Mike did what any publisher would do

Mike Arrington takes a fair bit of heat for the stuff he does at TechCrunch — even I have taken a shot at him when I think he has overstepped his bounds, like I did when he made those comments about Dave Winer and Rafat Ali the other day (see post below) — but for the record I think he is getting a lot of unnecessary crap about the dismissal of Sam Sethi from TechCrunch UK.

Much has been made of the fact that Mike doesn’t consider himself a journalist, and how TechCrunch isn’t journalism but something else that combines — or even embraces — conflicts of interest among those its covers, etc. etc. But for what it’s worth, I don’t think Mike has done anything different with respect to Sam Sethi than any editor of a magazine would do under the same circumstances, unless there are significant details that haven’t come to light (there’s a good roundup here).

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As far as I can tell, Sam got called an asshole by Loic Le Meur for the review he gave Le Web, then Mike and Sam differed about whether to remove that comment (because Loic felt badly about it), at which point Sam not only left the comment up but wrote a post (archived here) in which he said TechCrunch was going to start having its own conferences in the UK and Le Web was history.

I would agree with Mike that the latter move crossed an important ethical boundary. If you’re the editor of a magazine — which is what I think TechCrunch and Gigaom and PaidContent and other similar networks might as well be — you can’t trash a conference and promote your own in the same breath. That’s just not on. And I think Mike was right to make it an issue. In other words, I think Tom Morris is wrong to call it an example of Old Boys Club 2.0.

It’s too bad Sam and Mike couldn’t work it out, but I give Mike some props for putting it all out there on his blog and taking the inevitable fire from the armchair quarterbacks who see it as an arrogant American throwing his weight around in the UK or whatever. I think he did what had to be done.

Update:

Sam Sethi has pointed out that he and Mike were 50-50 partners on TechCrunch UK (which I don’t think was widely known), and that as far as he is concerned it was the decision not to remove Loic’s offensive comment that soured the relationship between the two. Mike’s post, however, makes it clear that it was the decision to promote TechCrunch UK’s events at the same time as he was trashing Le Web.

Mike Butcher, co-editor of TechCrunch UK, has posted a long open letter to Mike about the incident, and Duncan Riley has posted hilarious PDF of the entire debacle. To complicate matters further, there’s a comment on the TechCrunch UK post about Sam’s dismissal from “TCAdmin” (which is the name Mike Arrington had been using) saying: “I was being such a stupid arsehole I am so sorry. TCUK will be back shortly.” Someone spoofing the name, or has Mike reconsidered?

Facts get in the way of a good story

I’m sure there are lots of people who are even now blaming blogs and “new media” and God knows what else for the frenzy of stories about how iTunes sales are “collapsing” or “plummeting” or “hemorrhaging” or (insert sensationalized adverb here), all of which were based on a loose interpretation of a Forrester sales report. The key takeaway for most was that iTunes sales were down 65 per cent.

Great story, right? So great that it turns out to be, well… not exactly true. Or rather, true in a fairly limited sense. Forrester’s report was based on a relatively small set of credit-card data, and the research firm itself warned against extrapolating from that data. So what did The Register do? Extrapolated wildly, put the word “collapse” into the mouths of the Forrester team, and then said iTunes’ sales were “collapsing” in the headline (Bloomberg wrote a story too).

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Why did The Register do this? Probably because it made the story sound even more interesting, and because the writer, Andrew Orlowski, wanted to use the data as a springboard for a larger story about the death of DRM (digital rights management) and how the music industry might be forced to go the “blanket license” route.

Is this something unique to online media or the blogosphere? Hardly. Newspapers and TV networks do this kind of thing all the time. Staci at PaidContent is right that Rex Hammock had the best line: “Reporters’ inability to interpret statistics is ‘sky-rocketing’.”

Forrester analyst Josh Bernoff has a post here about the reaction to his initial piece about the report, in which he says that the data set was too small to jump to any conclusions, but that this point “was just too subtle to get into these articles.” It wasn’t too subtle at all — it’s just that some outlets couldn’t bear to let the facts get in the way of a good story.

Google provides options on its options

Sometimes I think that Google has a bunch of pissed-off ex-securities lawyers on staff whose sole job it is to screw around with things and come up with ideas that make Wall Street mad, or confused, or both. They haven’t been that busy since the IPO (Hey, let’s do a Dutch auction! And then not give quarterly estimates!) but they’ve come up with another doozy: why not create an online auction and let employees trade their stock options? Well, why not indeed.

