Everyone's a critic

Consumer Reports faces down a handful of online upstarts.

Published June 23, 2000 7:00PM (EDT)

It's stuffy, it's boring, it's older than your grandmother's Buick, but with a loyal print readership of 4.2 million, Consumer Reports has a secret: The product-rating powerhouse's online publication represents the second most popular online paid subscription after the Wall Street Journal.

But that position is currently under attack.

Call it the new review zoo. Suddenly, consumer-critique sites are starting to multiply. Where once there was only Consumer Reports, John Q. Purchaser now has a handful of new outlets with which to discuss, rate and rant about every fridge or juicer he has ever bought.

Online since 1987 (it was one of the first Web publications, via Prodigy) CR has 410,000 online subscribers, while newcomers like Deja.com and Epinions, which give readers a venue for their own consumer reports, now draw 1.7 million and 1.2 million unique visitors respectively and command ad rates of up to $53 for every 1,000 page views. (Consumer Reports, of course, has a no-advertising policy for both its print and its online versions.)

In recent weeks, these upstart reviewmongers have garnered plenty of buzz. Last month Epinions.com ("a platform, not a publisher," says co-founder and CEO Nirav Tolia) took home the Webby Award for best service, an honor certain to bring in thousands of new readers and enable Tolia to boost his ad rates even further.

Meanwhile, Deja.com -- now well beyond its original function as a Usenet archive (which, after all, nobody was making money on) -- has entered the realm of e-commerce: Its new "Precision Buying Service" business model combines the site's consumer reviews with professional critiques (by name-brand outfits such as CNET and Rolling Stone), incorporating price-comparison tips and links to e-merchants. The site's revamped business plan has just elicited a third infusion of capital from its investors, to the tune of $12.5 million.

Deja.com CEO Thomas L. Phillips recently shrugged off CR as "living in the old-media paradigm." (Phillips knows from old media; he was the founding publisher of Spy magazine, where -- full disclosure -- I worked from 1988 to 1990.) His dismissive statement has some wondering whether the Internet has in fact trumped CR's ace. Is the venerable magazine, home of ceremonious testing and centralized data, out of step in the era of advertorials and Matt Drudge?

It certainly looks that way. Deja.com and Epinions offer their services to readers gratis, while Consumer Reports staunchly adheres to the old-media business model: paid subscriptions (old, that is, to everyone except Inside.com co-founder Kurt Andersen, another Spy founding father now staking his fortune on paid subscriptions).

Information may want to be free, but the folks at Consumer Reports ask you to shell out for it -- to the tune of $26 per year for the famously ad-eschewing magazine or $3.95 per month (or $24 per annum) to use the three-year-old Web site. (Magazine subscribers get site access for only $19 per year.)

"You get what you pay for," says Michelle Rutkowski, Consumer Reports Online's marketing manager. "Free information on the Web doesn't always mean the best information for you, and it certainly doesn't mean it's unbiased."

By contrast, Rutkowski cites the millions of dollars CR's parent organization, Consumers Union, spends annually (almost $120 million in 1997-98, the last fiscal year for which figures are available) on "program services." These include such manufacturer-sniffing tactics as employing 100 anonymous shoppers to purchase products from local retailers and car dealerships; lab-testing all reviewed items under the supervision of its own engineers (after obscuring or removing all logos and brand names that might subconsciously sway the testers); compiling repair and reliability statistics from purchasers; and maintaining a large database of recalled products. The nonprofit Consumers Union even imposes a $10,000 lifetime cap on individuals' charitable contributions so that no ingratiating mogul from, say, General Motors can tip the scales (so to speak). One company's scruples, however, are another company's marketing niche. Indeed, Deja.com and Epinions appear to find Consumer Reports' conflict-of-interest concerns almost as quaint as the Glass-Steagall Act.

According to its chief strategic officer, Richard Gorelick, Deja.com accepts advertisements from merchants, retailers and manufacturers, which it clearly labels. And those companies' ad dollars do not influence the site's content, he says. "We don't control what is said in the user-generated product reviews, and we have a strict editorial policy that we're not going to remove a review because it's negative." Far from wanting to separate the ads from the product assessments, Gorelick says, Deja.com considers that proximity a selling point for advertisers: "This is where people are actively considering purchases." As for the credibility of the reviews themselves, he says, "We feel that our user-generated content is often much better [than lab test results] -- it is a little bit less pristine, but people are actually using the products in real-world situations."

They're also subject to real-world pressures: Gorelick admits that Deja.com was forced to deploy anti-abuse procedures some months ago after employees of competing online travel services each posted a flurry of diatribes about the other.

Epinions.com, meanwhile, addresses the credibility issue via its "Web of Trust" system, in which, Tolia explains, the software mimics "the sophisticated sorting and filtering that goes on" during real-life, word-of-mouth recommendations. As Tolia explains it, the Web of Trust's algorithms (patent pending) send untested newcomers' opinions to the bottom of the heap: "Those people who come into our system and have zero existing reputational capital ... just aren't seen that much."

What's more, Epinions expects that its system of compensating reviewers (at rates ranging from 1 to 3 cents per page view) will elicit more substantive content. Consequently, much of the site's traffic -- especially in taste-driven categories -- centers on the preferences of its trusted personalities rather than hard data. "What people are essentially doing is navigating the site not based on products but based on people," says Tolia.

A spontaneously generated "Neighborhood Watch" group of some 20,000 Epinions users now monitors the site's content 24 hours a day for possible abuses. And Tolia says advertisers, far from being alienated, often welcome the consumer feedback; he cites the example of Bekins, a moving company whose CEO responded to negative reviews by posting a letter to the site. "Some venture capitalists even use our site to do due diligence on companies," he says.

So who's on top at the bottom line? Deja.com's financial reports indicate revenues of $5.1 million and a net loss of $8.8 million for 1998, the last year for which data is available; at present, Gorelick says, the company is not discussing its financing plans. No data is available for the privately held Epinions, and Tolia says his yearling has no plans to go public in the foreseeable future.

Meanwhile, given a conservative estimate of $20 per Web subscriber, CR's online and print divisions alone bring in more than $117 million annually. Even so, at last tally, in 1998, the organization was still running at a slight loss: Expenditures exceeded revenues by $1.35 million.

There is no financial data to indicate whether Consumer Reports readers are defecting to the free-information sites, or whether CR will feel pressure to lower its prices in response, but one thing is certain: Plenty of people out there would like to get CR's info for free. According to Rutkowski, librarians say Consumer Reports is the magazine most often stolen from public reading rooms.

By Caren Weiner Campbell

Caren Weiner Campbell writes about entertainment and technology from New York City.

MORE FROM Caren Weiner Campbell

Related Topics ------------------------------------------