THE ECONOMIC COST OF BAD
ACTORS ON THE INTERNET

FAKE ONLINE REVIEWS
2021

INTRODUCTION TO
THE ECONOMIC COST
OF BAD ACTORS ON
THE INTERNET

2 FAKE ONLINE REVIEWS | 2021

The internet has heralded an economic revolution.
The internet economy of the G20 countries alone is worth morethan $4.2 trillion representing 5.3% of their total GDP. However,as Tim Berners Lee, the father of the internet has put it: "While theweb has created opportunity, given marginalized groups a voice,and made our daily lives easier, it has also created opportunity
for scammers, given a voice to those who spread hatred, andmade all kinds of crime easier to commit.’’ In a series of reports,
we reveal the monetary cost caused by bad actors on the internet.
CHEQ has commissioned economist, Professor Roberto Cavazos
at the University of Baltimore, to undertake the first ever in-depth
economic analysis of the full scale of internet harm. For the first time,using economic analysis, alongside statistical and data analysis, wemeasure the global economic price paid by businesses and society
due to problems including ad fraud, and fake online reviews.

THE COST OF
FAKE ONLINEREVIEWS: A $152
BILLION PROBLEM
In this way online reviews – and by extension
fake reviews – play a major part in the global
economy.
In this report we analyze the economic
damage of fake reviews globally. We
discover the price paid in the form of both
direct and indirect costs which collectively
undermine the cardinal principle of trust
underpinning free market economies.

THE ECONOMIC
BENEFITS OF
ONLINE REVIEWS
Online reviews in their most ideal state serve a valuable economic
function for all parties in a transaction. Genuine online reviews
bridge information asymmetries between buyers and sellers,
providing information that may not be otherwise be disclosed.

3 FAKE ONLINE REVIEWS | 2021

Fake online reviews are defined as any
positive, neutral, or negative review thatis not an actual consumer's honest andimpartial opinion and does not reflect a
genuine experience of a product, service,or business. The sites on which reviews
appear are multiple: ranging from online
brands making online feedback part of theircore offering (such as Amazon), sites thatembed third-party review platforms such as
Expedia, and platforms whose core purpose
is to provide reviews and feedback (such as
TripAdvisor).

THE ECONOMIC
BENEFITS OF FAKEONLINE REVIEWSFOR BAD ACTORS

1Secondly, the deployment of fake reviews
causes a substantial short-term rocket inorganic search positions and sales ranks
lasting four weeks, even after deletionor detection.3 Thirdly, using fake reviews
bad actors are able to "bootstrap" theirreputations with fake information.4
Overall, the eventual culling of fake reviews
occurs on average after 100 days, giving
fraudsters enough time to turn a profit.
In addition, like other online markets
we have analyzed, such as ad fraud, theeconomic benefits outweigh the risks andcosts of being caught. This incentivizes
bad actors and the ongoing growth of thisunderground economy.

Luca, Michael, and Georgios Zervas: "Fake It Till You Make It: Reputation, Competition,

and Yelp Review Fraud." Management Science 62, no. 12 (December 2016).
2

Federal Trade Commission (2011), ‘Firm to Pay FTC $250,000 to Settle Charges that it Used Misleading

Online “Consumer” and “Independent” Reviews’, Federal Trade Commission, https://www.ftc.gov/ newsevents/press-releases/2011/03/firm-pay-ftc-250000-settle-charges-it-used-misleading-online
3

The Market for Fake Reviews, Sherry He et al, Anderson School of Management, UCLA

4

Ibid

4 FAKE ONLINE REVIEWS | 2021

However, the benefits of trading in fake
online reviews are clear and proven. The
return on investment of soliciting fakereviews make them highly profitable. Firstly,
fake reviews bring immediate benefits: an
extra star on a restaurant's Yelp rating canincrease revenue by 5 to 9%1 The Federal
Trade Commission has shown that outlay
on fake reviews can provide a 20X payoff.
For instance, in an enforcement caseagainst Legacy Learning Systems Inc. it was
found that $250,000 outlay on fake reviews
generated more than $5 million in sales2.

