Oddly Together

Someone Should kick Michael Arrington’s Arrogant Ass

A month ago, April, 27, 2011, Michael Arrington posted “An Update To My Investment Policy”, which not surprisingly generated negative reaction from established journalists. I wanted to respond right away, but I’ve been too busy at Betanews, where new editorial responsibilities add to writing.

The issue is a long-standing one of debate regarding TechCrunch’s founder—that he invests in, or has other business dealings with, some of the companies he writes about.

Michael justifies this behavior:

Before TechCrunch I was an occasional angel investor, going back to the mid 1990s…Some people have seen this as a conflict of interest, which it of course is. To counter that I’ve always disclosed investments, and try not to cover these startups myself. Occasionally when news is breaking quickly or for other reasons, I will write about the company, but with the appropriate disclosure.

In 2009 the accusations of conflicts of interest by our competitors became somewhat distracting, and for a couple of years I discontinued investing in startups completely.

That policy has now changed. Over the last several months I have begun investing actively again.

Michael further explains that he can’t write about companies for which investments aren’t public (e.g., there’s some non-disclosure or other legally binding agreement), because he would disclose them first. Otherwise, when able to disclose and write: “I think that this will all be fine. I’ll still be very hard on companies I invest in when they deserve it”.

On the one hand, I laud Michael for disclosing these investments, but that doesn’t remove conflict of interest. What he writes can benefit these companies, even if he’s completely unbiased, or turns a critical eye. Investments’ disclosure is itself conflict of interest. Michael is known to be a successful entrepreneur—TechCrunch is proof of that—and shrewd seer of viable startups. Disclosure of these investments is tacit endorsement, and that can get the startups attention, perhaps needed funding or even eventual acquisition.

A Personal Example
I’ve written plenty of news stories over the years that moved companies’ stock, sometimes unknowingly. For small companies and their investors the results can be rewarding or devastating. One instance still bothers me. In September 1999, Dell briefed me on plans to offer WiFi cards from AiroNet. At the time, no Windows PC manufacturer shipped laptops with built-in WiFi. Dell chose an add-on to the portable’s PC Card slot as its first move into WiFi. The story posted at CNET News on Sept. 15, 1999. I didn’t realize two things, which may have been related: Dell exclusively gave the story to me (without saying so) and AiroNet had gone public a few weeks earlier.

CNET had no comments section on its site back then. Readers communicated by email. I received one from a desperate investor who had shorted AiroNet stock. He pleadingly asked if the Dell deal was true. Turns out that after my story posted, AiroNet shares started rising—up 40 percent over two days. No wonder he was panicked! Sometime later, Cisco bought the WiFi startup.

Suppose, hypothetically, I had been an investor in AiroNet, a new public company. The stock surge likely would have benefitted me, and surely I should have considered the possibility before writing one word. Similarly, any benefit Michael receives from writing about these companies is conflict of interest—plain, pure and simple. If he feels that disclosing investments is being transparent, I challenge him to go further. If there’s really no problem, then he should disclose when he financially benefits from these stories. That would be real measure of conflict of interest, as his critics insist there is.

“Screw Them All” Defense
However, Michael asserts he’s no different from other writers in followup post: “The Tech Press: Screw Them All.” He writes:

We can argue all day about whether or not my policy is a good one. You’ll have your arguments, I’ll have mine. But the really important thing to remember, as a reader, is that there is no objectivity in journalism. The guys that say they’re objective are just pretending. Everyone is conflicted in different ways, and yet the ‘rules of journalism”’don’t require any sort of transparency or disclosure unless it’s a direct financial conflict. I’m going to have to write a longer post about his yet again.

But when you read a tech blogger call a CEO ‘tough and misunderstood,’ should you know that the CEO in question is social friends with that blogger, and leaks confidential information to her? The answer is yes. But you’ll never know. Or when the same CEO is called incompetent by another blogger who was just turned down by said CEO to speak at his conference. Disclosed? No. Conflicted? Yes.

