2010 has not been a kind year so far to Yelp. The popular customer reviews website is now facing not one, not two, but three separate lawsuits which essentially allege that the company has built a business by extorting local businesses.

They claim that, in an effort to turn listed businesses into paying advertisers, Yelp salespeople have offered to remove bad reviews, and that they’ve also removed good reviews when businesses turn down advertising solicitations. Not surprisingly, Yelp has vigorously denied the charges leveled against it. And it’s not waiting for a court date to make the case that it’s innocent.

Yelp’s CEO, Jeremy Stoppelman, has published several posts on the Yelp blog answering some of the lawsuit claims, and now Yelp has hired a production studio to produce a ~3 minute video explaining how Yelp works, and in particular, how it filters the reviews that are submitted by its users.

The video explains that reviews are filtered, the reviews that are displayed on a business’ Yelp page are constantly changing based on a variety of variables (such as user trustworthiness) even though they’re always available on the reviewer’s Yelp profile, and that the innermost workings of the Yelp filter can’t be publicly detailed because, as with, say, Google, doing so would simply make it easier for shills and scammers to game the system.

It’s easy to sympathize with Yelp when it comes to the difficulty in explaining the technology of filtering. It’s unclear how many of the plaintiffs suing Yelp (and their attorneys) truly understand that Yelp has a filtering system in place and that the reviews displayed on their businesses’ Yelp pages are not static. It’s certainly plausible that some of the plaintiffs alleging that positive reviews were removed after they refused to purchase advertising were removed as part of Yelp’s normally filtering but simply made the obvious assumption that the removals were some form of retaliation.

Unfortunately for Yelp, it can fight lawsuits in the court of public opinion, but it can’t win them there. The allegations that have been made against Yelp are serious, and they involve more than just Yelp’s filtering. Yelp, for instance, will be forced to defend its sales practices, which also factor heavily in the complaints.

What I think is most interesting about Yelp going on the offense to defend itself is that it should have gone on the offense a lot sooner. More than a few business owners have complained about Yelp over the years, and there has been talk of lawsuits before. Frankly, it’s somewhat surprising that it took so long for lawsuits to be filed. Yelp may not have been able to avoid them, but in my opinion, it would have done itself a favor by making a better effort to explain its filtering system earlier, considering making changes to how reviews are displayed to eliminate the appearance that reviews just disappear, and reevaluating when and how its salespeople approach business owners.

Notwithstanding all of these things, I also think it’s worth considering the primary challenge that Yelp faces as a standalone customer reviews website: the businesses it is trying to sell advertising to are the same businesses Yelp users may be fairly or unfairly criticizing. That puts Yelp in a sticky situation; at the same moment, its own business interests could be opposed to the interests of the businesses it courts as advertisers and the users who trust it to remain impartial.

If Yelp learns anything from these lawsuits, it may be that building a popular customer reviews website is easy, but turning it into a long-term business is a lot harder.

Photo credit: InternetDefamationBlog.