There’s an Illicit Trade in Positive Online Reviews

The Wild West

Online reviews are so important to businesses these days that they are essentially a form of online currency. Consumers use Yelp (YELP), Google Reviews (GOOGL), and the like to make important spending decisions — and companies are well aware.

However, online reviews are largely unregulated and can be manipulated by business owners.

Reviews Drive Spending

All consumer decisions, from restaurant choices to services, can be influenced by the reviews they read online.

And that translates into real dollars: Products with three or four-star ratings on major platforms enjoy three times more sales than those with one-star ratings, according to consulting firm McKinsey & Co. Reviews are so powerful that an increase of just a single star on a business’s Yelp profile can result in a revenue jump of 5% to 9%, according to Harvard Business School research.

Federal Crackdown

As reviews have grown in importance, regulation has remained scant, and practices like faking reviews to inflate online rankings have taken hold.

Some sellers will advertise gift cards or free products for customers who agree to leave a positive review, or even track down customers who have left negative reviews and pressure them into removing them. Other retailers appeal to customers’ emotions to garner better reviews. Even the common practice of soliciting survey responses and feedback after a sale falls under this umbrella.

But the world of online reviews might not remain a “wild west” for much longer. The Federal Trade Commission is cracking down on companies who compensate customers for positive reviews, as well as those who censor negative ones, as both practices constitute an attempt to deceive customers and deny business to honest retailers.

Read more reporting here .

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