THE BOOMING
MARKET FOR FAKEONLINE REVIEWS
Hinting at the size of the vast market, in
May 2021 an open database revealed
the identities of over 200,000 individuals
appeared to be involved in Amazon fakeproduct review schemes.
Less sophisticated but powerfully effective,
companies simply urge employees to write
positive reviews of products, deliberately
masking their identity including through
VPNs.
For instance, in 2019 Skin care brandSunday Riley was found guilty by the
FTC of writing fake Sephora reviews foralmost two years under instruction fromits management.6 In 2020, Student loan
comparison site, LendEDU was fined$350,000 by the FTC after investigations
found that 90% of its reviews on Trustpilot
were faked with most reviews written or
made up by LendEDU employees, theirfamily or friends, or other individuals withpersonal or professional relationships withthe company.7

5

Ibid

6

Federal Trade Commission, November 6 2020 https://www.ftc.gov/news-events/press-

releases/2020/11/ftc-approves-final-consent-agreement-sunday-riley-modern-skincare
7

FTC 26 May 2020 https://www.ftc.gov/news-events/press-releases/2020/05/ftc-finalizes-

settlement-lendedu-case-related-deceptive-rankings

5 FAKE ONLINE REVIEWS | 2021

The trading of fake online reviews has
become standardized with groups,
commission structures, and loyalty
schemes. Payments change hands fromaround 25 cents to $100 per review.
Marketplaces include Facebook privategroups increasingly solicit buyers topurchase their product and leave a fivestar review in exchange for a full refund,and in some cases a $5-$10 commission.
Some 23 fake review related groups
operate per day.5 Other crackdowns
have shown bulk packages of reviews
selling at $11,000 for 1000, with "review
rings" further enrolling in loyalty schemes
to ramp up output. In other cases, fakereviews are being weaponized. Much
like ransomware, this extortion involves ademand for payment with the threat that an
e-commerce site's online ratings will drop
to one star if payments, of up to $5000, arenot executed. More hidden, fake reviews
via bot-driven services are common on thedark web.

THE RISE OF
BOT-DRIVEN
FAKE REVIEWS
For instance, in the analysis of one large
travel site reliant on reviews 2500 invalid
clicks from bots generated fictitious reviews
through paid campaigns designed to bringin legitimate prospects to purchase. This
both damaged their customer acquisition,
led to long-term bot-skewed metrics, andempowered bots to hurt the reputation of
their online reviews.

The challenge of bots has been a long-term
issue. Zach Pardes, Trustpilot’s Director ofAdvertising says they are battling "botCHEQ cybersecurity analyst, Refael Filippov, based fakes, where programs are written
says: "A classic fake reviews campaign
to generate fake text and post it to review
would start with registering multiple users
platforms". Fred Killingsworth, CEO of
to the relevant ecommerce platform - thisAmazon consultancy Hinge adds "Reviews
is increasingly done by landing throughare critical to your success. “Bot reviews
customer acquisition campaigns designed
skew the entire experience.”
to get people to buy goods, or book hotels
or holidays on a central site. Increasingly,
Finally, though not widespread, the use of
botnets that are used to click on ads can
AI-driven bot reviews are likely to rise, sincealso be the same ones that generate fakeresearchers trained a neural network that
reviews hurting these sites credibility andcan churn out fake reviews. These are shown
businesses on them. We find a connection
to be indistinguishable from real customer
between bots that have posted reviews,
feedback.
and we know that they're bots because of
cybersecurity analysis tests performed on
The heady mix of competitors, incentivizedclicks."fraud, bots, and AI alongside real economic
payoffs makes the fake review market
complex and fast-growing.

6 FAKE ONLINE REVIEWS | 2021

It must be noted that it may not be ahuman reviewing the product at all.
Though click farms, buying of fake reviews,
and competitor attacks, are common,
it is increasingly done by bots landing
through customer acquisition campaigns,
particularly observed on travel or
ecommerce paid search and paid social
campaigns (designed to attract paying
customers). CHEQ has found that botsclicking on ads such as paid ads are thesame botnets generating fake reviews.

