Forget fake news: Fake reviews are costing us billions

Fake online reviews plague small businesses, costing them USD $152 billion in 2021. Damages over lost revenue must be considered a part of the Australian government’s social media investigation. But financial costs aren’t the only thing founders have to worry about, as fake reviews also take up executive time and employee headspace.

Fake online reviews cost small businesses USD $152 billion globally in 2021. 

With 77% of consumers saying they “always” or “regularly” read reviews, those who leave false or sabotaging write ups are a fearsome enemy.

Small businesses aren’t the only victims either – 61% of electronics reviews on Amazon are fake.

The Australian Small Business Ombudsman Bruce Billson is pushing the government to act: “Our office is particularly concerned by the posting of negative reviews that are not founded in real customer experiences…. These reviews damage business reputations and cause significant distress to staff and business owners.”

As your startup grows, especially if you are physical product-based, it may not be a case of if you’ll get targeted by reviews scammers, but when. 

With fake reviews influencing USD $900 million of e-commerce spending in Australia, how can you act to protect yourself?

Fighting the fakery 

An immediate solution is requiring proof of purchase to leave reviews. This is what ProductReview does to secure authenticity. But this doesn’t prevent users leaving bad reviews on Google or the App Store. It only protects you if users are going out of their way to seek reviews, rather than coming across them on public platforms.

A more extreme solution is to file defamation cases against platforms like Google to unmask anonymous reviewers.

In 2020, Google and Optus handed over information that revealed the identity of an anonymous negative reviewer after Melbourne dentist Dr Matthew Kabbabe filed legal action.

Amazon filed a lawsuit against over 10,000 Facebook groups that acted as fake review marketplaces. Its aim was to learn the fake review leader’s identities, shut down the groups and compel them to return their “ill-gotten gains from brokering fake reviews.”

In response, Meta took down half of more than the 10,000 groups reported by Amazon and continues to investigate the others.

Obviously, this is all well and good for e-commerce giants. For startups, litigation is time consuming, costly, and becomes impossible if you’re targeting multiple reviewers. 

Bruce Billson recommends “build[ing] out tools that prevent fake reviews”, and dedicating time to monitoring and moderating. A worthy investment, and yet another reason to start staffing that IT department.

Fake business 

Fake reviews have two petty purposes: to slander a brand, or because of personal biases

A joint study between MIT and Northwestern University looked at 325,000 reviews of an unnamed apparel company and found 16,000 fake reviews where customers didn’t buy anything. 

Most of the fake reviews came from people who didn’t like the website design or disapproval of the company’s business practices – such as importing clothing made outside the US.

Unfortunately, fake reviews aren’t uncommon as 62% of customers think they read a fake review within 2022.

Going a step further, sometimes competitors or bad actors employ AI chatbots to leave bad reviews en masse.

Digiday reported that: “Multiple small companies report they’re seeing one-star reviews of unverified purchases on their pages that are written with bad grammar, coupled with remarks like, ‘Great product satisfaction guaranteed.’”

But fake reviews can go both ways.

We all know businesses can buy up positive fake or solicited reviews to boost sales. 

It’s one thing to send out free stuff in return for an honest write up – it’s another to go on content sites and pay for false ones.

From a customer perspective, there is again some protection provided by public platforms. Yelp combats it with a 90-day search ranking penalty policy that dings companies who keep listings with fake reviews.

If companies persist, Yelp puts a “Consumer Alert” warning on that business’ listing review to inform potential customers this company uses fake reviews to stand out.

But what a company does on its own website or social media feed is much harder to police.

Thankfully, any benefit gained from fraudulent positive reviews tends to be short-lived. When companies buy up positive fake reviews, they get a significant but short-term increase in average rating and review numbers. After they stopped, their product average ratings fell and one-star reviews increased.

A slightly more honest route is the use of influencers. But thanks to eroding trust, changing regulations, and a shift towards transparency, you’ve gotta be authentic.

#TikTokMadeMeBuyIt has 6.6+ billion views. Instagram’s entire value is based on its huge effectiveness as an advertising platform.

The problem is that Instagram has become almost exclusively an advertising and influencer space. Authentic and engaging content is diminishing and some are saying influencer culture is on its way out.

But word-of-mouth and influencer marketing are still powerful ways to gain the trust of new customers, and there’s still money to be made, as brands are making an ROI of USD $5.78 for every $1 spent on influencers.

It’s also possible to do it ethically, by targeting creators whose lifestyles genuinely align with your values, and who are recommending your product in good faith.

Business impact

The main impact for customers is being lured away from quality businesses and towards shady ones. 

Companies who use fake positive reviews as a business strategy tend to be in low quality product spaces. It’s the customer who gets hurt, falling for the hype and wasting their money. 

It’s also financial. While USD $152 billion was lost worldwide due to fake online reviews, goods and services also tended to rise an extra $0.12 cents per US dollar spent to compensate – meaning customers spent an extra 12% due to fake reviews.

For startups, the impact is obvious. When you’re new and don’t have many customers, that precious public feedback is all you have. 

It’s less of a worry for incumbents.

Netflix has 223.09 million global subscribers, but even though the streaming service was ranked last for “value satisfaction,” Netflix is still #1 for “must-have” subscriptions. Even after it lost 1 million subscribers due to price hikes, it’s still king of streaming platforms.

Netflix has proven value. Nobody’s not using it because of a bad review. In fact, no one’s seeking Netflix reviews. 

It’s small and unproven businesses who are at the mercy of them.

A better alternative 

E-commerce platforms are wising up to fake review groups, but business owners can combat fake reviews through word-of-mouth (WOM) marketing.

Since WOM isn’t reliant on online reviews, business owners can provide customers with an epic first experience to such an extent they tell their friends.

It’s so powerful, in fact, that 74% of consumers identify WOM as a key influencer in their purchasing decisions. And 64% of marketing executives believe WOM to be the most effective form of marketing available.

Business owners can also host brand activation events to showcase their product firsthand.

By generating engagement with an audience, startup founders give people a reason to be excited about their products and how they perceive a startup’s brand.

When done right, brand activations can blow away participants as 98% of people feel inclined to buy a product immediately after attending an activation.

When dealing with bad reviews, it’s best if startup founders get hands-on and address them directly on review sites or social media.

Jet Blue’s Twitter responds to an unhappy customer whose TV screen isn’t working and asks them to direct message the team to make it right.

In general, it’s a good rule of thumb to reply to every comment, whether it’s positive, negative, or neutral. Doing so increases brand recognition and allows founders to connect better with customers.

A major source of reviews, outside of review sites, is social media.

Startups can turn negative reviews into positive PR by making a FAQ to set expectations and sharing resolved negative reviews on social media pages.

Sometimes, customers feel like a startup’s product didn’t live up to expectations. To clear things up, founders can set up a FAQ to address common complaints to eliminate any confusion.

But if a genuine mistake was made, nothing feels better than redeeming yourself – especially if it’s a problem that can hurt a startup’s reputation.

Sharing resolved negative reviews on your startup’s social media page urges customers to reach out to you so you can make it up to them.

As the war against fake reviews is ongoing, business owners can use marketing alternatives to successfully jumpstart their business and net positive reviews. In the sage wisdom of Taylor Swift: “Nothing ruins your day more than getting a bad review.”

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