The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms

Chrysanthos Dellarocas
2003 Management science  
Online reputation mechanisms harness the bi-directional communication capabilities of the Internet in order to engineer large-scale word-of-mouth networks. They are emerging as a promising alternative to more established assurance mechanisms, such as branding and formal contracting, in a variety of settings ranging from online marketplaces to Internet search engines. At the same time, they are transforming a concept that had traditionally fallen within the realm of the social sciences into an
more » ... gineering design problem. This paper surveys our progress in understanding the new possibilities and challenges that these mechanisms represent. It discusses some important dimensions in which Internet-based reputation mechanisms differ from traditional word-of-mouth networks and surveys the most important issues related to designing, evaluating and using them. It provides an overview of relevant work in game theory and economics on the topic or reputation. It further discusses how this body of work is being extended and combined with insights from computer science, information systems, management science and psychology in order to take into consideration the special properties of online mechanisms such as their unprecedented scalability, the ability to precisely design the type of feedback information they solicit and distribute, and challenges associated with the volatility of identities and the absence of many familiar contextual cues in online environments. A fundamental aspect in which the Internet differs from previous technologies for mass communication is its bi-directional nature: Not only has it bestowed upon organizations a lowcost channel through which to reach audiences of unprecedented scale but also, for the first time in human history, it has enabled individuals to almost costlessly make their personal thoughts and opinions accessible to the global community of Internet users. An intriguing family of electronic intermediaries are beginning to harness this unique property, redefining and adding new significance to one of the most ancient mechanisms in the history of human society: online reputation mechanisms, also known as reputation systems (Resnick, Zeckhauser, Friedman and Kuwabara, 2000) are using the Internet's bi-directional communication capabilities in order to artificially engineer large-scale word-of-mouth networks in online environments. Online reputation mechanisms allow members of a community to submit their opinions regarding other members of that community. Submitted feedback is analyzed, aggregated with feedback posted by other members and made publicly available to the community in the form of member feedback profiles. Several examples of such mechanisms can already be found in a number of diverse online communities (Table 1) . Perhaps the best-known application of online reputation mechanisms to date has been as a technology for building trust in electronic markets. This has been motivated by the fact that many traditional trust-building mechanisms, such as state-enforced contractual guarantees and repeated interaction, tend to be less effective in large-scale online environments (Kollock 1999). Successful online marketplaces, such as eBay, are characterized by large numbers of small players, physically located around the world and often known to each other only via easily changeable pseudonyms. Contractual guarantees are usually difficult or too costly to enforce due to the global scope of the market and the volatility of identities. Furthermore, the huge number of players makes repeated interaction between the same set of players less probable, thus reducing the incentives for players to cooperate on the basis of hoping to develop a profitable relationship.
doi:10.1287/mnsc.49.10.1407.17308 fatcat:7l2e457fhzdinfloo6q23m5uyi