CALCULATING THE
DIRECT ECONOMIC
IMPACT OF FAKE REVIEWS
To calculate the economic impact of fake online reviews, weneed to analyze the size of the ecommerce market, the level ofpenetration of online reviews in global online buying decisions,and the percentage of fake reviews in the economy.

Size of overall Global ecommerce web revenue (2020)$4.28 TRILLION

89% of global ecommerce web revenue inﬂuenced by reviews$3.80 TRILLION

Level of fake reviews in ecommerce globally

4%

Consumer spend inﬂuenced by fake online reviews globally$152 BILLION

The size of the overall global ecommerce web revenue is $4.28
trillion.8 Of this spend we know that in today's economy the vast
majority of consumers are influenced by reviews. Multiple studies
reveal that at least 89% of consumers globally check reviews
online before making purchases.9 This has gradually risen fromaround 82% eight years ago.10 Overall, we conclude that online
reviews influence $3.8 trillion of global ecommerce spend in 2021.

8

https://www.emarketer.com/content/global-ecommerce-update-2021

9

2020: Trustpilot: The Critical Role of Reviews in Internet Trust shows 89% are influenced by fake reviews.

10

A 2013 European Consumer Center Network web survey showed that 82% of respondents read

consumer reviews before shopping

7 FAKE ONLINE REVIEWS | 2021

THE GLOBAL COST OF
ONLINE FAKE REVIEWSLEVEL OF
FAKE REVIEWSIN ECOMMERCEGLOBALLY

11

https://www.gov.uk/cma-cases/fake-and-misleading-online-reviews

12

Luca, Michael, and Georgios Zervas: "Fake It Till You Make It: Reputation, Competition,

and Yelp Review Fraud." Management Science 62, no. 12 (December 2016).

8 FAKE ONLINE REVIEWS | 2021

Next, we must establish the contentious level of fake reviews in the global
economy. Some government probes have estimated the number at only
between 1 and 2%11. The highest end estimates of fake reviews include
a highly influential study of fraud committed on the Yelp review site
identified up to 16% of all its reviews as fake.12 Higher still, according toreview detection software, Fakespot, up to 42 per cent of reviews are fake.
At the summit of ranges, the French Directorate-General for Competition
has put the figure as high as 45%.

OFFICIAL FIGURESOF FAKE REVIEWS: 4%% fakereviews

Trip Advisor

0.6%

Yelp

8%

Trust Pilot

5.7%

Amazon<1%

The fact that companies relying on reviews increasingly
make their levels of fake reviews (and actions to solve
the problem) known in a transparent corporate mannerreflects the sizable economic threats to their business andpublic perception interest.

For instance, Amazon which makes up 49%
of all US ecommerce, states that less than
1% of reviews are fake. "Our approximationis that less than 1 percent of reviews are
inauthentic," said Sharon Chiarella, former
vice president of community shopping,noting however that "sometimes individual
products have more suspicious activity."
In its 2021 Annual report Yelp claims " Asof December 31, 2020, approximately 8%of the reviews submitted to our platform
had been removed. In 2021, TrustPilot
published its first transparency report
revealing 5.7% of reviews (2.2million) were
removed.

This overall low range is also shown in
Google's analysis of fake postings andreviews on Google Maps, which found thatfewer than 0.5% of local searches were"policy-violating reviews" or "fake businessprofiles."With 4% levels of bogus reviews among
the large sector of sales ($3.8 trililion)
influenced by reviews, we conclude that thedirect influence of fake reviews on online
spending is set to cost $152 billion globallyin 2021. Within this large-scale figure, thefake review challenge is having an impact
on all leading ecommerce countries andsectors. Below, this large figure of direct
costs is broken down by country andspecific ecommerce sectors.

9 FAKE ONLINE REVIEWS | 2021

Ecommercesite

For the purposes of this study, we have calculated theeconomic losses based on actual data supplied by the
major review sites themselves. Based on leading players,
this places global fake reviews at an average of 4%. Thishas been published by the companies in a range oftransparent reporting.

