The Department of Justice opened its case against online review powerhouse Bazaarvoice yesterday. At question is whether the firm's acquisition of PowerReviews was a strategic move intended to snuff out its only true competition. However, the DOJ's focus on Bazaarvoice as product-review-platform purveyor neglects the company's recent leap into the ad targeting business, and could be reflective of a failure by government to keep up with the rapid transitions that are commonplace in the digital tech space.
The Justice Department's case hinges on the notion that Bazaarvoice effectively killed the competition by buying one of the only other significant online reviews platform firms. But most agree there wasn't much competition in the first place.
"Bazaarvoice sort of created a market for ratings and reviews," said Brian Cohen, exec VP-general manager at Etailing Solutions, which is owned by data giant Epsilon. "There's not a lot of competition," he said, adding, "It's one of those things where Bazaarvoice is almost getting punished for creating a market."
Ebay-owned Magento is another platform that enables ecommerce reviews.
The DOJ filed its complaint against Bazaarvoice in January, which stated that "elimination of PowerReviews has significantly enhanced Bazaarvoice's ability and incentive to obtain more favorable contract terms," and cited several instances before the acquisition in which Bazaarvoice executives referred to PowerReviews as its primary direct competition. The DOJ did not respond to a request for comment.
In an official statement in response to the complaint, Bazaarvoice said it was "surprised that the DOJ chose to base this case on a series of dated documents.... During the litigation, we will focus on rectifying the DOJ's inaccuracies."
The company completed its $168.2 million acquisition of PowerReviews in June 2012. At the time, Bazaarvoice said the purchase increased its client base to 1,800.
The product reviews that Bazaarvoice has published and syndicated across ecommerce sites since its 2006 launch generate a trove of data tracking which product pages users' viewed online, product prices, and review sentiment. The company in February introduced its Media Labs division to put that information to use for ad targeting. The system layers on consumer location, age range and interest data with information on products viewed and reviewed, and even transactional data from some of its retail partners showing what they've already purchased.
For instance, when someone checks out a TV product page, Bazaarvoice tracks that he visited the page, and knows if the item was a Samsung priced at $599.99. It also keeps track of ratings and reviews, measuring sentiment toward products, and gauges the most enthusiastic reviewers -- and biggest detractors.
"If you're looking at it through the lens of data collection…. There are a lot of companies who are doing targeting in the marketplace now," said Mr. Cohen.
For that reason, the big names in ecommerce data could be considered more relevant competitors. "You can make an argument that their number one competitor is Amazon," said Mr. Cohen.
Brands and merchants such as Levi's might have relationships with Bazaarvoice or PowerReviews while selling goods on Amazon as well their own sites, suggested Angus Davis, founder and CEO of Swipely, which offers a cloud-based in-store payment service. "I can say that online reviews are a huge factor nowadays in how consumers make a decision," he added.
If it's true that the underlying data is what creates the real value for firms like Bazaarvoice and Amazon, the DOJ could be taking a too-narrow view of Bazaarvoice's business and the market landscape it operates in.
"I think it's potentially opening up a can of worms in terms of who's defining the categories," said Mr. Cohen of the DOJ case. "So much of these businesses these days evolve all the time."