THE REPUTATION ECONOMYYOUR GOOD NAME IS BECOMING THE NEW CURRENCY, AS TECHNOLOGY

ENABLES TRUST AMONG STRANGERSSTORY RACHEL BOTSMAN

3 Unforgivable behaviour:Identify the single mostimportant good behaviourthat the reputationmechanisms need toencourage. This willsimultaneously act as astrong disincentive for badbehaviour.

3 Decipher: There is a gapbetween what peopleactually care about andwhat they think they careabout. Test your system toclarify the difference.

3 Competition: We are innatelywired to love being top ofthe table. Present your userrankings to create healthycompetition among peers.

3 Quality: Celebrate andreward users who take thetime to contribute qualityfeedback; they shouldbecome the benchmarkfor others.

3 Signal: People need to becrystal clear on what theyare rating. Identify the mainbehaviour signal you wantusers to be able to share, eglike/dislike;satisfied/dissatisfied;trust/distrust;reliable/unreliable, etc.

3 Sticky ratings: Pick aprimary scoring system(stars, ticks, tiers, thumbs,badges, numerical ratings)and give the ratingssticky names, such as“Power Seller”.

3 Trust dimensions: Peoplebuild trust in different ways.Scoring systems are greatbut they are often binary.Build in qualitative feedbacksystems based on open­ended questions that anyonecan answer and that willprompt people to sharesomething revealing

and meaningful aboutthemselves.

3 People like me: We like toknow, and tend to value,what our friends and peoplelike us think of other people.Integrate “inner­circle”vouching mechanisms(for example, went to thesame school, work in thesame office) into yourreputation system.

3 Peer­police: An openreputation system must bepeer­policed but if things dogo wrong, your organisationneeds to be on hand quicklyto offer support, resolvedisputes and weed out thevandals and abusers.

3 Mirror reality: The ultimategoal of your system is tovirtually replicate the trustwe form face to face. Mirrorthe questions and dynamicswe use in physical reality.

10 ISSUES TO CONSIDER WHEN DESIGNING A PEER­TO­PEER REPUTATION SYSTEM

It would have seemed like a crazy idea a dec­ade ago that people would virtually tradegoods with complete strangers. Yet every sec­ond of every day, $2000 worth of items are

traded on eBay. You can’t physically inspect anitem; users are free to choose a trader identity,even a pseudonym. Furthermore, you pay with­out any guarantees your goods will be posted, letalone be in the condition you expect. How doesa system that shuttles vast quantities of usedgoods among distant strangers work so well?

eBay has proved how the trust we typicallyform face to face can be built and assignedonline, by creating the grandfather of reputa­tion systems, the Feedback Forum. After any

transaction, buyers and sellers can rate eachother using a simple points system (1, 0 or ­1).Once users reach a certain number of points,they receive a star attached to their screenname, indicating their trustworthiness. The“red shooting star” indicates the highest rating.

But points alone often don’t get across thedetails and subtleties of a transaction. This is whyeBay encourages users to leave a short commentexplaining their rating, along the lines of “itemreceived as described, thanks”. On the flip side, ifbuyers are not happy with the trade, they postdamaging reviews such as “seller is a rip­off” oreven more frank: “Lied about condition. Rude,don’t buy from! Look at her feedback!”

result, users will often go to great lengths tobuild and protect their reputations. eBay’s peer­policed rating system weeds out the bad behav­iours and encourages the good.

THE RUMOUR MILLThe striking thing about the feedback amongusers on eBay is that it is so positive. Studies havefound that about 99 per cent of trades receive a“positive” rating and the 1 per cent rated “nega­tive” or “neutral” are often downgraded for rela­tively minor reasons, such as “item arrived oneweek later than expected”.

So why do people behave so well? It’s prettysimple: users know people will see feedback leftabout them and that their behaviour will affecttheir ability to transact. It’s the ancient power ofword­of­mouth meeting the modern forces ofthe networked world. As Axel Ockenfels, an eco­nomics professor at the University of Cologne,puts it, the reputation system on eBay “functionslike an organised rumour mill”.

