Putting Consumer Reviews to Work: PowerReviews Takes on Amazon, Looks to “Social Navigation” for E-Retailers

10/17/11Follow @wroush

If you’re like me, you do a lot of research online before you make a big buying decision, and sometimes even before a small one. And you lean heavily on the reviews left by other shoppers. My favorite trick, when I’m zeroing in on a specific product, is to read all of the “1 star” or “most critical” reviews first. It’s a surefire way to find out about product glitches, misleading advertising claims, or poor customer service.

In fact, I’d say that the explosion of user-contributed reviews around the Web is one of the three biggest developments benefiting consumers in the e-commerce era (which dates back to mid-1995 or so, when Amazon first turned on its website). The other two are the rise of comparison shopping, which keeps prices in check, and the simple-but-still-amazing fact that you can click a “Buy” button on a website and make a book or a game or a DVD appear on your doorstep without ever leaving home. If you think about it, though, e-retailers themselves haven’t innovated that much around reviews. A review on Amazon today looks and acts pretty much like a review on Amazon in 2002.

But there’s one San Francisco company, PowerReviews, that keeps working to make reviews more useful for consumers and more profitable for e-retailers. I spent some time recently with Andy Chen, PowerReviews’ founder, and learned a lot about how the company sees the world of product research—and what it’s learning that could change the experience of shopping online.

Andy Chen, PowerReviews Founder

Chen says that when the company got started back in 2005, it had two interlinked ideas. The first was that a lot more e-retailers needed customer reviews on their sites, and that it might be profitable to build a white-label review system that companies could plug into their sites rather than having to build the functionality on their own. The second idea was that if you could build this system, it would then be possible to aggregate all of the reviews collected by all of the participating e-retailers into one giant product recommendations site, and use that site to earn money on lead generation and affiliate commissions. That’s exactly what PowerReviews has done with its sister site Buzzillions, which brings together a good chunk of the 23 million reviews sent in by customers of Power Review’s clients. That, by the way, is a group of almost 6,000 companies, including many high-profile bricks-and-mortar brands like Toys R Us, Staples, and REI.

PowerReviews has had to tweak its ideas along the way. It originally provided the review system to e-retailers for free, but the Buzzillions site didn’t turn out to be as profitable as the startup had hoped. So the company had to start charging for the review platform, just as competitors like Austin, TX-based BazaarVoice do. The good news is that “we’ve been growing extremely quickly” on the platform side, while Buzzillions is “still a good revenue source,” according to Chen, whose formal title is Founder and Vice president of Strategic Partnerships. (Pehr Luedtke, a veteran of Shopping.com and Levi Strauss, is PowerReviews’ CEO.)

With some $37 million in venture capital on the line from Menlo Ventures, Tenaya Capital, Draper Richards, Four Rivers Group, and Woodside Fund, PowerReviews needs all the growth that it can get. To speed things up, and to compete with e-commerce juggernaut Amazon, the startup has been trying new strategies like getting consumers to answer each other’s questions about products (that’s a feature called AnswerBox) and integrating the review platform with social media, especially Facebook.

But one of the company’s biggest opportunities, Chen says, may not lie in the reviews, exactly, but rather in what he calls “social navigation” based on all the data PowerReviews collects about the reviews and the reviewers. By analyzing what products people are buying and reviewing, what they’re saying in their reviews, and what they do after reading the reviews, PowerReviews may be able to help e-retailers adjust their sites to help consumers locate popular products more easily. “The reviews are just the starting place,” says Chen. “What you see in the reviews, as a consumer, is probably 10 percent of the value.”

PowerReviews is Chen’s fourth company and his second startup. The first was FogDog, a San Jose-based online sporting goods retailer that started out in 1994 with the classic “four guys in a dorm room,” in Chen’s words, and went public by 1999. GSI Commerce bought FogDog in 2000, and Chen’s team moved to GSI’s Philadelphia headquarters, where they used FogDog’s technology to rebuild GSI’s e-mail marketing and shipping management back-ends. After GSI, Chen went to Yahoo Shopping, which he helped transform from a portal filled with mini-stores into a full-fledged comparison shopping engine that competed with the likes of Shopping.com and Pricegrabber.

