Reputation networks and branding

I can think of a couple things that branding achieves

  • Establishing a history of good relationship with customers.
  • Being a costly signal of trustworthiness.
  • Tap into tribal instincts (hello Apple).

The two first functions are a low tech way to build reputation. Reputation networks could efficiently replace branding and strongly diminish the economies of scale. There are still economies of scale (the more customers, the stronger the confidence in your brand) but the scale power coefficient is likely much smaller.

Reputation network even allow “brands” to bootstrap. A company could place bets on the average rating it receives from a large pool of reviews. This allows individual consumers to hedge their assymetric risk without allowing them to game the outcome.

May 12, 2011
120 words


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