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The Effects of Fake Online Reviews on Today’s Information Cascade

Positive reviews on the social-media ratings and review websites can be a very useful tool in today’s business marketing. TripAdvisor, for instance, has more than “60 million unique visitors per month and over 75 million reviews,” (1). The growing influence of these sites, however, has created a severe fraud of fake reviews by the companies themselves. According to Gartner (1, 2), these fake reviews will make up 15% of the total reviews on such rating websites by the year 2014, much higher than two to six percentages of now. Even on Twitter, there’s an application by the Status People, which shows you the possible percentage of your followers who are fake or inactive. An example of faker scores is shown below:

The impact of ‘information cascade’ has been increasing more than ever with the growth of world-wide web network. We learned in class that there are some basic ingredients of Information-Based Imitation. When there is a decision to be made among people, who make decisions sequentially over time, you can see what earlier people did. This allows you to see their actions, even though you may not know what private information they had. Using this information from other people’s behaviors and experiences alone can be very helpful if there is not much information to begin with (i.e. for the first time visiting a place or buying a product).

As a rational user of the online network, it is reasonable for us to read the reviews online and follow the good ratings. According to Jenny Sussin (2), a senior research analyst at Gartner, about “31 percent of consumers today check an online review before making a buying decision.” According to another survey by Forrester in 2011 (1), “81% of travelers find user reviews important . . . during their trip.” Google also conducted a survey recently (see below, 1). The result shows that both leisure and business travelers highly prioritize reading other people’s reviews online when they plan a trip.

When planning a travel, online review websites, such as TripAdvisor, are not the dominant tool. However, Google Search Engines and other travel agencies all have their own reviews and comments section. Clearly, online reviews and ratings have gained a tremendous power in all kinds of markets to both buyers and sellers. More and more consumers depend on the recommendations and ratings online. Business marketers now know that positive reviews online can help their business a lot, whereas bad reviews can make several damages to them.

However, there are weaknesses to these online websites. Rick Steves (3), a popular writer of travel guidebooks in Europe, notes several factors that lead to the fragility of TripAdvisor. Since ‘anyone’ can leave reviews on these websites, he fears that there can be negative reviews written by the opponent companies. As he travels, he also finds more hotels “offering a free breakfast to people who promise to write kindly about them on TripAdvisor,” (3). Not surprisingly, he also remarks that there are some consumers who threaten the hoteliers “with a bad review unless the hotel gives them a deep discount,” (3). Furthermore, in early October, a General Manager at a hotel in UK was arrested after “telling his workers to post fake reviews on TripAdvisor,” (4).

Since these fake reviews may result in poor experiences to some viewers who trusted on these reviews, the increase of fake reviews will ultimately break the cascade, and the online review system will fall apart. Thus, to maintain high reputations and reliability, these online review websites, such as Facebook and Yelp (2), are trying to catch such fake online reviews or ratings. Information cascade is reliable and efficient only if we can assume that all the reviews are true. Without proper implementation to pick out the fake online reviews, today’s online review or rating network is yet to be trustworthy.

-helloworld

Sources:

  1. http://www.business2community.com/online-communities/fake-online-reviews-on-the-rise-0309232
  2. http://www.cnbc.com/id/49539961
  3. http://www.huffingtonpost.com/rick-steves/tripadvisor-the-new-bully_b_2011656.html
  4. http://www.dailymail.co.uk/news/article-2214974/Hotel-boss-caught-telling-workers-post-fake-reviews-TripAdvisor.html

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