Why doesn’t Amazon police their own product reviews? Market failures in everything.

About a decade ago I started seeing a lot of fake product reviews on Amazon.com. They used to be easy to spot because sometimes a bunch of reviews in a row would have almost exactly the same comments. Or sometimes you could click on the person who left a suspicious rating and see all their other ratings which might have pretty much the same text and be either five stars or one star because they were either trying to maximize a score or lower one. I emailed Amazon about it years ago and I assumed that they would eventually do something about it, but the problem kept getting worse. It seems that Amazon finds it profitable that a large percentage of its product reviews are fraudulent. If they wanted to stop the problem, they have ample resources to dramatically curtail it. In fact, a little startup called Fakespot.com provides a valuable service testing customer ratings at Amazon for fraud. Their service isn’t perfect, but it is a lot more accurate than Amazon’s raw rating. There is also ReviewMeta.com which offers the same service, but I don’t have as much experience with it. Professional sellers who use Amazon are well aware of these issues.

You can test which reviews are more accurate for yourself. Look back at stuff you have bought in the past and now that you have a better idea of how good it is, does the value of your purchases seem more correlated with the Amazon ratings or with the FakeSpot adjusted ratings? Amazon DID try posting “verified purchase” with reviews and that seemed to help for a while, but the scammers soon just started to get “verified” by buying a product from themselves before writing fake reviews. That change generated even more profit for Amazon from the fake reviews because Amazon directly makes a commission from each fake review when the fraudulent reviewer “buys” a product and then Amazon makes more money from the hyped reviews luring naïve customers to buy more stuff from Amazon. Although meta review websites like FakeSpot can partially correct this self-inflicted market failure at Amazon, very few people use these services, and Amazon could do a much better job weeding out the fraudsters with its vast resources and richer data. This is an example where fraud is profitable for the sellers of the products and for Amazon too.

So spread the word. Check FakeSpot before trusting reviews. My next question is: will Fakespot eventually be corrupted by the fraudsters once enough customers start using Fakespot to make it profitable to bribe Fakespot?

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Posted in Managerial Micro

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