Ratings and reviews built upon the opinions ofmillions of users (“the wisdom of crowds”) areincreasingly influencing our consumer behav­iour. From the books that we read (Amazon), tothe music we download (iTunes), to the restau­rants or shops we choose (CitySearch) to thetradespeople we hire (WhoCanDo) to the prod­ucts we buy (Epinions), we are increasingly rely­ing upon the opinions of peers. But reputationsystems are now entering a turbo­charged ageof sophistication and they will become moreimportant in building collaboration andtrust, peer to peer.

Over the past 20 years, we have literally wiredour world to share, creating an unbounded mar­ketplace for exchanges between producer andconsumer, seller and buyer, lender and bor­rower, and neighbour and neighbour.

The old consumer world created a layeredinterface – otherwise known as the middlemen –between the company and consumer, bridgingthe gap between production and consumption.But the internet is removing the middlemen, sothat everyone from T­shirt designers to musi­cians can make a living selling peer to peer.

A socio­economic cornerstone of this peer­to­peer economy is reputation. In the old con­sumer world, our credit rating was far moreimportant than any peer­to­peer review. Nowa­days, with every seller we rate on eBay, idea ormoment we share on Twitter or Facebook, videowe post on YouTube or photo on Flickr, weleave a reputation trail of how well we col­

laborate, and whether or not we can be trusted.Companies involved in social technologies

(social media such as Facebook and other sites)often focus on the newest bells and whistles,believing this will make their venture succeed orfail. Undoubtedly, a great user experience is crit­ical but a well­designed reputation system driv­ing the right behaviours and community culturecan make the difference between a flying successand a miserable flop. Reputation systems buildpeer transparency and knowledge – of interests,whom users know, personal preferences, pastactions – about strangers, thereby taking ano­nymity out of transactions.

RIDING ON REPUTATIONIn the United Statesand Canada, Zimride is oneof the fastest­growing ride­sharing services. Ituses social technologies and Google Maps tomatch riders and drivers taking the same route.The company was founded in 2007 by entrepre­neur Logan Green and former Lehman Bro­

thers banker John Zimmer, who wanted to cre­ate more sustainable transportation but not godown the route of environmental guilt. Theyrealised the enormous potential of mobile tech­nologies to reinvent an old idea – car pooling.Given that an estimated 20 per cent of all CO2emissions come from cars, and about 75 per centof all car trips in the US and Australia are solorides, the idea made a lot of sense from a puregreen­savings perspective.

But Zimmer and Green’s vision was bigger: toturn commutes and errands into a social activityby transforming solitary rides into shared ones.Critical to the success of Zimride – and otherride­sharing platforms just getting started inAustralia, such as Needaride or Catchalift – isenabling people who have never met to over­come the understandable wariness of sharing aride; in other words, using technology to buildtrust between strangers. There is a Russianproverb, “doveryai, no proveryai,” that translatesas “trust, but verify”.

“Reputation is a summary of one’s past actionswithin ... a specific community, presented in amanner that can help other community mem­bers make decisions ... whether and how torelate to the individual,” Chrysanthos Dellarocaswrote recently in MIT Sloan Management Review.Not surprisingly, on eBay, ratings strongly influ­ence buyer and seller perceptions.

A positive rating becomes equivalent to a first­hand reference from someone we’ve never actu­ally met, helping us make better decisions aboutwhom to exchange or interact with. People wantto buy from sellers with positive ratings and willpay a premium. And many sellers will not acceptbids from people with low or few ratings. As a

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Zimride’s founders recognised that differenttrust features would be necessary to allow theirusers to build a complete picture of what adriver or rider was really like. The first andmost important reputation mechanism onZimride is “closed networks”, which enableride­sharing within specific communities, suchas universities and companies (Wal­Mart andCigna are users, for example) where peoplehave something in common or can vouch foreach other.

The second reputation mechanism is Zim­ride’s integration with Facebook Connect andother social network profiles, so users can learnabout the person with whom they might want toshare a ride. “The concept is simple,” Green says.“Our parents had yearbooks; we have Facebook.Zimride leverages the trust inherent to onlinesocial networks to push car pooling to become amainstream form of transportation.”

Finally, Zimride features a feedback systemwhere riders and drivers leave reviews after a tripis completed, eBay style.

It would seem Zimmer and Logan got theirreputation system right; they have built a com­munity of 350,000 users. Two years after launch­ing, they have a sustainable, fast­growingbusiness – companies and universities pay a sub­scription to use the platform. Zimride is a power­ful example of how the trust we establishthrough virtual tools can be taken offline totransform a service and create a new sector.

