Story at a glance
- Yelp reviews can predict how much a business’ revenue will grow.
- A Brookings study shows that businesses in majority-black neighborhoods get worse reviews than those in other neighborhoods.
- Even highly-rated businesses in black neighborhoods are seeing losses in revenue, the study shows.
What do you look for when you’re rating a business on Yelp? The storefront, cleanliness or how long you spent in line? New research shows that your judgements might be racist.
“For a small business in a black neighborhood, lack of access to capital could impact their ability to make cosmetic improvements, or they’re understaffed because of lack of capital,” Erica King, president of a nonprofit that provides loans to small businesses in underinvested communities, told the Next City.
Businesses in black-majority neighborhoods get consistently lower Yelp ratings and fewer reviews than other businesses, according to a new report by the Brookings Metropolitan Policy Program. This can have serious consequences for business owners in those neighborhoods. The study estimates that revenue grows by 1 to 2 percentage points for a one-star increase in Yelp reviews, and 2 percentage points for every 10 reviews — good or bad.
In general, minority-owned businesses earned higher ratings than white-owned firms, but the study found that in black-majority neighborhoods, even highly rated businesses saw less revenue growth than in neighborhoods that were less than 1 percent black. In fact, annual losses in business revenue are as high as $3.9 billion, the study said.
“It’s clear that business quality is not what is holding back profit growth,” said Andre Perry, Brookings fellow and lead author of the report, in a statement. “Distorted views and old stereotypes are drags on local economies that hurt everyone, especially those living and operating businesses in black-majority neighborhoods.”
Black people represent 12.7 percent of the U.S. population but only 4.3 percent of the nation’s 22.2 million business owners, the study quoted. Historically racist policies such as redlining and discrimination by banks have folded into the current reality, where the disadvantages black business owners face are compounded by rating and review services such as Yelp.
“Great businesses should be rewarded with more customers and higher revenue growth, but years of racial discrimination and neighborhood disinvestment has distorted that relationship in black neighborhoods,” said Jonathan Rothwell, Gallup principal economist and co-author of the report. “State and local governments are quick to offer huge subsidies to multinational corporations, but citizens should ask if they are paving roads and maintaining streetlights near high-performing businesses in black neighborhoods.”
So the next time you give a Yelp review (or don’t), ask yourself whether the judgments you’re making reflect the business itself or an inequity in resources.