Size of overall
ecommerce
revenue(US $)

Value of spend
inﬂuenced byonline reviews(US $)Country consumer
spend inﬂuenced
by fake reviews(US $)US$791
BILLION$703
BILLION$28
BILLIONUK$140
BILLION$125
BILLION$5
BILLION

AUSTRA$25.7
BILLION$22.8
BILLION$900
MILLION

JAPAN

$181
BILLION$161
BILLION$6.44
BILLION

CANADA$64
BILLION$57
BILLION$2.27
BILLION

10 FAKE ONLINE REVIEWS | 2021

E-COMMERCE
SPENDING
INFLUENCED BY FAKEONLINE REVIEWS IN
FIVE COUNTRIESSize of web
sales in sector

Value of spend
inﬂuenced byonline reviews

Consumer spend
inﬂuenced by fake
online reviews

FASHION
ECOMMERCE$110.6BILLION$98.4
BILLION$3.96
BILLIONBEAUTY ANDPERSONAL CARE

$22.54BILLION$20
BILLION$800
MILLIONENTERTAINMENT$28.06BILLION$24.92
BILLION$1
BILLIONFURNITURE AND
HOMEWARE$52.6
BILLION$46.8
BILLION$1.87
BILLION

ELECTRONICS$95
BILLION$84.5
BILLION$3.3
BILLIONTRAVEL$115
BILLION$102
BILLION$4.1
BILLION

11 FAKE ONLINE REVIEWS | 2021

US ECOMMERCE
SECTORS INFLUENCED
BY FAKE ONLINE REVIEWSINDIRECTCOSTS: PRICINGIN TRUST AND
TRANSPARENCY
Direct costs, described above, refer to thelosses and opportunity costs imposed onsociety by the fact that a crime or attack
is carried out. In this case this involves the
direct economic influence of fake reviews
on online spending. However, the US
government has suggested that to best
understand the cost of harm,

estimates should consider both the financial
and non-monetary effects of harm.13
Such indirect costs could impact quality oflife, increase fear, or change behavior. Some
researchers have concluded that crime’s
most costly factors stem from these lesstangible effects.

The high price of court cases brought about– both by public bodies and competitors
fighting each other's alleged treatment of
fake reviews – is a major indirect cost thatmust be added to our $152 billion direct
loss. The costs of enforcement, lawyer's
fees, court time, executive and employee
headspace, and litigating over fake reviews
can stretch into millions of dollars.

Benjamin Edelman points out thecomplexity of acting court against fakereviews "in light of its cost relative to thevalue of a typical transaction". He argues
that the decisision to take action mustbe "set against "the difficulty of pursuing
claims against a distant counterpart andthe heightened difficulty of proving any
disputed question of fact".14
Nevertheless, the appetite for prosecutions
has grown as the seriousness of neglect offake reviews has become a corporate-wide
challenge.

13

Benjamin Edelman, The Market Design and policy of online

review platforms, Oxford Review of Economic Policy, 201712 FAKE ONLINE REVIEWS | 2021

ENFORCEMENT COSTS

2011

New York regulators
imposed $350,000
penalties on 19
companies for fakereviews.

Amazon sued morethan 1,000 people for
writing fake reviews

2013

2014

2015

2018

Skin care brand Sunday
Riley was found guilty
by the FTC of writing
fake Sephora reviews
for almost two years

In a sting operation, Yelp
ﬂagged dozens ofbusinesses for buying
fake reviews

2019

2020

The Federal Court ofAustralia ruled against twosolar panel businesses for
publishing fake testimonials
onlineAn Italian court handed
down a nine-month prison
sentence to the owner ofPromoSalento for fake travel
reviews on TripAdvisor.

Student loan comparison site, LendEDU
ﬁned $350,000 by the FTC

Nextiva was accused of fabricating fakesocial media users to "post fake, positive
reviews of their own services, and fakenegative reviews of RingCentral's services"
Casper Sleep alleged that rival Nectar
Brands wrought public harm through"the deception imposed on consumerpurchasing decisions".

Facebook takes down
16000 groups trading
fake reviews after action
from the UK's CMA

2021

City tour bus competitors, Taxi Tours
vs Go New York Tours alleged claimsof fake review posts in court.

