Who’s to blame for prostituting the integrity of the WSJ and TechCrunch? The internet

October 14, 2011

At first sight, there may not seem much connection between AOL’s recent dismissal of Michael Arrington, founder of TechCrunch, and a spectacular scam at the Wall Street Journal, which this week brought down its European publisher Andrew Langhoff.

Don’t be deceived. There is every connection. Not in detail, but in principle. Both executives were fired because they had prostituted editorial integrity.

It’s fairly evident that neither deliberately set out to do so. Rather, they were attempting to apply imaginative (and increasingly desperate) commercial solutions to a problem endemic in the news information business. Namely, the pernicious effect of the internet – the ‘free news’ junkies’ hourly fix – on traditional advertising revenue.

Arrington had to go because his cavalier attitude to conflict of interest put him on a collision course with Arianna Huffington, editor-in-chief at AOL – who was rightly concerned about the impact of his heretical gospel on the rest of AOL’s news assets (chiefly the Huffington Post).

Although TechCrunch, which AOL acquired for $30m last year, is a respected news source, as a free blog it was badly underfunded by the low-yield advertising which was the only traditional alternative to subscription revenue. Arrington’s solution was to set up CrunchFund, a venture capitalist fund specialising in new technology companies. Which aspiring tech company would not trade exclusive stories with TechCrunch in the hope of coming into contact with untold Wall Street riches? Investors, on the other hand, soon came to recognise TechCrunch for what it was: an invaluable source of investment-grade information.

The problem was what happened next. Should TechCrunch journalists, to all outward appearances acting without fear or favour, be obliged to soft-pedal any clients who signed up to Arrington’s fund? The new funding paradigm soon became a very old-fashioned conflict of interest.

The WSJ/Langhoff affair also breached journalistic ethics, but in a rather different way. Officially, Langhoff was fired because he had signed a deal with Dutch consulting firm Executive Learning Partnership which resulted in a series of special reports considered in breach of the WSJ’s ‘unimpeachable’ standards of editorial integrity. In fact, this was only the half of it, according to The Guardian. Apart from trading too much prominence and name-checking, Langhoff also seems to have struck an interesting side-deal with ELP’s sponsorship money (ie, advertising revenue). ELP was to channel money (including, at a later stage, some of the WSJ’s own money) into buying a large number of heavily discounted copies of the European edition of – the WSJ. This action is not illegal nor, strictly speaking, does it break the Audit Bureau of Circulations’ rules (Why not? we should ask indignantly). But it is designed to deceive. Inflated ABC figures give advertisers the impression that the WSJ is a stronger media vehicle than it actually is, which helps to harden rates.

While denying some of The Guardian’s more “malign interpretations”, News Corp – which owns the WSJ through Dow Jones – has nevertheless conceded that Langhoff had to go because he had allowed WSJ to enter into “a broad business agreement” which could “give the impression that news coverage can be influenced by commercial relationships.”

If respected operators like WSJ and TechCrunch are getting up to such tricks, where does the rot stop? The answer may not be very comforting for the integrity of news values in general.


If oil’s the next tobacco, watch out Big Food and Big Booze

June 17, 2010

General Mills, the food giant that owns Cheerios, Häagen Daz and Green Giant, is breathing a sigh of relief after it suppressed a press release suggesting the US government was about to mount a full-scale investigation into its supply chain. The release was a hoax, but General Mills has no room for complacency. The threat of political interference in the food business could be very real if we extrapolate what the government has been doing to BP.

I owe the originality of this insight to the Financial Times’ John Gapper. Gapper’s argument, laid out in a column this week, is as follows. “Slick Willy” Sutton, the infamous armed robber, once observed that he raided banks because – that’s where the money is. In the same manner, US politicians – aware that they have to address a yawning budget deficit if they are to be re-elected – are casting around for easy money to plug the gap. Voters, impoverished by Wall Street’s scandalous behavioiur, don’t have it. But dividend-rich companies, like BP, do.

BP, of course, had it coming to it. Its behaviour in the Gulf of Mexico can be described as neither caring nor competent. That, however, is not the point. It is the ease with which Congress and Obama have been able to extract $20bn – none of which is ever likely to be returned to the company – that should be worrying shareholders everywhere. There is no fixed liability associated with this sum and – like blackmailers the world over – politicians will come back for more if they think they can get away with it.

To Gapper, the BP concession has echoes of the 1998 tobacco settlement, in which the industry paid $246bn to various states following legal action by their attorney generals. It’s worth quoting him more fully here: “Only 5% of tha money was spent on tobacco-related initiatives with Virginia, for example, investing in higher education, fibre optic cables and research into energy.”

Now let me see, which other big-dividend paying companies could land themselves in a pickle with the state over litigation liability? Gapper thinks the list is comprehensive and cites energy providers, drugs companies and consumer goods companies. I think two on his list stand out particularly prominently: the food and alcoholic drinks companies.

Imagine, for example, what might happen if scientific evidence conclusively proved that many of the big food companies had been slowly poisoning us to death through the use of (now largely discontinued) hydrogenated fats? Or what about excessive sugar and salt in cereals directly leading to premature cardio-vascular impairment? The legal fall-out, through class actions, could be stupendous. And lining up behind the lawyers would be the politicians waiting for a big, fat hand-out, or else. After all, it could be argued, a massive amount of taxpayers’ money has, historically, been funnelled into dealing with the collateral medical issues: time for industry to pay back the “subsidy”.

All the more could these arguments be applied to the side-effects of excessive alcohol consumption. The history of the tobacco industry suggests that free will and individual responsibility weigh little in the balance once these matters come to court.

And where the US leads, little Britain surely cannot be far behind.


Why creativity is getting back into bed with media

May 1, 2009

There’s an interesting piece by John Gapper in the FT tying together some salient trends in Madland. His thesis is that creativity and media planning are getting rehitched after a lengthy divorce. It’s a bit of a shot-gun remarriage driven by two compelling circumstances: 1) cost pressures caused by the recession, which will make the big networks rationalise the ragbag of boutique specialists they have acquired over the years and 2) the nature of effective internet marcoms, which is a million miles from the traditional segmentation of agency skills. Here’s the flavour of 2). ” [Internet campaigns] demand a lot of creativity –  a good internet or mobile campaign is more like a short piece of programming or entertainment than a marketing pitch – and a sophisticated grasp of consumers, and how to use old and new media. In other words, it draws on the entire range of the industry’s fragmented skills.”

Certainly something will have to give as revenue is squeezed out of the traditional agency model. Check out Coca-Cola attempts to impose a new “no win, no profit” fee structure on its agencies.


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