Monday, August 22, 2005

Epinion Review Numbers

Numbers can often be deceiving, and accounting shenanigans are something analysts must be aware of when researching companies. We must be thorough, especially when investments are at stake. Aside from financial figures, analysts look at other numbers to help diagnose companies. These numbers include survey data.

Some people have expressed concerns about the review survey figures of Epinion, particularly that of Overstock.com. The number of reviews for Overstock.com on Epinion seem questionable. Amazon's 2004 annual revenue was $6.9 billion and received 1,060 Epinion reviews. Whereas, Overstock's trailing 12-month revenue adds to $641 million... yet it somehow managed to generate 35,286 Epinion reviews.

Let me see if I'm getting this right. Overstock generates less than 1/10th the sales Amazon realizes, yet OSTK somehow managed to obtain 33 times the Epinion reviews than those for Amazon! Overstock must be really (and I mean REALLY) good at convincing their customers to take review surveys. Maybe it’s me, but I don’t remember being so enthused about taking customer surveys.

To be fair, it is possible that Overstock is much more aggressive than Amazon when it comes to having its customers take reviews on Epinion. However, other reviews and surveys (particularly from Resellerrating.com) contradict that of Epinion. My point is this... only the survey takers really know how they rated a company. Survey numbers can be deceiving, so investors should be careful and not put too much faith in one survey. Overstock has been gaining alot of negative attention, and purely from an investment perspective, it's probably best to move on and consider better companies to add to the portfolio.

3 Comments:

At 3:06 AM, Blogger mfairview said...

Sam, as you frequent Jeff Matthews blog and responded directly to this thread, I am unsure how you missed this post. Here it is again.

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http://www.epinions.com/merchant/survey_popup.html

Where do surveys come from?
This merchant allows Shopping.com to collect feedback directly from their customers after they have made a purchase. To do this, a survey is served to a customer immediately after they make a purchase. We then follow-up with the customer a few weeks later, after they should have received the product they purchased. The customers' answers to these follow-up surveys are displayed as Surveys on the Shopping.com network.

I suspect EBay/Amazon doesn't partake.

 
At 11:11 AM, Blogger Sam S. Park said...

"mfairview"

I saw that post on Jeff's site. And I had originally thought that was a valid point, but I took it a step further. I actually put all the Epinion figures onto an excel spreadsheet file. I'm not sure if you really want to hear this since you seem to favor OSTK so dearly, but here's what I found.

Excluding the companies without any review numbers, and also excluding OSKT, these are the numbers:

Sum of ALL 127 companies with review numbers: 21,981 (compared to OSKT's 35,389)

Average: 173

Higest number of reviews excluding OSKT: 3,616

Here's my point, OSKT's review numbers stick out like the Giant (from Jack and the bean stalk) would at the North Pole among the little elves... the numbers speak for themselves. If you want this excel file, give me your email address, I'll be glad to send it to you for free.

 
At 6:00 PM, Anonymous QUALITY STOCKS UNDER 5 DOLLARS said...

Nice take on a interesting market.

 

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