In Praise of Buyer/Selling Ratings

By: Steve Outing Let's say you're looking to buy a used bicycle. You find a promising one on eBay. The seller, according to eBay's buyer/seller rating system, has bought and sold 20 times using eBay, and he has a "positive feedback" score of 95 percent. You read over what other people have said about transactions with this seller. One person had a bad transaction with this individual, but you can see the seller's response to the criticism, and you even contact the critic to learn more about his experience.

You have enough information to believe that the seller of this item is a trustworthy person. The eBay community has done more than just connect you the buyer with a seller; it has facilitated a level of trust between you and a seller.

You also check out the classifieds section of your local newspaper's Web site and search there for used bicycles. A promising ad offers the model you want, but when you get to the ad you see what is basically a print newspaper ad with text and a photo. Contact information for the seller consists of a first name, a phone number, and an e-mail address.

You know nothing about this seller. He could be a nice guy trying to sell an old bike or a crook out to unload a stolen good. You could show up at his house to check out the bike (unlike on eBay), but you may not feel comfortable with that.

What's wrong with this picture? Why are commercial transactions as facilitated by most newspaper Web classifieds so inferior to what the best online companies offer -- after a decade of the newspaper industry working online?

Why, for the most part, do newspaper Web sites still ignore one of the most powerful marketplace tools available online, the buyer/seller rating systems that use the power of an online community to identify trustworthy participants in the marketplace?

Losing the local marketplace

Much has been written about newspaper classifieds and the industry's attempts to fight off competition from online entities that have succeeded in taking away big chunks of the multi-billion-dollar classifieds business. Newspapers have made significant strides in developing online classifieds services; at many newspaper Web sites, the classifieds area is slick and useful. But they still lag behind in significant ways.

I'd suggest this: Online newspaper classifieds will continue to lose badly to Internet competitors (especially the likes of eBay and Craigslist) until the day the newspaper industry figures out how to turn its classifieds sections into true community marketplaces.

An effective marketplace puts together buyers and sellers. OK, newspapers have been doing that for decades; most online marketplaces have been in place for fewer than 10 years. But those young online competitors typically have taken advantage of the full interactivity available in the online medium to outdo local newspaper marketplaces. By doing a better job, they've taken away billions of classifieds dollars that might have stayed with newspapers had their publishers competed more effectively.

"A crucial part of any community is the marketplace, and newspapers are in the process of losing major portions of the marketplace to the online medium," says Dan Pacheco, president a Colorado-based new media consultancy FutureForecast and an online-news pioneer. "People use eBay, Craigslist, and other sites not only because they work, but because they feel like they're somewhere. When was the last time you felt that way about newspaper classified liner ads?"

How to fight back

While Pacheco and others point to the larger issue of newspapers needing to create the proper "marketplace," I'm inclined to be more specific. I think that the lack of buyer/seller rating systems in creating the best local marketplace possible is a serious impediment to newspaper classifieds' success. Newspaper don't necessarily have to invent new marketplaces, they just need to improve what they've got by adding this kind of functionality.

Look around you on the Web and see what's happening, after all.

eBay is clearly the champion, having spent years developing an online community where buyers and sellers learn whom they can trust by checking out the rankings that buyers and sellers give each other, where criminal activity is policed, and where direct communication is facilitated between buyer and seller without sacrificing privacy. Why not apply this concept to newspaper marketplaces?

Keep track of every person who engages in an online transaction via your newspaper classifieds marketplace and build a database of their transactions and the feedback they've received from others. Encourage buyers to fill out a feedback form whenever they purchase something via the classifieds; ditto for sellers when they complete a sale. Facilitate more transactions that can be conducted online rather than face to face, then incorporate post-transaction feedback into the process. Act on complaints about sellers and buyers and take corrective action.

eBay is predicated on the notion that it provides "an honorable exchange of commerce," says Jim Townsend, editorial director of Classified Intelligence, a publisher and consultancy covering the online classifieds business. He says that while the site obviously is not perfect at keeping out scam artists, eBay does a pretty good job of policing those who try to commit fraud and disrupt an otherwise useful commercial marketplace.

Elsewhere, other systems aren't quite as sophisticated as eBay's, but they do help consumers trust those with whom they're contemplating doing business -- individuals and businesses. Consider, for example, Yahoo! Local, a directory of local businesses that allows consumers to rate any listed enterprise with a simple 1-to-5-star selection and optional text comments.

Look for auto-repair shops in your town on Yahoo! Local and you'll see what previous customers think of them. That's a far cry better than the lifeless information you can get from a Yellow Pages listing, or from display or classified ads for repair shops in a newspaper or on its Web site. Every online marketplace could benefit from such consumer ratings. Imagine perusing auto, home, or job classified listings on a newspaper Web site and seeing what others think of the car dealers, Realtors, and employers advertising there.

A mix of the eBay and Yahoo! Local models of consumer feedback is represented at ZiXXo, a two-year-old California company that's just now making itself known. ZiXXo is setting up a network of local online marketplaces in dozens of cities around the country; the company aspires to compete directly with local Craigslist sites as well as newspaper classifieds marketplaces.

According to ZiXXo president Mike Hogan, the model is similar to Craigslist in that it gives away classified ads in an effort to build a viable commercial marketplace in each of its target cities. Unike local-classifieds models where basic-level ads may be given away free but charges apply for additional features (photos, boldface headlines, etc.), ZiXXo plans none of that. Everything is free, and the company supports itself by selling online coupons to local advertisers.

ZiXXo takes a page from Netflix, the online DVD subscription service, with its 5-star user rating system. ZiXXo users currently are allowed to rate an ad (1-5 stars), with aggregate voting results shown to subsequent ad viewers.