There are local examples applying the sameprinciples. Findababysitter.com.au (now part ofFairfax Media, publisher of The Australian Finan­cial Review and AFR BOSS), allows par­ents, babysitters and nannies to find each other.The site, established in 2005 by Delia Timms andJeff Bonnes, uses a star­rating system to providefeedback on childcare workers.

Freelancer.com.au links small businesses withworkers or firms to complete projects. Once thejobs are done, the site allows the employer andfreelancer to rate each other, on a scale of one to10 stars, and provide detailed feedback. Usersget two ratings ­­ one as an employer and one as afreelancer. There is also a list of the site’s top 50members, rewarding good behaviour.

uses a peer­to­peer reputationsystem (just like on eBay).Other parents award a starrating out of five and providereviews such as “I have nohesitation in recommending Xfor any babysitting job”, whichare visible to everyone.The best and most reliablecarers quickly rise to the top.

SING YOUR OWN PRAISESThe “reputation statement ofaccount” was designed byJason Tester, a researcher at theCalifornia­based Institute for theFuture, to measure social capitalby contributions to peercommunities from Flickr toWikipedia.Rachel Botsman

build a 360­degree, trustworthypicture of your reputationthrough transparent, crowd­sourced opinions.

SCREEN THE BABYSITTERFindababysitter.com helpsparents locate nannies, after­school carers and babysitters.It connects people directly,cutting out the fees of typicalagencies.The site has more than 73,300carers to choose from, but howdo parents know which ones totrust with their kids? Not onlyare experience, skills, hourlyrates, drivers’ licences, first­aidqualifications, police checks andreferences all readily availablebut Findababysitter.com also

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BUSINESS PEERS PITCH INWhen you hire an employee, doyou ask for references, do aGoogle search and check theirFacebook profile, yet still findyourself wondering what thisperson will be like to work with?That’s where Duedil (short for“due diligence”) comes in. It’s abrowser application now indevelopment (Duedil.com) forprofiles on the professionalnetwork LinkedIn.Users are prompted to answertwo questions: “What is thisperson best at?” and “Howcould they improve?” You andothers can reply to the reviewswritten about you by deemingthem “fair” or “unfair”.The big idea behind Duedil is to

BANK ON ITReputation capital is becoming so importantthat it will act as a secondary currency, one thatclaims “you can trust me”. It is shaping up as acornerstone of the 21st­century economy. Peo­ple might eventually have a “reputation bankaccount” alongside their financial accounts.

At the moment, it is difficult to transfer trustinformation and reputation scores from onebusiness to another. If you have invested timebuilding your reputation on eBay, why would

The world of social media can bedaunting to the uninitiated, but theimmense and growing popularity ofsocial sites means the corporate worldcan no longer avoid engaging with it.

The trouble is working out how – and why – anorganisation can derive a business benefit frominvesting in such activity.

Social media and business communicationsexpert Lee Hopkins has worked with companiessuch as IBM and Telstra to sharpen their mediastrategies. “The trick is to understand themedium,” he says. “Communication is all aboutculture change and it must be aimed at meetinga specific business objective. If a specific tooldoes not support a business goal then it hasno place existing.”

Many large organisations are starting to useinternal social tools to change the way they com­municate with their own staff. Giam Swiegers isthe Australian chief executive of Deloitte, whichhas created the largest enterprise­based Yammercommunity in the world. Yammer uses a shortmessaging system similar to Twitter, but forclosed communities. A company can establishan account and its employees can exchangeideas, ask questions and source answers fromanywhere and anyone in the organisation.

“I use Yammer at least once a week,” Swiegerssays. “It has allowed me to connect with youngpeople in a far more effective way than before.”

Swiegers also keeps a close eye on Deloitte TV,an internal YouTube­type channel. “It’s a greatplace for our employees to express themselvesand share their ideas.”

YouTube is the second most used searchengine in the world behind Google – users viewabout 13 billion video clips every month on thevideo­sharing network. Hopkins says video is fastemerging as a powerful tool for businessesacross many different levels. “View as many asyou can to get a feel for what can be achievedwithin your budget,” he recommends. “Videocan be used for corporate training, marketing,product pitches, or meetings.”