According to Google, the idea is designed to allow employees to see some benefit from their options before they actually vest and can be sold on the open market. For example, if the stock price looks like it is going down and the value of those options is also going to decrease, an auction of tradeable options would give employees the ability to lock in a particular price. This is part of the reason why people like my friend Paul Kedrosky think that the idea is a bearish signal for the stock (he also thinks there isn’t enough transparency).

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Bearish signal or not, I think it’s a great idea. One of the difficult issues with stock options — apart from the fact that companies hand them out like candy and then allow executives to reprice and extend them at will, which I’ve discussed here — is arriving at a value for them. Since they only really have value in the future when they are exerciseable, it takes a fair bit of hoop-jumping to arrive at a current value, which quite quickly gets into Black-Scholes pricing theory, etc.

An auction would solve at least that problem, although it’s likely that ways could be found to “game” such a process. But I think it has benefits for employees and also for Google, which could theoretically waste less on the options it does hand out. As the NYT story points out, Microsoft and other companies have done one-off options-buying programs, but this would be the first permanent process inside a company. Don Dodge says he thinks it’s a win-win-win.

Craig and Wall Street — universes apart

It was a few days ago now, but the New York Times’ DealBook blog had a great little item about Craigslist CEO Jim Buckmaster meeting with Wall Street types at the UBS global media conference. Naturally, the analysts wanted to hear a bit about the gazillions of page views that Craigslist gets, and how it is making about $50-million or so a year without even trying.

Jim, however, said the site had no real interest in maximizing revenue. Although he and Craig had looked at running ads, they had no plans to do so, he said, because — get this — users hadn’t said they wanted them. The only reason that Craigslist charges fees at all (to professional real estate agents for posting apartment ads in several cities) is that users complained about the ads, so the fees were instituted as a way of driving them away.

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In the DeaBook pieces, Wendy Davis of MediaPost describes the presentation as a “a culture clash of near-epic proportions.” She says UBS analyst Ben Schachter asked how Craigslist planned to maximize revenue. We don’t have any such plans, Mr. Buckmaster said. “It’s not part of the goal.” Mr. Schachter’s response: “I think a lot of people are catching their breath right now.” I’ll bet.

Craigslist currently gets a mind-blowing 5 billion page views or so a month. A premier site like Craigslist — and one that is focused on classified advertising, which is inherently purchasing-type behaviour — would likely command a fairly high CPM rate for ads. Let’s say theoretically it was $10 per thousand. That would bring in $50-million a month (StartupBoy says Craigslist is worth more than eBay, and he doesn’t even include ads).

But Craig would rather focus on the user. Brilliant? Or deluded?

Update:

Kevin Burton of TailRank says that Craigslist should be taking all that money from advertising and giving it to the poor (he expands on that idea here), but that Craig “thinks money is evil” (Craig responds in the comments that that isn’t true). Chuqui says Kevin and others should leave Craig alone and that Craigslist is being true to its vision. The Scobleizer agrees, and so does Nick Douglas at Eat The Press. And Dan Farber and larry Dignan at ZDNet took on this issue back on Dec. 7

FTC tells PayPerPost to knock it off

From my friend Leigh Himel, CEO of Oponia Networks, comes word that the U.S. Federal Trade Commission has put out a statement on word-of-mouth marketing practices — you know, the kind where someone gives you a phone or something and hopes that you write about it on your blog. The FTC was asked to look into it by Commercial Alert, a non-profit organization that says it tries to keep commercial culture from “subverting the higher values of family, community, environmental integrity and democracy.”

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Call this one the PayPerPost rule, after the blog payola company that pays you to write about their clients but doesn’t make you disclose your compensation (I’ve written about them here and here). As the FTC statement puts it (PDF link), the petition from Commercial Alert:

Raised concerns about a specific type of amplified word-of-mouth marketing, specifically the practice of marketers paying a consumer (the “sponsored consumer”) to distribute a message to other consumers without disclosing the nature of the sponsored consumer’s relationship with the marketer.

As the Washington Post story describes it, word-of-mouth marketing is already covered by existing legislation, but the FTC wanted to make a specific statement to the effect that not disclosing the relationship between seller and consumer advocate is misleading, and that “such marketing could be deceptive if consumers were more likely to trust the product’s endorser “based on their assumed independence from the marketer.” Which is, of course, the whole raison d’etre behind PayPerPost.

