Digital reputation is online identity
A few years ago, Amazon.com started offering a new service. Instead of acting as the sole supplier of goods to their members, they started validating some merchants (and individuals) and allow them to sell items to Amazon.com’s members too. The mechanism to become an Amazon.com seller is allegedly simple. There are many types of sellers, some of which are invitation-only and will deal through Amazon.com as an intermediary; others are open to individuals and small companies and require little else but registration, and are allowed to sell directly to the end-user. Amazon.com’s idea was simple: if we can cut down the red tape in gathering more products to be sold through our services, we will increase the number of happy customers and our revenues at the same time.
eBay had long since gone a step further: eBay itself is not a merchant, they just act as the electronic marketplace technology provider. Sellers and buyers contact each other directly; eBay does not even act as an intermediary, except in the sense that they provide a tool to list services and handle the underlying transactions.
Since the audience of those services is global, it means that different legislations require a different compliance to national laws, specially in the case of small businesses. From the perspective of an European buyer, ordering something from someone in the US, China or Russia is pretty much the same thing: the laws regulating business transactions on those countries are so different that it hardly matters for an European user what kind of “real life” information was disclosed to eBay. Very likely, even if they had sent volumes and volumes of documents and certificates, you wouldn’t be able to read them; and even if you can read those, you might not be sufficiently proficient on international trading laws to be able to rely on those documents to establish credibility and a good reputation. This is the typical case where using a government for reputation-by-proxy is totally, completely, utterly meaningless.
So what do eBayers do? They rely on digital reputation, and since “ratings” can be easily gamed, this means also reading things on forums — either the ones from eBay or independent ones. It means sending those companies and individuals on foreign countries some messages and see how they reply. But mostly it means questioning the network of eBayers to try to assess a specific vendor’s reputation.
Is it effective? Well, of course there are scams, and of course there are failed transactions, and lots of horror stories. Nevertheless, eBay still prospers, and, surprisingly, the number of frauds is quite low — much lower than the usual “magic number” of 4% of liars (btw, credit card fraud at the start of the millennium was close to that percentage, but it has dropped to about 1.4% these days). Personally, I cannot believe that all that is thanks to stronger measures of prevention (although some technology improvements have certainly helped). China has as many Internet users as the US, but I have absolutely zero chances of validating a certificate emitted by a Chinese official (even if I might be able to do so for a US company); nevertheless, overall fraud has decreased in relative numbers. My own evaluation of the issue follows the argumentation in Freakonomics: even though the chances to sue someone in China for fraud is very low, any serious Chinese merchant, just like their US counterparts, is more likely to continue to do good business by establishing a good online reputation, since that’s all we can seriously evaluate. The incentive to do better commerce online is directly related to the amount of positive recommendations attached to a merchant, and much less to the “amount of paperwork” that this merchant is able to provide. This is even more important with intangible goods (e.g. service providing) where you can’t even look at a picture of what you’re supposed to be buying. You have to rely only upon word-of-mouth reputation.
Fortunately, these days, all you need to do is a few Google searches. Even the most awkwardly-spelt company name from the remotest country in the world, if they’re serious about their business, will have something written about them somewhere on some place, in a language you can understand. And even though you have to take what you read on the Internet with a pinch of salt (or often a whole barrel…), it definitely means that small companies in remote locations are actively engaged in enhancing their online reputation, since they know this is all that they have to show their honesty and ability to deliver. A good recommendation on LinkedIn is far better than publishing your tax report.
Again we have to point out the major difference on transactions through the world-wide Web: it’s decentralised and global, and the mere distance will make small-scale operations hard to validate through established international sellers. Putting it differently, how much are you willing to pay to lawyers to sue a company in the Caribbean for the sale of a single CD for US$10? Or if you can’t afford to sue, do you really believe that the Interpol will take your case seriously enough?
So what’s your choice? Asking around on the ‘net to see if that Caribbean company is legitimate is probably far easier, and even though it takes some time (for instance, asking on forums if anyone ever bought some CDs from them), it pays off. Remember that a good customer experience will make the buyer tell 5 friends about it, while a bad one will be reported to 50 friends. So it’s far harder to maintain a good reputation than a bad one. Multiply that by a million when we’re talking about the world marketplace on the ‘net, and you’ll see how important a digital reputation is. Serious, honest companies know perfectly well that if you sell on a global scale, you have few arguments, based on local reputation only (or strict compliance to local regulations), that will impress your potential customers. A good review on a popular blog, however, will make all the difference. Being helpful in answering queries and questions, specially on open, public media (like forums or comments on blogs), goes much further than publishing your tax forms. Nobody will check up if “Room 604, 1376 Nanjing Xi Lu, Shanghai” actually corresponds to a real address (well, they might look it up on Google Maps), but your clients will definitely want to see what you say on your webpage, and look it up on Alexa to see how much traffic you get, and cross-reference it via Google to find someone who wrote a report on you.
(A small parenthesis. I hope nobody thinks I’m picking on China purposefully; it’s just an example that crosses my mind often, since I’m pretty sure I couldn’t read a certificate of incorporation in Mandarin Chinese, and I believe that most of the readers on this blog wouldn’t, either. On the other hand, some of my best shopping experiences on eBay have been with Chinese vendors. They went through pains to make sure everything was delivered to me, even if in one case I completely mistyped my own address! Thankfully, China is in 2010 close to be the largest English-speaking country of the world, so language was not a barrier. Also, for us Second Life residents, dealing with Anshe Chung has shown how she could build a reputation across three virtual worlds — building her content empire on SL, IMVU, and now Frenzoo — and be on the cover of a magazine. Would that be possible if Anshe relied only on her real world credentials to establish a reputation? I’m afraid not.)
So why do people like Scope Cleaver still complain about stupid clients that don’t take his credentials in the digital world as his base of reputation? I think that the real reason comes from “common sense” which has little or no sense at all, and this is something that requires a drastic mentality change, which, however, is not forthcoming. The world is simply changing too fast, and old habits die hard — since WWII at least nobody trusts a mere signature on a paper, but the point is, there is no rational, logical reason for doing otherwise. I have repeatedly read and heard stories about how my fellow SL residents “would never do business with someone they never met in the real world”. But when I asked them if they were ever victims of a scam or a fraud by someone they never met “in the flesh”, they all invariably answered “no”. Or rather, “no, but…”. If I pursued the issue a bit further and asked them if they had any friends of contacts that were actually scammed with fake identities or similar abuses perpetuated on the digital world, where “forging an identity is simple” (or so it is claimed), they utterly failed to give a single example (my own experience is the total opposite; the biggest scams I’ve been a victim of were all perpetuated in the flesh, once at gunpoint).