Trustpilot and misaligned incentives

November 08, 2020

💡 TL;DR Trustpilot and Glassdoor are PR agencies for companies. Not impartial review platforms for customers. This creates a challenging incentive problem.

Trustpilot enables customers to review companies and Glassdoor enables employees to review companies. They have similar and fascinating business models. Let’s dive into Trustpilot.

How does Trustpilot work?

Let’s imagine you are setting up an online physiotherapy clinic called StiffNecks.com. To build your reputation as a clinic you create a Trustpilot page. The first client comes along, has a great experience, and you send them an email to the Trustpilot page asking them to leave a review. The client had a great experience and writes a lovely review of StiffNecks.com rating it 5/5 stars. BOOM your Trustpilot page now has a 3.5/5 “TrustScore”. Wait, what?!

With that 3.5/5 rating, TrustPilot now has you hostage. They use a Bayesian average to calculate the TrustScore which takes into account how old the reviews are, the frequency you collect reviews, and they start you with a lovely 7 reviews of 3.5 for good measure. In other words, they control what your reputation is. And they charge businesses for this service with incentives misaligned from the business and definitely the customer.

Let’s jump back to StiffNecks.com. You now have anxiety from the yellow 3.5/5 score staring at you and so with each new customer, you do your best to push them towards Trustpilot. Eventually, (with about 10x5 star reviews) you get past the dreaded 4/5 threshold beyond which no customer dares to buy. But with each new review, it signals to customers that this is a valid reflection of your business’s reputation. And did I forget that you get penalised if the frequency of collecting reviews decreases. No stopping now. A few days later you get a call from Trustpilot agent offering the paid service.

Where do the incentives go wrong?

The immediate incentive is for Trustpilot to charge businesses more. Pretty easy to do when they directly control a business’s reputation. How can Trustpilot charge more? By either threatening to reduce their reputation or helping them to improve their score.

How do you help a company improve their score? At the moment Trustpilot uses widgets to show reviews and tools to collect reviews. But… there’s also strong incentives for Trustpilot to curate/remove negative reviews. Something that is already happening at Glassdoor (anecdotal evidence here).

What does this mean for the customer? Believing in Trustpilot as a measure of reputation is a crucial part of their flywheel. But there’s much stronger incentives to be on the side of helping paying businesses have an artificially high score.

How can Trustpilot remedy this?

I think Trustpilot is an awesome service for consumers but the incentive problem is tough… For Trustpilot to truly fix the incentive problem they would need to be directly aligned with the reviewer. But the obvious business models such as paywalling reviews would strongly interfere with their flywheel.

It’s possible to continue charging businesses. But Trustpilot would need to play the long game - not fudging the reviews at any cost. Instead, continuing to be a forcing function for businesses to treat their customers better, and thus improve their score. But, moderating reviews is hard because customer experience is subjective and Trustpilot does not have proper validation for who has and has not been a customer. Solutions to the verification problem seem feasible, such as the Facebook retargeting mechanism of sharing a hashed list of their customer emails.

Appendix: The Trustpilot flywheel

More companies email customers to leave reviews on Trustpilot → More customers leave reviews → More customers trust and use Trustpilot → More companies sign up to Trustpilot → More companies email customers to leave reviews on Trustpilot → …