Chen left Yahoo in 2005 with an idea for improving the whole online shopping experience. “Amazon had solved how to build and manage a great online store, but no one had solved how to use the Web as a shopping tool,” he says. “You still had to do tons of research and spend read magazines and spend countless hours figuring out the best products to buy.”

In some ways, Chen argues, the Web has actually made shopping harder. “Back in the days before the Internet, if I needed a new washer-dryer, I’d go to Sears, I’d ask a couple of questions, and they’d say you should chose between these two models. You’d take it home, it’d be great, and no one gets hurt. Now, you buy Consumer Reports, you read a whole bunch of reviews, you ask some friends, you do weeks and weeks of research, and if you buy it and it’s not the right one for you, you blame yourself.”

The “holy grail of e-commerce,” Chen says, would be a system that gives people lots of information but helps them make a confident decision faster. And the key to such a system, he thinks, is to structure the whole online shopping experience around customer reviews, rather than around classic search results. “You don’t go to Google to search for restaurants—you go to Yelp,” says Chen. “You don’t go to Google to look for a hotel; you go to TripAdvisor. The reviews on those sites break it down in a way that is far more compelling than any other option.”

Amazon certainly has lots and lots of customer reviews on offer, but it still organizes the products themselves as if the site were a collection of separate big-box stores: books, electronics, home & garden, toys, clothing, sports, et cetera. “Especially back in 2005, the point of view they were giving to the consumer was an Amazon-centric point of view,” says Chen. “Amazon still has not figured out how to use the users’ voices to actually guide people when they’re shopping. Reviews are still an add-on to the product pages, not the thing you use to start your process.”

The original business plan at PowerReviews was to build a “review engine” that would collect structured reviews from buyers after their purchase—inviting them not just to pen open-ended essays but to answer specific questions and name specific pros and cons for each product. (Today, some 95 percent of the company’s reviews arrive in response to the post-purchase e-mails that PowerReviews sends out on behalf of its customers. If you buy a tent from REI.com, you’ll get an e-mail a few weeks later asking what you thought.) The startup planned to offer the engine to thousands of specialty online stores that weren’t big enough to have their built-in review systems. With the permission of each retailer, it would mirror all of the reviews at its own recommendations site, Buzzillions.

PowerReviews built the review engine, and it quickly caught on. But the business plan didn’t work out, for a couple of reasons. “Because we had this competitor that started at the same time [BazaarVoice], we had to invest in a sales and marketing infrastructure to ‘sell’ the free product at an enterprise level, without enterprise-level revenue,” says Chen. At the same time, he says, traffic at Buzzillions, the partner site, was lagging, and the people who were coming to the site weren’t ready to buy, so there wasn’t as much affiliate revenue coming in as anticipated. “We assumed the monetization would be comparable to a standard comparison shopping site like Shopping.com, but it turns out that customer who are just reading reviews are further away from the checkout process,” Chen says.

All of those revelations took a couple of years to surface, Chen says. “We had to deploy a solution, collect a bunch of reviews, sell against our competitor, put the reviews into a credible site, and then learn the fundamentals of that business” before the flaws in the plan became visible.

But by 2009, PowerReviews had started its business-model pivot, toward charging retailers for the review platform. To make it worth the price, the startup has added new features like AnswerBox, plus a system that automatically recommends site changes to make product pages and customer reviews more visible to search engines.

There was a silver lining to the company’s original plan, Chen says. Because the review platform was free, PowerReviews never added much customization. “We didn’t branch the code to accommodate clients,” says Chen, which meant the company had a streamlined, efficient product that new customers could build into their sites quickly. “You can plug in your credit card and launch [reviews] within an hour,” he says. “We are a 100-person company live on 5,500 sites, collecting 20,000 to 30,000 reviews a day, so it is an incredibly efficient business we have.”