There’s a difference between being friends with a CEO and being an investor in his or her company. I wholeheartedly agree with Michael that conflicts of interest are unavoidable among journalists. But that’s no excuse for engaging them—actively, in this case—nor does the justification address issues of degree. When there are huge amounts of money involved, the difference between investments and accepting a product and reviewing it or having personal political biases simply don’t compare. There simply is no ethical justification for writing about companies in which you invest or have other financial relationships. For the record, I own no stake or stock in any company.

Would it be so hard for Michael to establish a hands-off policy about the companies for which he has financial relationship? What? Are there no other competent writers at TechCrunch, who could report about these companies instead? That Michael has to justify his relationships as disclosure demonstrates there is significant conflict of interest—that he must be concerned that TechCrunch reporting might jeopardize them.

When the AOL Well runs Dry
Surely Michael must already be thinking about the future and his end of days at TechCrunch. In late September 2010, AOL acquired TechCrunch. His site looked like the crown jewel for AOL’s new media empire, but then, in February 2011, AOL bought Huffington Post and put the queen of aggregation in charge of the media company’s editorial content. I don’t see how there’s room for two such large personalities at AOL, and they do have conflicting agendas. While I may gripe about Michael’s personal ethics, I praise what he has created in TechCrunch. Unlike Huffington Post, which lifeblood is aggregation, TechCrunch is nearly all about original reporting—using an effective technique sometimes called “Process Journalism.”

[Edtor’s note: Due to some unfathomable glitch at Tumblr, the post from the paragraph above onward simply vanished and could not be recovered even in browser history. It’s actually the portion of this commentary written first. What follows is a poor reproduction; it’s shorter, and the original impact is gone. I was in the zone when writing and completely lost momentum afterwards.]

TechCrunch not only excels at original reporting, it produces many scoops. By comparison, Huffington Post is a mashup of aggregated, freely-written and occasional original content. Ariana Huffington puts panache, style and hype behind the presentation. Huffington Post may be the Internet’s most successful gossip rag.

One might call Huffington Post and TechCrunch as two sides of a coin. I see them as antithesis to one another. Based on position, style and knack for navigating AOL’s political hierarchy, my money is on Ariana surviving before Michael. Besides, he is known for being gruff and pushy, qualities that won’t hold up long with AOL management. In the war of strong-willed personalities, Ariana is more likely winner. It’s not a question of if Michael leaves TechCrunch but when.

Change, What Change?
So Michael’s start-up company investments and other business dealings are crucial for what comes next, and surely he knows that. From that perspective, there is huge conflict of interest, because of his incentive to protect his on-the-side business dealings. If that’s not the case, then I again challenge him to prohibit himself from writing about these companies or having editorial oversight over the content. See, his argument cuts both ways. If there’s no problem with these business dealings, no benefit from his writing about them, then there should be no problem with someone else writing about them, too.

But there’s no incentive for him to change anything. Journalists can argue all they want about ethics or conflicts of interest, but in the end one thing matters to Michael: TechCrunch is a business. It’s his baby, which he wants to continue succeeding. Post-merger, his job also is to continue making money for the new AOL taskmasters. From a business perspective, this conflict-of-interest stuff doesn’t matter. If it did, TechCrunch would have lost masses of readers or advertisers in the month since his disclosure post, and there is no indication of that. TechCrunch posts interesting and timely content—plenty of scoops and original stories—and the readers are part of the storytelling process by way of comments. It’s not surprising, from that vantage point, Michael can take a “screw them all” attitude to his critics.

Still, someone should kick Michael Arrington’s arrogant ass. His disclosure policy is justification for the most egregious conflict of interest. No journalist should directly profit from his or her reporting.

Tech startups are suddenly hot properties again, and Michael wants some of the action. LinkedIn’s IPO, Twitter’s TweetDeck acquisition and Microsoft’s pending Skype purchase are signs of a new tech bubble forming—and these are all deals that occurred after Michael’s April disclosure post. He just sold TechCrunch to AOL, he has strong ties to venture capitalists and writes about them and startups. Michael knows exactly what the venture capital investment opportunities are shaping up to be as the new bubble expands.

