Do ‘Black-owned’ business labels work? Harvard study says yes.

A Harvard study found that when Yelp rolled out a feature that let users search for Black-owned restaurants, it increased sales.Bloomberg/Photographer: Bloomberg/Bloomber

Tech companies from Yelp to Instagram have increasingly been experimenting with ways to highlight and promote Black-owned businesses on their marketplaces.

But Michael Luca, an associate professor at Harvard Business School who studies ways in which tech companies can create a more inclusive society, wanted to know one thing: Are these practices actually working?

According to a new study he coauthored, which focused on Yelp’s decision to introduce a “Black-owned” business label in June 2020, they are. He found that the feature led to a 30 percent increase in sales for those businesses, suggesting there had been pent-up demand from consumers to support them.

The study, which was based on data shared by Yelp, looked at restaurant activity on the platform before and after the Black-owned business button was introduced. Luca found that the label also led to a 10 percent increase in weekly in-person visits to the restaurants, showing that the impact went beyond online engagement and into the real world.

Based on previous research, including his own on racial discrimination on short-term rental site Airbnb, Luca thought that highlighting Black-owned businesses might potentially lead to unintended, negative consequences.

“If you look at the history of social science research, in most cases, when you raise awareness of the race of a Black person in America, it leads to anti-Black discrimination,” he said.

Tech companies have tried to limit discrimination by implementing “blinding systems,” which conceal the race or identity of the people on their platforms, Luca said.

Airbnb has been the subject of criticism over the years because it used to prominently display the names and pictures of its short-term rental hosts. It has since taken steps to reduce the amount of information guests see about hosts before they book a rental.

Luca said the findings from Yelp show that marketplace companies have an opportunity to disclose information about race in a more “targeted and thoughtful way.”

“Yelp is not putting pictures and names of the restaurant owners on top of every listing,” he said. “Instead, they’re allowing people who want to find a Black-owned business to more easily search for it.”

Interestingly, Luca’s research found that the demand for Black-owned businesses on Yelp came largely from white consumers. He said that supports the idea that Yelp’s new label increased inclusivity, instead of, say, increasing the number of Black customers that visited Black-owned restaurants.

But the fact that there is demand for Black-owned businesses is “context specific,” he said, meaning there’s no way to know whether a similar strategy would work if applied to another marginalized group or during a different time period.

Though Luca’s study focused on Black businesses on Yelp, he said the findings could be applied to other tech companies as they continue to roll out new features intended to help Black business owners.

“The extent to which we should care about these initiatives depends on if it’s actually helping to improve the bottom line,” he said.