Use and be Used: Understanding the Role of User Reviews in the Online Marketplace

-- By StephenClarke - 05 Jan 2010

• Why don't you use standard web linking here? You could preserve the citation form if you need the sly parentheticals, and you would be providing easier access to the cited works.

Many traditional sources for expert reviews of goods and services are dying off. See, e.g., Motoko Rich, Are Book Reviewers Out of Print?, N.Y. TIMES, May 2, 2007 (reporting on the growth of book blogs and cancellation of book review sections in newspapers); Stephen Kamizuru, Electronic Gaming Monthly Cancelled: A Slow Death Quickens, DAILYTECH.COM, Jan. 9, 2009 (reporting that EGM, the oldest running magazine covering video games, would no longer be published). The impersonal marketplace of the Internet has, however, transformed customer reviews into a staple of American life. They appear in many different forms on blogs, message boards, and online storefronts. See, e.g., Melissa Rayworth, Moms who Blog—with Corporate Backing, MSNBC.COM, May 6, 2009 (product reviews in blogs); Amazon.com, Dan Brown, The Lost Symbol (retail site featuring user reviews). In 2009, a major consulting firm found that approximately 39% of all consumers depended on user reviews to help them make purchases. Many Consumers Have Turned Permanently Tight-Fisted: Survey, REUTERS.COM, Nov. 11, 2009. Most manufacturers and retailers have strong incentives to provide forums for reviews because they attract customers and fuel sales. See generally, Jennifer Alsever, Even Bad Reviews Boost Sales, CNNMoney.com, Sept. 28, 2009 (detailing the benefits of reviews for retailers). Unfortunately, user reviews are inherently unreliable and review systems can be profitably manipulated. As a result, both consumers and regulators need to take action in order to ensure that user reviews provide consumers with meaningful information regarding product quality.

User reviews are commonplace because they satisfy distinct psychological needs in an online marketplace crowded with specialized retailers and unfamiliar products. First, user reviews reduce the “vendor uncertainty” created by the risk that a consumer may purchase a product from the wrong retailer. Nan Hu et. al., Does Sampling Influence Customers in Online Retailing of Digital Music?, INFO. SYS. MGMT. & E-BUS. MGMT. (2009) [hereinafter Sampling]. As one retailer noted, “[r]eviews help build that initial trust.” Alsever, supra (quoting Jim Hobart, co-founder of AlpacaDirect.com). Second, user reviews reduce the “product uncertainty” created by the risk that a promising product may actually be unsatisfactory or comparatively undesirable. Sampling, supra. For online shoppers, user reviews take the place of the kind of physical inspection of a product and a store that enables a consumer to feel comfortable making a purchase. See generally, Laurie Kawakami, Giving Reviews the Thumbs Down, WALL ST. J. ONLINE, Aug. 4, 2005 (reporting how an executive at KB Toys had noted that online customers who cannot “touch and feel the toy” value reviews by “someone else like them”).

Nevertheless, the most influential product reviews are those most likely to be written by individuals with unrepresentative perspectives or corporate actors working to influence consumers. Empirical research conducted on book sales shows that customer reviews posted soon after a book’s release are “systemically positively biased” because early buyers are generally people such as avid fans who are disproportionately likely to respond positively to a product. See Xinxin Li & Lorin M. Hitt, Self Selection and Information Role of Online Product Reviews 3, 29 (2007). Becuase consumers do not discount for this effect, a significant number of consumers end up purchasing products that they would not otherwise buy due to false impressions regarding product quality. Id. at 27. Since early reviews have a disproportionate impact on sales, retailers and manufacturers have strong incentives to solicit early reviews from those most likely to favor a product or simply fake early reviews. Id. at 29 (noting the disproportionate influence of early reviews and the incentive for retailers to promote selection bias in early reviews). Unfortunately, the effects of selection bias do not dissipate with time. Purchasing bias, the bias created by the fact that people with higher product valuations purchase the product and others do not, ensures that product reviews are generally positive. See, e.g., Nan Hu et al., Overcoming the J-shaped Distribution of Product Reviews, 52 COMMS. OF THE ACM 144 (2009) [hereinafter Overcoming the Distribution] (reporting that more than 70% of books, DVDs and videos on Amazon.com had a rating greater than or equal to four out of five stars). Over time, the purchasing bias and apathy on the part of those with moderate views combines to create a body of reviews that reflect a “brag or moan” dichotomy. Overcoming the Distribution, supra, at 144. Most reviews are strongly positive, but the few negative reviews that exist are strongly negative. Id. The result is a marketplace in which user reviews tend to provide inaccurate information regarding product quality and often actively deceive consumers.

Consumers and regulators need to take action to ensure that this marketplace can be safely navigated in the future. First, consumers must demand that retailers provide useful information regarding user reviews. Any review system that does not enable user to see a reviewer’s review history or which fails to provide feedback mechanisms sufficient to establish reviewer’s reputations invites fraud and deception. Second, consumers should discount positive average review scores and demand that retailers provide meaningful statistical information regarding review scores. See Overcoming the Distribution, supra, at 146 (noting that standard deviation among review scores is a fair measure of product quality). Third, regulators need to focus on the early reviews put forth in newer online marketplaces and reviews regarding new products. As experience with the iPhone App Store has shown, new marketplaces crowded with new products incentivize deception because consumers are likely rely heavily on user reviews when navigating them. See, e.g., Brian Garner, Review Scam Leads to Removal of Over 1,000 Apps from App Store, APPLEINSIDER.COM, Dec. 7, 2009 (reporting that a large developer had been banned from the App Store for posting fake 5-star reviews of its own products); Gagan Biyani, Cheaning the App Store: PR Firm has Interns Post Positive Reivews for Clients, MOBILECRUNCH.COM, Aug. 22, 2009 (reporting that employees of a large successful public relations firm had posted early 5-star reviews of their client’s products).

• "Regulators" here means State Attorneys General, I think, unless you expect to find a way to get the FTC into the fray. You might have talked about that in the conclusion that one initially suspects will occur near the end of the essay.