Way I see it, Michael wants to have his cake and eat it, too. Fine, then open and run a TechCrunch public relations agency, Mr. Arrington. But don’t pretend that eating and sleeping where you crap is healthy living.

Photo Credit: Robert Scoble

Do you have a journalism ethics story that you’d like told? Please email Joe Wilcox: oddlytogether at gmail dot com.

This is How Misreporting Happens

Have you ever played the game where someone whispers in the ear of another person and the information goes down a line of people? What often starts out from the source is different than what comes out at the end.

This little game is good example why bloggers and journalists should do original reporting/sourcing instead of relying on someone else. The problem isn’t just the veracity of the second-hand source but the judgement applied by the blogger or journalist reporting it.

I got an unexpected example this morning. I came across a startling headline in my RSS feeds: “PSN Shut Down for Good by Sony”. Say what? I’ve been reporting on the PlayStation Network outage and don’t recall Sony ever indicating a permanent shutdown of the service. The headline is from a story by Austin Ritchie at IThinkDifferent. The post begins: “In order to better upgrade Sony’s online security, the PlayStation Network, or PSN, has been taken down for good”, linking to a Wall Street Journal story.

The Journal story states that “the Japanese electronics giant said it is keeping its PlayStation Network videogame service offline indefinitely”, linking from “indefinitely” to an April 25 blog post from Sony.

“I don’t have an update or timeframe to share at this point in time,” Patrick Seybold, Sony’s senior director of Corporate Communications & Social Media, states about PSN restoration. “As we previously noted, this is a time intensive process and we’re working to get them back online quickly.” Quickly is a long way from “indefinitely” and even farther from “for good.” Troubling: The IThinkDifferent story later uses the same quote.

More troubling: In a follow-up post, yesterday, Patrick writes: “We have a clear path to have PlayStation Network and Qriocity systems back online, and expect to restore some services within a week”. Really? That’s shut down for good?

Responsible and accurate reporting isn’t a duty. It’s a privilege for being allowed the public’s trust. In this era of aggregation and free content, responsible reporting is too often a rarity. As this example shows, the chain of information can be hugely misleading when published/posted as fact. Original reporting is one way to break the chain of misinformation.

Do you have a journalism story that you’d like told? Please email Joe Wilcox: oddlytogether at gmail dot com.

What the Hell is Sarah Lacy Thinking?

There’s a proposition on the California November ballot to legalize marijuana. Sarah Lacy must be smoking some already. Her TechCrunch post “Now that the Recession Officially Ended….Whatever Happened to that Other Shoe?” is so out of touch with reality—what else could it be? That:

• Sarah is so much the rich bitch living inside the Silicon Valley bubble she is clueless about the real America?
• To pay for this month’s pedicure, she needs to write something outrageous to drive up TechCrunch pageviews?
• She’s so poor a journalist—really none at all—she cobbles together unsourced data and uses it in the narrowest of contexts?
• Fox’s “Fringe” isn’t just TV it’s reality, and the Sarah writing this clueless post lives in an alternate universe where there is no economic crisis?

Or perhaps there’s another explanation—and it’s not pot smoking: Sarah isn’t clueless or out of touch at all. She’s smart, sassy, aggressive, relentless and knows her audience. Her post is all about how the economic downturn really didn’t turn down Silicon Valley investing, like it did during the dot-com crash and subsequent 2000-2001 recession. She writes:

From where I sit, it never felt much like a recession at all. Revenues tightened up and people didn’t get raises, but I don’t know any friends who lost apartments, few who lost jobs and few companies that went under, just because of the crash…This thing we just went through? From the Valley standpoint it was an excuse to trim fat and put some decisions off.

Sarah then presents—count `em—”six indicators for startup ‘health’.” She doesn’t adequately source those indicators, by the way.