Michael Smith, managing director for Optus’sconsumer division, says social media sites such asTwitter and Facebook have provided his organi­sation with new ways of interacting with itscustomers. “In mid­2009, we established adedicated team to monitor and respond to cus­tomer queries through the official @optusTwitter account,” he says. “The team includes

customer service staff who have been trainedon how best to engage with our customers usingthis medium.”

Smith says the account has more than 6000followers. Customers use it for product infor­mation, billing enquires, technical questionsand general feedback.

On a personal level Smith uses tools thatanalyse social media sites, like Summizer, tomonitor comments and get a feel for trends.“I will also comment directly in an individualblog on behalf of Optus if a customer is havingan issue,” he says.

Social media campaigns don’t have to beexpensive, but they do take a fair time commit­ment to work property, says Peter Strong, execu­

you want to start from scratch on a new plat­form? Reputation systems are designed to beconfined to a specific context because this helpscompanies sustain loyalty. However, it is only amatter of time before there will be some form ofnetwork that aggregates your reputation capitalacross peer­to­peer platforms. We’ll be able toperform a Google­like search to see a completepicture of how people behave and the degree towhich they can be trusted, whether it’s aroundproducts they swap and trade, money they lendor borrow or cars they share. As Craig Newmark,the founder of craigslist, recently commented:“By the end of this decade, power and influencewill shift largely to those people with the bestreputations and trust networks.” 5

Rachel Botsman is co­author of What’s Mine isYours, and founder of the consulting group CCLab.Feedback to boss@afr.com.au

GUIDE TO THE TWITTERVERSETHE eBAY REPUTATION SYSTEM IS LIKE AN ORGANISEDRUMOUR MILL BUILT ON THE WISDOM OF CROWDS.

TAPPING ONLINE COMMUNITIES FOR BACKGROUND CHECKS 3 DAVID BURDEN CEO at technology and marketing company Webfirm3 Self­confessed social media junkie3 Uses: Facebook, Twitter, LinkedIn, Skype3 Burden likes to keep personal and professional separate in the social

network sphere: “I use LinkedIn in for business. We’re fielding for a CFO atthe moment. I find it interesting to see how [prospective hires] are using

social media.” He uses Skype to call colleagues and clients, and Twitter to observe – he has sentfewer than 100 tweets. In the Twitterverse the shorter your personal moniker, the better your cred –it means you got in early – and Burden’s is a ripper. “I have the name @DJB,” he says. “There area lot of DJs [disc jockies] in the US who use ‘DJ’ in their Twitter names. One offered me $US10,000for my hashtag – but I wouldn’t sell.”

3 GREG MCAWEENEY general manager at RaboPlus, the online division of Rabobank3 Prolific twitterer3 Uses: LinkedIn, Twitter, Facebook, Skype, blog3 McAweeney has posted more than 1000 messages on Twitter, mixing business

and personal messages in his feed. “Off to the #Leinster game in the HeinekenCup today. Trips back home always seem to coincide with #rugby,” tweeted the

native Irishman recently. His top topics of social network conversation are Ireland, France, South Africa,rugby, bank and Wales.

3 GIAM SWIEGERS CEO at Deloitte Australia3 Social media mystery3 Uses: LinkedIn, Yammer, Facebook, video blogs3 Prolific user of Yammer. Has a Twitter account with one solitary tweet,

directed at global chief executive officer Jim Quigley: “This is the sort ofstuff partners will like to hear.” What, we wonder? Unfortunately, Quigley’s

tweets are protected, and he has only 10 followers. Swiegers’ Facebook account is also blocked offto the public, apart from his favourite quote: “The average never wins.”

tive director of the Council of Small Business. Hedescribes social media as “great equaliser” forsmall and medium businesses, who can now playalongside the big dogs.

But he says it is important to know what you’retrying to achieve. “Ask yourself, what do I want?”he suggests. “Do I want more people in my shop?Do I want more people to purchase off my web­site? Do I want more people to be aware of mybrand and my location? If you do put in the timeand create a campaign, be prepared for it to besuccessful. If people respond positively you needto be ready to fulfil the campaign’s promise, oth­erwise you risk losing those customers forever.” 5

Rachael Bolton and Kimberley Church

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