Positive reviews do not always pan out. Investors flocked when Trustpilot listed in London a year ago, granting the online review site a £1.08bn valuation. It is now worth less than half that. Annual results released on Tuesday, showing a 29 per cent rise in revenues but a net loss of $25.9mn, did nothing to dispel negative vibes. Its shares plummeted 16 per cent.
Trustpilot, which charges clients for collating and analysing their customer feedback, merits two types of feedback. A bleak outlook, weighed down by higher costs, confirms the bear case.
Spend on sales and marketing in the past two years had withered. At $46mn last year it accounted for 35 per cent of sales, down from 39 per cent the previous year. This year’s “meaningful re-acceleration” of investment for those and ramped up spending on technology imply a reversal of that trend. Both moves entail hiring more staff, after pruning headcount in lockdown-hit 2021, at a time of wage inflation.
The bull case has revenues growing at a faster clip. Trustpilot makes money from the businesses that customers review. It offers a sliding scale of services piggybacking on feedback: analytics, aggregation, real time feedback and embedding customer comments in businesses’ own websites.
Annual fees, depending on the level of services sold, range from $2,400 to — at the very top — $100,000. The average kicks in at $5,600. Winning more clients and shunting those it has on to a higher fee tier should not be a huge stretch. Also, Trustpilot’s monster competitors, Google and Amazon, are under review in the UK — Trustpilot’s biggest market. The competition watchdog frets at a lax attitude towards fake reviews. That could at least hobble these rivals.
Trust is thus as much Trustpilot’s currency as its name; last year it weeded out 2.7mn fake reviews, 6 per cent of the total. But even harnessing AI tools to wage war on fakery only goes so far, as every app owner knows. Trustpilot has a strong franchise. Now it has to prove it can make money from it.
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Source: Financial Times