If you visit a site with customer reviews powered by PowerReviews, you notice right away that the reviews are a lot more detailed than those on Amazon. For an example, check out this Staples.com page for an illuminated PC keyboard from Logitech. A whopping 538 people have reviewed the item—329 of whom consider themselves “power users.” You can tell at a glance that the keyboard is popular—it gets 4.7 stars out of 5 overall. But you can also see why it’s popular, on a granular level: 478 of the reviewers said that the keyboard has a comfortable design and 378 said that it’s reliable. At the same time, though, 18 reviewers say it’s difficult to clean, and 13 say it’s not compatible with some computer models.

To see how PowerReviews is working to take advantage of the social-networking revolution, check out a very different customer: Nutrex Research, a seller of nutritional supplements and weight-loss products. If you’re really curious about Lipo 6, Nutrex’s “liquid capsule fat-burner” supplement, you can click on the Reviews tab and use the Facebook buttons to “Subscribe to reviews,” which will send new reviews of the product straight to your Facebook news feed, where your friends can see and comment on them. Or you can click a “Get advice from friends” button to post a poll asking what your Facebook friends think of the product.

The big idea behind the Facebook tools is to encourage consumers to tap their existing communities for shopping advice—which, not coincidentally, feeds into retailers’ viral marketing efforts. At the moment, though, these tools may be nifty add-ons rather than must-have features. A social shopping study commissioned by PowerReviews this summer concluded that “there appears to be a divide between community and commerce” and that only 29 percent of consumers have ever used their social networks to gather shopping advice.

What’s a much bigger priority at PowerReviews, according to Chen, is exploring how e-retailers can plumb the information the startup collects to create new “social navigation” schemes. “Remember our original vision for taking reviews and using them to create good recommendations? That is starting to become a reality, and that is where we are going with our clients,” Chen says.

He explains through an example. “Right now, if I go to an online store and I’m looking at buying some shoes, the results are sorted by keyword, price, best sellers, maybe ‘featured’ shoes. You can sort the reviews according to ‘Top Rated.’ That much is obvious. But because we are collecting structured data, we can say that a given shoe is top-rated by a professional, or by doctors or teachers. We also have a field called ‘Best Uses’ so you can ask whether these shoes are good for orthotics, or for wet weather, or if you are a nurse.”

These types of recommendation are totally different from the “collaborative filtering” mechanisms long used by Amazon and other sites. Those algorithms simply tell you that “You bought Item A, and other people who bought item A also bought item B.” With social navigation, you can find out what people who are actually like you—people who have self-identified as nurses or teachers or investment bankers (well, probably not investment bankers)—thought about each product.

At the same time, retailers can also dig into the tags and terms that customers use in their reviews and use the wisdom of the crowd to create new product categories that could facilitate browsing on their sites. “If water aerobics is a common tag, or turkey hunting, or women’s suits for weddings, why don’t I create a category for that? Why not use this feedback to adjust your whole sales model?” says Chen.

It might be a long time before Chen’s company can get everyone to start their product research by consulting customer reviews. After all, there are always going to be people who go to Amazon by default because they like the company’s prices, or they’ve already bought into the company’s free shipping program, Amazon Prime. But ultimately, “consumers don’t want to depend on retailers to guide their shopping,” Chen argues. “There is always a channel conflict or profit motive behind the scenes. Retailers can’t be the one-stop shop. Although maybe someone will solve this. Walmart is trying to solve it. Amazon is trying to solve it.” Or maybe PowerReviews will solve it first.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • Lawrence Kahn

    At least Amazon publishes negative reviews. I don’t know if PowerReviews or J&R decided to ignore my one-star review of an extremely expensive shower radio with major flaws, but I do know I can’t trust them. In 2005 I bought a very expensive Asus laptop from NewEgg. It turned out that negative reviews exposing the faults of this laptop had been written before my purchase, but NewEgg chose not to publish them. Reviews are useless if they’re censored, and I believe PowerReviews censors submissions. It’s all perfectly within their terms of use, of course, but they’re not honest reviewers – they’re promoters, and nothing from PowerReviews can be trusted.

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