What if every online classifieds area on a newspaper site allowed such ratings of those who advertise on it? It's a simple concept to execute, and it would add greatly to the value of the marketplace.

Protecting the innocent

One of the principal concerns heard from publishers comtemplating such approaches is the potential for abuse. There's the disgruntled customer who goes over the top in criticizing a business, the teenager who posts nasty words about a business or individual as a prank, the competitor who tries to sabotage the ratings of a rival business. There's the business that receives legitimate poor ratings from customers -- and that threatens to pull advertising from your site unless the criticisms are stricken from the record.

None of those is reason enough to abandon the idea. Classified Intelligence's Townsend points out that eBay demonstrates a model for dealing with such issues. Its customers must agree to a lengthy terms of service (TOS) contract, which prohibits bad behavior in the feedback areas that could damage a legitimate business. The TOS gives eBay permission to remove feedback that is inappropriate or fraudulent.

Beyond that, an excellent safeguard is to give the person or business being criticized in a user-rating comment the opportunity to respond publicly. That's a hallmark of the eBay rating system. When a buyer gives a seller a negative rating and comments on why, the seller can respond and explain his side of the story for all to see.

All traditional media need to wake up to the fact that this is the way of the marketplace from here on, Townsend says. And business owners need to recognize that public consumer ratings are not going away -- and they should work on improving their customer relationships rather expend fruitless effort fighting the inevitable. For publishers, it's not a matter of figuring out how to avoid public ratings systems, it's about devising strategies to surmount the challenges.

The slow-growth problem

A significant issue for buyer/selling rating systems is in getting them started. You can see the problem at Yahoo! Local, where in a list of local businesses (at least in my hometown), very few businesses as yet have any consumer ratings at all. An eBay-like feedback system just starting out will have few user comments till things build up.

That's part of the reason that you don't yet see more buyer/seller rating systems in place at newspaper websites. The technology is available, but many publishers are skittish about an inactive ratings system making their online marketplaces appear to be "dead."

CityXpress, a Vancouver-based developer of online classifieds and auction solutions for newspapers, offers buyer/seller rating features as part of its new E-Classifieds Xpress program, which allows Web sites to offer classifieds that support online direct party-to-party sales or eBay-like personal auctions. Clinton McKinlay, the company's director of business development, says that many of his company's clients initially are opting not to turn on such ratings features for that very reason.

The issue, he says, is that if a newspaper Web site decides to emulate eBay and allow buyers to rate sellers and vice versa, those new to the system can be at a disadvantage to those already ensconced and with plenty of positive feedback notices. Since local marketplaces of newspapers aren't likely to get the level of traffic of eBay, this is a potential problem for new buyers and sellers.

McKinlay says that CityXpress is agnostic on the issue: It has the technology to support eBay-like buyer/seller ratings, but it leaves the business decision about enabling ratings or not to the client publisher. For some Web sites, he says, it may make sense to wait a while before enabling consumer ratings as the marketplace builds up.

What some CityXpress clients have opted to do is collect negative feedback on buyers and sellers from the start. If a seller is tagged with lots of negatives, for example, a site's managers might kick that person off the system. That gives a site's customers some assurance that the people advertising on the site are being screened for fraudulent or bad behavior.

That's the approach of Craigslist, which solicits feedback from users and investigates alleged fraudulent behavior by those who use its Web sites. It does not currently support an eBay-like buyer/seller feedback system. (eBay owns a minority stake in Craigslist.) Craigslist users know that while not every advertiser can be trusted, the company makes it a priority to respond to reports of fraud and kick out those who behave badly. The Craigslist marketplace is perceived as secure, at least to some degree.

Still, I can't help but think that such a cautious approach isn't as powerful as taking the plunge and enabling buyers and sellers to publicly rate each other right from the start. Yes, lean times can be expected early on, as ratings are sparse. I think your users will understand. And you can encourage them to rate people they do business with via your site by incorporating strong requests in the transaction process. (eBay does a great job on this point.)

Another option is to go ahead and collect consumer feedback, but don't publish it until a good pile has been amassed -- then flip the switch.

The Bakersfield experiment

There are signs of movement in the newspaper industry on the issue of improving classified marketplaces. The south-central California city of Bakersfield is the home of a new Craigslist site and a ZiXXo site, both offering free classifieds in direct competition with the Bakersfield Californian newspaper.

In response, the Californian has created a new free-classifieds online marketplace of its own, launched last week in beta form (and already with more ads than the Bakersfield Craigslist or ZiXXo sites). Bakotopia.com is, I believe, the first free-listings classifieds site developed by a newspaper company. It has the potential to replace the newspaper's traditional paid classifieds, though it's targeted at the young audience in Bakersfield; newspaper executives expect the older audience to continue patronizing the newspaper's print and online classifieds.

(Bakotopia is marketed as separate from the newspaper brand. If you read the site's About page, you won't find any reference to the newspaper. Bakotopia is owned and operated by Mercado Nuevo LLC, a wholly owned subsidiary of the Californian.)

What's significant is that Bakotopia is adding buyer/selling ratings and eBay- and Craigslist-like features, according to Future Forecast's Dan Pacheco, who also serves as the Californian's online new product manager. In its early days the features aren't ready, but they're coming soon, he says.

That's great, and a harbinger of the future for newspaper classifieds.

Notice, however, that such forward-thinking features appear on a classifieds site that is clearly divorced from any connection with the parent newspaper.

What I'd like to see in the near future is for newspaper classified brands to try out some of these strategies. If they're good enough for eBay, surely they're appropriate tools to take newspaper online classified marketplaces to a higher level.

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