Dr. Tony at Deep Jive Interests points out that this could have a spinoff effects on affiliate marketing as well. But wait, my friend Stuart says: what about those travel reviews in the newspaper where the writer got a free trip to Cabo? They’d better hope the FTC isn’t reading. According to the statement, “staff will determine on a case-by-case basis whether law enforcement action is appropriate.” Scott Karp at Publishing 2.0 has some thoughts about it too.

Facebook isn’t yelling Yahoo! just yet

Yahoo’s burning desire to acquire Facebook has been the talk of the Web 2.0-sphere for lo, these many months. At one point, there was rumoured to be an offer for $750-million, and then another worth $1-billion — and then, silence. Now, the plot has thickened, thanks to TechCrunch’s publication of the Secret Yahoo Spreadsheets for the project code-named “Project Fraternity” (I guess “Project Please Help Us Compete With Google And Make Up For Not Buying MySpace” wouldn’t fit on a PowerPoint slide).

As Mike Arrington points out with a tiny bit of understatement, the numbers that Yahoo used to justify its valuation — at one point it offered a deal valuing Facebook at a YouTube-ilicious $1.6-billion — look to be based on “robust” user growth. How robust? By 2010, the company projected that the social-networking site could be attracting almost 50 million users, or more than 50 per cent of the combined high school and young-adult population of about 83 million.

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And that’s not the only thing that is “robust” about Yahoo’s numbers, as Fred Stutzman notes on his blog. He points out that the projections for Facebook’s revenue — from which the purchase price is derived, as in “6 times revenue at a discount rate of X” — assume that more than 90 per cent of the site’s users are “active users.” That’s not just an aggressive target, it’s right up there in wishful-thinking land.

Was it those kinds of nose-bleed projections that made Yahoo pause in its all-out pursuit of Facebook? Or was it the fact that the Internet giant was being held at arm’s length by Mark Zuckerberg, a guy who won’t get up at 8 a.m. even for a conference call with Microsoft, and who wears sandals to venture capital conferences? Or did weird old Uncle Terry finally put the kibosh on the deal?

Hey Mike — chill out, dude

Okay, so I thought Mike Arrington of TechCrunch had decided to take some time off to ski and hang out at his parents’ place in upstate Washington, as he described on his personal blog last month. So then who is that doing all the flaming in the comments section at TechCrunch under the name “Mike Arrington?”

As Nick Denton at Valleywag points out, the discussion of the New York Times adding social-bookmarking links to its stories — which TechCrunch described as “surrendering” to social news — degenerates into some name-calling by Mike about news consultant Jeff Jarvis of Buzzmachine and Rafat Ali of PaidContent, amid what appears to be some deep-seated anger at the Times (likely in part because of this).

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First, Mike takes a shot at Dave Winer, saying he only supports the NYT because they adopted RSS early on (which Dave admitted in his comment). Then he says that TechCrunch is “an occasional (but always unlinked-to) source of breaking news to the NYT” and calls the newspaper an “ethically-bankrupt institution.” After a relatively mild response from Dave, Mike then says that he, Rafat and Jarvis “are sucking up to them to further your own agendas” and that this “has resulted in outright fabrications” by Rafat and Jarvis.

Then he closed the comments. Mike, I think you should hit the slopes, dude.

Update:

Rafat posts a comment at Valleywag saying he has no clue what Mike is talking about.

Google marketing picks Yahoo’s pocket

Well, this is just sad. I’m a big Google fan, and whenever people at Yahoo start to whine and moan about Google getting press for things that Yahoo already has (*cough* Google Finance *cough*) I always stick up for the poor billionaires at the Googleplex. But Jeremy Zawodny has a pretty blatant example of the Googlers ripping off a Yahoo ad campaign — for the release of a branded version of the Internet Explorer 7 browser. Here’s Google’s version:

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And here’s the Yahoo version from back when IE 7 first launched:

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That’s just sad. And while some commenters have tried to argue that Microsoft provided the template for the ads and therefore they look the same, it appears that Yahoo created the page themselves, and that the HTML code behind the two is completely different (Google’s apparently sucks). Lame, lame, lame.

Digg — worthless, or just misunderstood?