13 FAKE ONLINE REVIEWS | 2021

Yelp closed more than 1200 user accounts
for being part of review rings

ECOMMERCEINVESTMENT BY
ECOMMERCE PLAYERS
Other indirect costs include theconsiderable time and resources invested
in tackling the challenge. Amazon has spentover $500 million and employed over 8000
people in 2019 alone to reduce fraud andabuse. In a major and interesting update,
Google adopted a new "Product Reviews
Algorithm" to attack the problem at source.

The update aimed at rewarding high-levelproduct review content, above thinnercontent. Other updates to Google Maps
fraud detection have been implemented.
"Through better detection of click farm
activity we are making it harder to post fakecontent cheaply, which ultimately makes it
harder for a click farm to sell reviews andmake money."

Businesses can be severely hurt with one
or two negative reviews, and this brings
home the economic pain set out throughthis report. Tommy Noonan, now founderof Review Meta, was alerted to the problem
after setting up a review site for gym
supplement which was bombarded withfake reviews. "It is a small site, but if it ishappening to supplementreviews.com, it
must be happening elsewhere". In anothercourt case from Australia a plastic surgeon

13

https://www.gao.gov/assets/700/691895.pdf

claimed that his business dropped by
23% in the week after a fake review wasposted. In a court case in 2018 (UnitedStates District Court Eastern District ofCalifornia) California based Super Mario
Plumbing said their business dropped 25%
and were forced to reduce the work of two
employees as a result of a competitor's
fake review. Elsewhere, an Ottawa shop
selling dumplings cited the time and money
they spent: "It took 10 days for 13 years'
worth of work to break down [the issue],”

14 FAKE ONLINE REVIEWS | 2021

THE OUTSIZED EFFECTS
OF FAKE REVIEWS ON
BUSINESS REVENUEsaid Kamilla Riabko of Ottawa Perogies. In a fight over bus passengers
two New York bus companies (Taxi Tours vs Go NY Tours) allegedthat "fake positive online reviews…wrongly diverted" customers from
TopView to Big Bus, damaging their bottom line. In an April 2020 court
action, Nextiva was accused of fabricating fake social media users to"post fake, positive reviews of their own services, and fake negative
reviews of RingCentral's services on various platforms". In a mud-slinging
mattress war, about reviews on Google and Amazon, plaintiff Casper
Sleep alleged that Nectar Brands wrought public harm through "thedeception imposed on consumer purchasing decisions" flagging thewider harm of consumer's inability to find honest and independent
reviews in a potentially opaque marketplace".15

LOSS OF TRUST IN
ONLINE BUYING

15

September 2020, Casper Sleep Inc vs Nectar Brand UNITED STATESDISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

15 FAKE ONLINE REVIEWS | 2021

In addition, trust is damaged – consumers who buy products that
deployed fake reviews are left feeling deceived and potentiallyunwilling to trust future sites or reviews. The presence of fake reviews
makes consumers suspect, with 85 percent believing the reviews theyread were "sometimes or often fake". Elsewhere, Bazaarvoice found
28% of respondents said a fake review would cause themto distrust other reviews, and 26% said it would lead them to distrust
the brand. "Simply put, once shoppers suspect a company of having
fake reviews, trust is in question," says Joe Rohrlich, chief revenue
officer at Bazaarvoice.

CONCLUSION

16 FAKE ONLINE REVIEWS | 2021

The vast economic cost of fake online reviews — straining sectors
from fashion and beauty, to travel — reflects the ubiquity of online
reviews across the $4.28 trillion ecommerce sector. The ease andaccess to fake reviews is only increasing whether by humans or
botnets, click farms or groups. This makes online reviews oneof the largest markets hit by bad actors and among the costliest
in economies where ecommerce further expanded during the
COVID-19 pandemic and continues to grow. This confirms a
European Commission report citing fake consumer reviews as oneof the most market-distorting factors in ecommerce causing severe
consumer detriment. It has become a clear economic necessity to
act against fake online reviews and further diminish the reach ofbad actors undermining online buying decisions.