A new study by UBC Sauder School of Business and colleagues has found that fake news could be highly detrimental for companies that are caught in the act.
Researchers found that companies that spread fake news against their competitors end up experiencing the brunt of negative publicity and reputational damage. For the study researchers examined a real-life case from 2012 in South Korea, when a customer reportedly found a dead rat in a loaf of bread made by one of the country’s most popular bakery brands. The company’s business plummeted, until a reporter discovered that a rival bakery had whipped up the fake story. Suddenly, the offending franchise found itself in the hot seat, in the media and online.
The researchers examined three years’ worth of blog posts, news articles and social media exchanges, and counted how many positive and negative words were used in reference to each company. They found that, while the fake story damaged the victim company at first, it caused far more significant and lasting damage to the firm that originally concocted the story. In fact, damage to the victim company lasted one year, while the effects for the offender lingered for more than two years.
For businesses that practice these smear tactics, the researchers caution that fake news detection technology is becoming increasingly more precise.
According to study co-author Ho Kim, assistant professor of digital and social media marketing at the University of Missouri-St. Louis, the findings serve as a warning to companies to avoid using smear tactics.
The study, “Does Deceptive Marketing Pay? The Evolution of Consumer Sentiment Surrounding a Pseudo-Product-Harm Crisis,” was recently published online in the Journal of Business Ethics. Reo Song at California State University also co-authored the paper.