Maybe it’s just meant to be “Digg-bait” (as Nick Denton at Valleywag likes to call it), but Jason Clarke of Download Squad has a long post up about Digg and how it is destined for failure. As Jason mentions in the post, Download Squad is part of AOL, which owns the revamped Netscape — a site that was essentially modeled on Digg — so perhaps it’s an elaborate corporate hit-job. I thought Download Squad was all about cool software, but maybe I was wrong.

In any case, Jason’s criticisms are not really all that new. As far as I can tell, his two main points are: 1) Digg’s audience is full of mouth-breathers and low-foreheads who just pile on and flame each other, and digg down things they don’t agree with. And 2) Digg’s traffic, a kind of “flash crowd” that can shut down even the most robust hosting service in a matter of minutes, consists of window-shoppers who come quickly and leave quickly, and if they sign up for something they never actually use it.

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Jason says that the Digg community is “rotting from the inside out,” and that “the sheer level of superiority, sarcasm, and general negativity is overwhelming.” As with many other critics of the Digg model, or social media in general — including Nick Carr and Andrew Keen, as well as newcomers Andy Rutledge, who I’ve written about here, and Lee Gomes of the Wall Street Journal, who I’ve written about here — the argument is that the wisdom of crowds doesn’t exist.

The problem with the whole concept of taking advantage of the “wisdom of crowds” is that crowds have no wisdom. Microsoft Windows is an example of an operating system written using the wisdom of crowds… and don’t get me started on the majority of large open-source efforts.

As a commenter rightly points out, the Windows crack is a gigantic red herring. Any problems at Microsoft have little or nothing to do with the wisdom of crowds, and everything to do with corporate hierarchy and centralized decision-making. If anything, they could use a little more Digging. And as for the traffic problems, it’s true that Diggers flood in and then disappear, leading some to wonder how much value they actually bring with them. But couldn’t we say that about Web traffic from plenty of other sources too, like TechCrunch for example?

In conclusion, Jason says:

Social media sites are an unproven phenomenon… I predict that in the near future sites will start to attempt to block digg as a referrer, since getting a link from digg will simply cost them money. And over time I believe users will tire of the constant negativity that characterizes digg… unless digg can find a way to clean up their collective act.

Does Digg have flaws? Sure it does. And so do plenty of other social media sites. But I think Jason (for whatever reason) is being way too negative. What do you think?

Update:

More commentary at the CWS blog, with comments from Diggers.

What the heck is a portal anyway?

Among other things, a post today by my friend Scott Karp over at Publishing 2.0 has helped crystallized for me just how inadequate a lot of the terminology is that we’re using for Web services and communities — and not just the obvious kind of cringe-inducing terms like “user-generated content.” In his post, entitled Platforms Are The New Portals, Scott discusses Edgeio and a post that Keith Teare has written about the “de-portalization of the Internet.”

Scott says that “user-centric platforms” such as YouTube and MySpace are acting more like portals, and that Yahoo is an old-school portal because it doesn’t create most of the content it aggregates, and because “it aggregates it by hand, so it’s a closed system and therefore less efficient than the platforms.” In Scott’s view, Yahoo is a portal but YouTube is a platform, in that it allows people to upload things (VC Fred Wilson has written about Yahoo and “de-portalization” here).

But at the same time, he says, “even a platform like YouTube that embraces the distributed nature of the web is still acting like a portal, because YouTube is THE place to upload your videos and THE place to find your videos.” Scott asks why video content owners can’t do what blogs do and publish their content wherever they want, and then with a good search engine “It won’t matter where the video is hosted.”

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In conclusion, Scott says: “The challenge for any company that wants to scale in the distributed age is to create a platform that acts as a distributed portal — still a de facto gateway, but one that exists across the web.” This is no slight against Scott, but that sentence made my head hurt. And the more times I read it, the more my head hurt. So you have to be a platform, but one that is a distributed portal; a gateway, but one that exists “across the web.”

The worst part is, I think he’s right. It’s just the language that is making things difficult. What is a “gateway” or a “portal” or a “platform?” If I had to try and imagine something like what Scott is talking about, it would be a new kind of television — one that is hooked up to the Web, and has a powerful search engine, and shows me content not just from the TV networks but from anywhere (like this kind of stuff), using tags and keywords and smart filtering and Digg-style voting and search.

What to call it? A plat-port-way. A way-form-tal. A whatever. I want one.

Update:

Leigh Himel’s friend Peter says the network is the portal.