Online reputation plays a crucial role in some of the biggest technology companies founded over the two decades, many of which are marketplaces. In 1995, eBay! launched it’s online auction marketplace, facilitating transactions online for new and used physical goods: today it’s the largest online marketplace with over 100M users and $68B of goods sold annually. Companies like eBay!, AirBnB, Etsy, Skillshare, Rent The Runway, Taskrabbit all rely on a critical piece of data: trust, most often in the form of user reputation.
In order for these marketplaces to facilitate transactions between users efficiently and effectively, user profiles representing reputation data is necessary to help establish trust amongst users and within the marketplace. To be able to rent out your home to a stranger, send money to Russia for a laptop, or take a class on web development from someone with a college degree, some missing information has to be fulfilled: trust in a user/marketplace’s quality and ability to satisfactorily provide what it says it will. The result of these various online reputation profiles almost creates what might be thought of as an ‘online community’, one in which are online behaviors and actions are used as the basis of our individual profiles.
My friend David Haber (@dhaber) thinks about this stuff all the time. He recently published an amazing post on Web Marketplaces in which he identifies some of the most important characteristics in evaluating the success of online marketplaces, namely:
- Size of the market
- Excess Capacity
- Customer Experience
David provides a great snapshot of the dynamics facing marketplace technologies. For an even more in-depth analysis of the way these type of platforms evolve and scale over time, check out Prof. Tom Eisenmann’s working paper with HBS colleagues: Platform Envelopment.
But shying away from a more detailed analysis of marketplaces themselves here, we can still learn more about online marketplace characteristics by adding another category to consider:
6. Trust: the ability to measure, maintain and access online reputation profiles
The creation of online reputations for the consumers (and producers) in online marketplaces is essential for providing the fundamental trust necessary for individuals to transact and form relationships with other users and businesses online.
In the context of the categories above, online reputation is a key underpin for both 3) Friction/Opacity & 5) Customer experience. For friction/opacity, this deals with the information that is readily available (or not) in the marketplace, and a valuable piece of this information often deals directly with reputation, e.g. for reliability and accessibility. On AirBnB for example, the response rate (i.e. frequency of responding to messages from other users) is prominently displayed for users looking to rent out their homes. The response rate is one of AirBnB’s most valued piece of data, as it represents how active, attentive and engaged their hosts are in interfacing with potential guests: a potential friction point if hosts are slow/disengaged from future guests. High response rates means fast and fluid communication between users, a strong value for AirBnB as a marketplace for facilitating connections, and a well-monitored metric for their business.
Online reputation is also an essential component of 5) Customer experience. Looking again to AirBnB as an example, we see reputation manifest itself in customer experience via user testimonials (i.e. the quantity and content of reviews from individuals that have stayed with you). Having a reputation for being an amazing host on AirBnB means a large quantity of positive testimonials from guests that have stayed with you. This data acts as a signal (an important sociological concept to explore in a future post) of trust, inviting in potential guests with information around the safety and quality of the relationship. This applies to other marketplaces as well: the number of students and quantity of positive reviews for a teacher on Skillshare indicates what type of experience a prospective student can expect, and the number of feedback stars of a Taskrabbit provides security around the history of the errands they’ve run successfully. Ensuring great customer experience is a tenant of marketplace companies, particularly at the earliest stage when just starting: it’s hard to operate without a liquidity of data points that speak to the quality and effectiveness of what your platform promises to offer.
Online reputation acts as a digital analog for a concept we’re very familiar with in our real-world day-to-day, as trust is a powerful piece of information. It may be that it’s easier for us to take for granted basic trust around identity and security, but online where there is a computer and internet separating you from other users and companies: the need for trust and reputation online becomes glaringly necessary in the absence of in-person information and assurance.
Next post: How online reputation also acts as the basis of online social networks such as Facebook, Quora, and LinkedIn. The role trust plays in these communities is also critically important, and worth it’s own discussion given the greater focus on social relationships rather than transactions between users.
*Note: this post is published as part of a series, ‘Online Reputation’, inspired by Harvard’s CS105: Privacy & Technology & taught by Prof. Jim Waldo (you can find his writings here).