fraudulent -- up from only 5 per cent in 2006, according to the report, called "Fake It Till You Make It: Reputation, Competition, and Yelp Review Fraud."

The study's authors, Michael Luca of Harvard Business School and Georgios Zervas of Boston University, analyzed more than 310,000 reviews of 3,625 restaurants on Yelp, including those that had been filtered out by the site.

Among their findings was that fake reviews tend to be extremely positive or negative.

Just last week, the New York Attorney General's office announced the conclusion of a year-long investigation that resulted in more than $350,000 in fines for companies that had been creating fake online reviews.

The investigation, dubbed "Operation Clean Turf" found that many of the false reviews were written by freelance writers from the Philippines, Bangladesh and Eastern Europe who would receive between $1-10 for each review.

"Consumers rely on reviews from their peers to make daily purchasing decisions on anything from food and clothing to recreation and sightseeing," said New York Attorney General Eric Schneiderman in a press release.

"This investigation into large-scale, intentional deceit across the Internet tells us that we should approach online reviews with caution. And companies that continue to engage in these practices should take note: 'Astroturfing' is the 21st century's version of false advertising, and prosecutors have many tools at their disposal to put an end to it."

As for why companies would manipulate their online reputations in such a way, it all comes back to business.

According to one study cited by the Attorney General, a one-star rating increase on Yelp translated to an increase of 5 per cent to 9 per cent in revenues for a restaurant.

"Organizations are more likely to game the system when they are facing increased competition and when they have poor or less established reputations," wrote Harvard University assistant professor Michael Luca, co-author of the Fake It Till You Make It study. "More generally, this casts light on the economic incentives that lead organizations to violate ethical norms."

Yelp itself has responded to the study, writing that the findings "shouldn't come as a complete surprise -- as consumers increasingly turn to online reviews to find a local business, the incentive to artificially improve one's reputation also increases."

The site does stress that through the use of sophisticated software, it has been "successfully fighting these attempts to deceive consumers since the very beginning."

Only 75 per cent of reviews are highlighted at any given time by the site's algorithms, while those that are suspect are not published on a business listing page.