Yesterday, Amazon (AMZN - Free Report) made an update to its review policy in order to address concerns over potentially biased reviews for products sold on the company’s website. Incentivized reviews are now banned, and they will only be allowed to be posted by people who are in its Vine program. It should be noted that reviewers only get invited to participate in Amazon Vine if they have a review rank that reflects a high level of helpfulness, as judged by other Amazon customers.
If you’ve seen product reviews on Amazon, you may have noticed that people who receive a discounted or free product in exchange for their unbiased opinion have a tendency to leave higher satisfaction ratings in their reviews. So much for being unbiased. In fact, a study of over 7 million Amazon reviews has shown that incentivized reviewers tend to rate products 0.38 stars higher than non-incentivized reviewers. The study notes that although the margin seems marginal, it can bring a product up from being a good product to being a top rated product.
Amazon’s update yesterday noted that it has tried to prohibit review manipulation by “introducing a machine learned algorithm that gives more weight to newer, more helpful reviews; applying stricter criteria to qualify for the Amazon verified purchase badge; and suspending, banning or suing thousands of individuals for attempting to manipulate reviews.” Amazon’s new policy stands to greatly reduce the amount of bias present in reviews, and this will help in creating a more transparent experience for consumers who rely on its ecommerce platform. Amazon stock is a Zacks Rank #3 (Hold) and it is slated to release its next quarterly earnings report in late October.
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