TechCrunch critics argue that Michael Arrington and Co. is a house built on conflict of interest/questionable journalism ethics—that Michael sleeps with the people he reports about, so to speak; investments and other sultry relationships with venture capitalists and startups mire the reporting. I dunno. But Michael admitted to something in May 2007 post “Silicon Valley Could Use A Downturn Right About Now.” Hilarious, Michael pines for a downturn Sarah says never came. He confesses:

Entrepreneurs are no longer talking to us just to get our opinion and hope for a blog post and a little discussion. These guys need press to stand out from the scores of startups just like them. Saying no to them isn’t really an option. They show up at our front door with a bottle of wine or flowers. They instruct their PR firms to do anything necessary to get a story. More than once I’ve had a CEO break down and cry on the phone when we said we weren’t covering them. And more than once, I folded and wrote about them after those conversations.

Kara Swisher appropriately responded: “Message to Michael: Just Say, Well, No.”

Assuming Sarah isn’t dimwitted, that she actually knows what she is writing and whom it’s for, the “Other Shoe” post says much about TechCrunch’s audience, regardless whether those conflict-of-intersest accusations are true or not. That for all the blog’s larger readership, the target audience is no larger than Silicon Valley investors and the tech startups they fund. Why else should Sarah write such an alarming analysis for them—that contends they’re doing just fine?

For those startups ravaged by the economic tsunami hitting everywhere else—the one Sarah doesn’t see—she writes:

Stop whining. If you couldn’t raise money your company probably wasn’t working, which doesn’t mean it was bad, it just means you were a startup trying to do something risky that didn’t work. If no startups go under—in good times and bad times—entrepreneurs and investors likely aren’t taking enough risk. If you lost your job–and you work in tech—you likely either worked for a public company that had more systemic problems (cc: Yahoo, eBay) or the recession was an excuse to get rid of you. Either way, you likely have been rehired somewhere since. The verdict is in: It wasn’t just like 1999. It wasn’t bubble 2.0 and it certainly wasn’t dot-com crash 2.0.

For the record, I know plenty of people who lost their jobs during the recession and still can’t find work. They were productive but removed because of high salaries. Companies often replaced them with someone younger, less experienced and cheaper. Or, worse, they were brought back as freelancers or contractors to do the same or similar jobs for less pay and no benefits. Sarah Lacy is relatively young (not yet 35) and reasonably attractive. It will be interesting to see how she feels about the journalism job market in 15 years.

I worry that the New York Times is right: “For the Unemployed Over 50, Fears of Never Working Again.” I’m now in that 50 bracket and trying to do my own thing after failing to find gainful reemployment elsewhere. But I’m not whining. The whiner here is Sarah Lacy, who either knows her audience well or, even after nearly 35 years of living, knows nothing at all.

Photo Credit: LunaWeb

[Editor’s Note: This post was moved from joewilcox.com to Oddly Together on May 20, 2011.]

Do you have a bad writing story that you’d like told? Please email Joe Wilcox: oddlytogether at gmail dot com.

‘Can Ping Be Saved?’ is the Wrong Question

Apple’s social music discovery service isn’t even a week old and Fortune blogger Philip Elmer-DeWitt is asking: “Can Ping be saved?” Oh yeah? One million signups in 48 hours is such a failure. There are thousands of CEOs or product line managers who would say: “Gimme that problem. I’ll suffer through the failure of gaining 1 million customers in just two days.”

Elmer-DeWitt sees things differently. “That’s not necessarily a good thing, given how many of those people are complaining—loudly and with pretty good reason—about Ping’s shortcomings.” Blah. Blah. Blah. It’s just an excuse to write another lazy-ass Top 10 list. I’m sick of them—and, yes, I’m guilty of writing them, too. No longer. I’ve place a personal moratorium on Top 10 lists.

[Editor’s Note: This story was moved from joewilcox.com to Oddly Together on May 7, 2011.]

Do you have an iTunes story that you’d like told? Please email Joe Wilcox: oddlytogether at gmail dot com.