Trust, by the numbers

By Dan Raile , written on July 23, 2015

From The Sharing Economy Desk

I don't give a damn 'bout my reputation
You're living in the past, it's a new generation

- Joan Jett

Many of the issues arising from what people used to call “the sharing economy” go well beyond the domain of smartphone’s and laptops, seeping into the real world. This summer in court cases around the country, thinkpieces across the blogosphere, and legislative chambers throughout the American federalist system, those issues – around safety, workers’ rights, regulation – are receiving their due.

Last week on Pando, Greg Muender detailed an excessively negative experience he’d had using car-sharing service RelayRides, and shared some thoughts about how companies like RelayRides could improve their offerings to foster greater trust:

I think RelayRides can do more. Who are Jim’s friends? Do we know anyone in common? Has he used any other platforms before? How is his creditworthiness? What does he do for a living?

Good or bad, things like these paint a picture of the type of person that Jim is.

Just like you wouldn’t befriend someone that you know very little about, you shouldn’t feel obligated to transact with someone you don’t have a baseline understanding for. 

As if Muender had summoned it out of the air, an email came across my desk that very day, announcing the a service that claims to do nearly all the things Muender suggested.

LA-based Karma Labs is a couple of quiet months into the public beta for its Karma product, which links reputation data across multiple peer-to-peer commerce platforms and assembles them into a single score. It also links to social media sites, to establish some basic benchmarks of identity.

I spoke with Karma Labs’ co-founder and COO Mike Stein yesterday by phone.

“Karma is a contested name, but we really couldn’t think of any word that better describes the system of rewarding peoplel for their goodness,” Stein said. There are at least five other startups called Karma, and many others using variations on the word – KarmaKey, Karma Snap, KarmaKarma, Karmalot. It’s a marketplace unto itself, with no clear winner yet. I for one find it commendable and intrepid that Stein and his co-founders opted enter this fray rather than adopt some language-polluting neologism.

“For a while we were toying with the name Circle, but then Dave Eggers’ book came out and we didn’t want to have anything to do with that,” Stein explained. Damn you, David Eggers.

Karma currently exists as an unobtrusive browser extension, and culls and analyzes users ratings and reviews from eBay, Etsy, Airbnb, RelayRides, DogVacay and Vayable. It also connects with Facebook, Twitter, Foursquare and LinkedIn, which Stein says goes a long way to proving one is who one says one is. Interestingly, Karma also integrates with Craiglist, allowing users to bring their reputations established elsewhere to that traditionally anonymous marketplace.

Stein said that the company hopes to integrate with ridesharing services as well, though that will likely require them to develop a mobile API that Lyft, Uber and Sidecar can call. Since the reviews generated within those apps are not as data-rich as those from an Airbnb or RelayRides, it’s not a make-it-or-break-it priority. Finally, a sector of the sharing economy incompletely dominated by Uber.

The grand vision is to be something like the PayPal of trust. But as in the case of digital payments, a lot of things will have to be done right for Karma to assume this perch.

Stein and his two co-founders have backgrounds in gaming and filmmaking, and he says the team has solid consumer-product chops. He’s betting this will go a long way to spurring adoption, since the product looks attractive, is non-invasive and intuitive to use, and the Karma score – on a 0 to 100 scale with color coding – is readily understood.

On the backend things are more complicated. Every platform Karma utilizes to establish its score has a different rating system, some use stars, some a simple upvote or downvote, others are review-based. Stein says Karma has put together a machine-reading component using existing libraries and its own code for analysis of reviews.

“We don’t have enough hubris to believe the machine algorithms we are developing are going to be right all the time, which is why we built in a system for flagging early on,” said Stein.

Some sites are weighted more heavily than others, based on the amount of risk or intimacy involved – Airbnb reviews carry more weight than eBay buyer feedback, for example. One’s Karma score also reflects the total number of data-points involved in a particular person’s score.

This last bit means that if you have done no sharing ecommerce, you’ll have a fairly low score. One way the company hopes to ease this burden is by offering users a limited number of opportunities to vouch for others, and these endorsements are tallied into the score. Another way of mitigating this punishment for lack of participation begins to bleed into talk of a revenue model for the young company.

“One thing we’ve identified is that for people onboarding into the sharing economy for the first time, with no data out there, it’s a sticking point. One potential revenue source is a more formal onboarding process that allows people to build a stronger reputation background even when they don’t have data from any of those sites. For example, a user could have a background check done on themselves and we could analyze that data for a Karma score,” Stein said.

For now though, the primary goal is to spread user adoption, and as such the company is focused on the user interface and the utility of the Karma score as consumer product, though Stein did mention that talks with Airbnb are “ongoing.”

Karma Labs has collected $800,000 in seed funding over the first one-and-half years since its founding. Stein says that’s enough for the six-person team to actualize its current gameplan.

One thing that remains to be seen is whether the companies that Karma pulls its data from are amenable to their efforts. Stein made a case for how the Karma score benefits these platforms, by adding an absent feature, minting a coin of the realm of trust. But if this really is desireable, and really fills a market need, why have none of these platforms built a similar product? And why haven’t the VC’s who are banking on their success piled in to provide this missing link?

Karma is still in its early days mapping the wilderness of on-demand trust, but it has arrived with a mature-enough product to at least prove the need (or lack thereof) of such a service in the marketplace.