Reputation economy is the Silicon Valley coined term that describes the way the standing of a product, person or company is framed by the evaluation of consumers. These days it’s normally applied to the realm of Web 2.0, which refers to all the interactive and network based applications of the world wide web.

A company might spend millions building up its reputation in the eyes of consumers but it can easily be broken and they are increasingly vulnerable online. The explosive growth of user generated web content is one of the main dangers. Social networking sites, like Facebook and Twitter, but increasingly also blogs and opinion based websites, like TripAdvisor and Yelp, offer consumers a soapbox to express their views or pass judgment on anything from the latest celebrity haircut to the price of fish.

One of the big differences with this new form of media is that it doesn’t play by the same rules as traditional newspaper publishing, for example, where content is checked for accuracy. Partly that’s because of the opaque legal rules governing the electronic environment, where internet libel isn’t easy to prove.

Added to that, more and more people are using these networks to communicate. Over 211m people in Europe use social networking sites, mainly Facebook, according to ENISA, Europe’s information security agency.

And so while Web 2.0 offers signifi cant opportunities for companies to engage with their customers it also poses a signifi cant risk to corporate reputation. “The internet has absolutely changed the entire landscape of corporate reputation management,” explains Leslie Gaines- Ross, the chief reputation strategist for public relations fi rm Weber Shandwick in New York.

“It has had a vast impact on how companies are perceived. The general public is much more cynical than it used to be. It doesn’t take companies or their CEOs at their word. Instead consumers do their own investigations or dig deeper.” There is so much more activism amongst consumers, she says, and no bad

news goes unpublished. “Disgruntled consumers blog and twitter and they get so much more coverage because they’re so easy to fi nd…Basically companies and their CEOs are naked today and it’s really hard to deal with.”

Plenty of PR consultancies offer brands “online reputation management” services and some of them promise to be able to bury bad news online so that negative comments and stories don’t show up on Google searches. Although this sounds like a murky form of censorship a growing number of businesses are turning to these cyberspace “fi xers”, says Nathan Barker of Liverpool based Reputation 24/7.

Social networking sites pose plenty of IT security risks for companies but they also represent a big threat to their brand. A recent survey of more than 1000 offi ce workers found that 42% of those aged between 18 and 29 discussed work-related issues on social networking sites and blogs. Elsewhere, security software provider Sophos surveyed over 500 organisations, and discovered that 72% are concerned that employee behaviour on social networking sites exposes their businesses to danger, and puts corporate infrastructure—and the sensitive data stored upon it—at risk. Survey respondents were asked which social network they believed posed the biggest security risk, with 60% naming Facebook; 18% said MySpace; 17%, Twitter, and; 4% LinkedIn.