Reviews, ratings and repercussions

Any business that relies on word of mouth will know its business can be destroyed by a bad online review. So it was probably with a little glee that some hotel owners read of the UK Advertising Standards Association decision to gag online travel giant TripAdvisor from claiming all its reviews are from real travelers.

The ASA told TripAdvisor not to claim or imply that all the reviews that appeared on its website were from real travellers, or were honest, real or trusted.

The watchdog's ruling is a major milestone for companies seeking to cash in on reviews, which in Australia includes Telstra online business Sensis, its new business partner and TripAdvisor competitor Yelp, News's Digital's True Local, Urban Spoon, Eatability and financial services infomediary Mozo.

Forrester Research says consumers love reviews, so much so that in the US consumers now rely on them for the majority of purchases. But it's an industry built on incentives, agendas and personas, and that can make it difficult to know who to trust.

It defies logic that consumers trust the reviews of complete strangers over the claims made by companies. Those companies may be full of spin, and some cynicism is required, but in most countries there are laws that are enforced for stopping companies from making misleading claims. There's no such law that applies to reviewers, other than defamation, made problematic by the fact that many reviews are anonymous.

Sensis has said it won't be selling ads through its partnership with Yelp until next year, probably because it has to wait for Yelp to build a viable community and bank of reviews in Australia. This takes time, especially when you offer little more than social kudos to the reviewers helping to build the community.

Mozo and others have taken a different tack, launching competitions to incentivise people to write reviews, but you only need to look at the many one line basic “reviews” of the banks on Mozo to see this adds little value.

It's inevitable that mobility and social media will have a big impact on the reviews business which at the moment is heavily skewed towards stars and paragraphs.

Facebook and Google are already doing an interesting job connecting brands and individuals, and both the social networking giants are determined to avoid anonymous users from frequenting their platforms.

Australian retailers are also stepping up their efforts to drive reviews at every opportunity. As this happens it's likely consumers will look more closely at their friends for reviews rather than the less known but currently larger group of reviews from strangers.

Services like Hunch, which feed on data from a user's Facebook and Twitter accounts, and then asks them to rate things such as food, music, books and movies to improve its recommendations, are only likely to gain traction.

As reviews and ratings improve, companies will need to get better at strategically using the feedback to enhance the customer service offered by their business and for product development and innovation. Right now we're just scratching the surface of what's possible, and it's not surprising those companies limiting themselves to one dimensional and anonymous reviews are being subject to greater scrutiny.