Why the Transparency Economy is Booming

child Discovering the outdoors

Last week, I had the opportunity to attend the CMO Argyle Executive Forum in Chicago, an event that brings together CMOs and marketing leaders from various industries to discuss strategies and best practices in a discussion-based format.

I engaged in some great conversations and heard from some of today’s top marketing executives. But one presentation that really stuck with me was a session called “Data Capital” from Jeff Gallagher, Group Vice President of Big Data at Oracle. Jeff started off his presentation with these thought provoking statistics:

  • Uber is the world’s largest taxi company, but owns no vehicles
  • Facebook is the world’s most popular media owner, but creates no content
  • Alibaba, one of the world’s largest retailers, has no inventory
  • Airbnb is the world’s largest provider of accommodations, but owns no real estate

The Transparency Economy: Made Possible by Ratings and Reviews
None of the companies I mentioned above sell a “product” in the traditional sense, yet each and every one is growing quickly, thanks, in large part, to data. For many of these companies, a large amount of that data is being generated by ratings and reviews. In fact, I’d argue that ratings and reviews are the biggest reason some of these companies have managed to survive — and thrive.

Think about it for a minute. Would you book a room on Airbnb without first reading the reviews from previous travelers? Would you get in an Uber driver’s car if she had a low rating? I know I wouldn’t.

Ratings and reviews promote accountability and trust which drives traffic and conversions. The provider — for example, the person renting out his home through Airbnb — is held accountable for providing a good experience for visitors. If he doesn’t, he’ll get negative reviews, which will make future travelers think twice before booking. And the consumer looking for a place to stay on Airbnb reads the reviews of previous travelers to build confidence before making a purchase. 

Ten years ago, it was unheard of to stay in a stranger’s house while on vacation or to get in a stranger’s car so they could give you a ride to the airport. But today, both of these practices are commonplace thanks to ratings and reviews.