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Fake Online Reviews Eroding Consumers’ Trust

Fake Online Reviews Eroding Consumers’ Trust

By | 09.22.12
Fake Online Reviews Eroding Consumers’ Trust

Over the past few years, social media has had a dramatic influence on how businesses communicate with their customers and prospects. Perhaps more importantly, social media channels provide powerful platforms for those customers and prospects to communicate with each other.  One of the most powerful ways they communicate is through online reviews.

For local businesses, consumer generated reviews not only influence buying decisions, they can also have an enormous impact on search engine rankings. Businesses with positive reviews rank higher in Google Maps results than those with negative reviews. In addition to appearing at the top of Google’s map results, local businesses that win the review battle also frequently appear in the organic results.

Competition has become so fierce that many small businesses have begun compensating customers who write positive reviews. Others have resorted to creating fictitious online personas for the purpose of fabricating positive reviews for their businesses, even though Google specifically warns against these practices in its Places for Business policies and guidelines. More than simply a breach of Google’s guidelines, paid reviews, if undisclosed, are actually considered deceptive advertising by the Federal Trade Commission, and are therefore illegal.  And consumers are becoming increasingly suspicious about the authenticity of online reviews in general.

Fake and paid reviews are particularly prevalent among smaller businesses. A recent study of online review manipulation conducted by the National Bureau of Economic Research found that the majority of fake reviews in the hotel industry were generated by small, independent operators competing with branded chain hotels. However, large businesses have also begun using these deceptive practices.

According to a new study by technology research firm Gartner, Inc., fraudulent and paid reviews will account for between 10% – 15% of all online reviews by 2014.  In a press release, Gartner analyst Jenny Sussman said, “Many marketers have turned to paying for positive reviews with cash, coupons and promotions including additional hits on YouTube videos in order to pique site visitors’ interests in the hope of increasing sales, customer loyalty and customer advocacy through social media ‘word of mouth’ campaigns.”

Gartner furthermore predicts that at least two unidentified Fortune 500 businesses will face prosecution for their deceptive or fraudulent reviews practices.

Resources:

Max Nisen. Business Insider. “Fake Reviews Are Becoming An Even Bigger Problem For Businesses”. http://www.businessinsider.com/fake-reviews-are-becoming-a-huge-problem-for-businesses-2012-9#ixzz26yV1eqJu. 09/19/12

National Bureau of Economic Research. “Promotional Reviews: An Empirical Investigation of Online Review Manipulation”. http://www.nber.org/papers/w18340  August 2012

Gartner Newsroom. “Gartner Says By 2014, 10-15 Percent of Social Media Reviews to Be Fake, Paid for By Companies”. http://www.gartner.com/it/page.jsp?id=2161315 09/17/12

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