useit.com Alertbox Sept. 1999 Reputation managers happening

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Jakob Nielsen's Alertbox, September 5, 1999:

Reputation Managers are Happening

A reputation manager is an independent service that keeps track of the rated quality, credibility, or some other desirable metric for each element in a set. The things being rated will typically be websites, companies, products, or people, but in theory anything can have a reputation that users may want to look up before taking action or doing business.

The reputation metrics are typically collected from other users who have had dealings with the thing that is being rated. Each user would indicate whether he or she was satisfied or dissatisfied. In the simplest case, the reputation of something is the average rating received from all users who have interacted with it in the past. Other systems are possible, as discussed below.

Current Reputation Managers

• eBay (auction site) keeps reputation ratings for all the people who offer things for sale on the site. After buying a collectible in an auction, you can go back to the site and rate the seller for prompt shipping and whether the physical item actually matched the description in the auction. This is the most literal of the current reputation managers: eBay literally keeps track of the reputation of each seller. Prospective buyers can feel safe bidding on items from people they have never heard of: if the reputation ratings show that many previous buyers were treated well and thought that the textual descriptions matched the actual collectible, then the seller is almost certainly honest and worth dealing with. Also, sellers are highly motivated to offer great service to every single buyer: a single customer with a bad experience will ruin a seller's perfect reputation rating and multiple bad experiences (quickly followed by negative ratings) will put a seller out of business for good.
• Epinions (electronic opinions) is the most interesting new reputation manager: it collects user feedback, reviews, and ratings for a wide range of products and services - all the way from laptop computers to museums in New York. When you want to buy something, you go to Epinions first to check the reputation of the different models you are considering. You can also check the reputation of the manufacturer's other models: do they in fact work as advertised or do people experience problems after owning something for awhile? Despite all the hype about ecommerce, it is so hard to buy anything on the Web today because you never know whom to trust. It has close to zero value when somebody who sells a product claims that it is great or that it meets certain needs. Having an independent service to guide customers to good products and warn them against lemons will be one of the most important enablers of ecommerce.
• Google (search engine) maintains a reputation rating for every site on the Web and uses this data to sort the return set for searches to place the highest-quality hits on top of the list. Google derives its estimate of a website's quality from the number of other sites that link to it (as well as some fancy math that gives greater weight to links from more important sites and less weight to links from minor sites).
• Go (search engine formerly known as Infoseek) is adding a human touch to the service in the form of so-called Guides: individuals who are experts in a certain area and provide Go with their ratings and comments on sites within that area. These comments combine to form the reputation of the sites. But more interestingly, the Guides themselves are rated for the quality and value of their contributions and rise through the ranks based on these reputation metrics. More advanced Guides (with high ratings) are responsible for larger areas of the service and have some form of management responsibility for lower-rated Guides.
• Slashdot (discussion board) lets users rate the usefulness of the various comments in a discussion thread. When reading a thread, you can set an option to show only the N highest-rated postings, thus significantly increasing your experienced signal-to-noise ratio. Unfortunately, the ability to filter out poorly rated comments is not turned on by default, so only diligent users who study the slightly confused user interface will discover this useful feature. Slashdot also awards regular users "karma" points which are a true reputation manager: if you have done well in the past, you have high karma, which again means that your actions carry more weight.
• Third Voice is an annotation service that allows users to write comments on any Web page in a transparent overlay layer that is shown to other users of the service. These annotations are not under the control of the website owner since they come directly from the Third Voice server. The annotations combine to a kind of reputation for each site: for sure, they can be used to warn unsuspecting visitors about shoddy products and false or misleading advertising. Since the annotations are natural language text, they are less useful for finding the best sites or doing any kind of computations.

Reputation Manager Problems

Amazon.com pioneered the idea of customer reviews, but has been plagued by unreliable reviews (an author's enemies post a flood of negative reviews; followed by the author's friends who post glowing reviews). Also, users never know whether they can trust reviews that are posted as part of a site that profits from selling the product.

Google and eBay avoid these problems by aggregating ratings across a very large sample. Google also benefits from the fact that Web authors are reluctant to include a link unless they actually want to guide users to the destination site. Even if there are some spurious links, they vanish when doing statistics across a billion pages with several billion links. eBay collects reputation rankings from the specific people who actually bought something from a seller, thus avoiding comments from random users.

Epinions is a double reputation manager: not only does it rate products and services, it also rates reviewers. After users have read a review, they are encouraged to vote on whether they found the review useful or not. In showing lists of reviews to users, Epinions places the most highly rated reviews on top, thus assuring that readers will focus on the best content. Also, reviewers build up status depending on the user feedback on all their reviews, meaning that people will be reluctant to contribute low-quality reviews to the service. A final interesting twist is that users earn a micropayment every time somebody reads one of their reviews. Thus, people are motivated to write valuable reviews, not just to gain a high reputation rating, but also to earn money.

Future of Reputation Managers

Reputation managers overcome the complaint against shop bots that they purely focus on price and ignore customer service. Once it can include an independent source of rating data, a shop bot can show users:

• what they can buy
• where they can buy it
• how much each option costs
• how good each option is
• what level of customer service to expect from each vendor (e.g., average fulfillment delay, whether shipments usually arrive in good shape, whether the vendor is decent in dealing with returns, etc.)

Reputations managers will thus cause a renaissance for good customer service: the way a company treats any individual customer will be fed directly back into its reputation ranking and will influence its future sales.

Investors will finally get a handle on intangible concepts like "brand equity" and "goodwill": just go to the reputation manager and look up how customers rate the company and various aspects of its service. If a company does something wrong, its reputation statistics will rapidly drop, immediately followed by a massacre of the stock valuation. If a few Belgians become sick from drinking a soft drink, then the manufacturer may lose billions on Wall Street five minutes later. Another reason reputation managers will contribute to highly improved product quality and customer service.

Disclosure: I am on the advisory boards for Epinions and Google.

See Also: Complete list of other Alertbox columns