The secret to Silicon Valley's success, we've been told, is its ecosystem: Where else in the world can you find such a large, symbiotic collection of expert visionaries, engineers, marketers, financiers?
How about influence peddlers?
Technology news bloggers' curious habit of accepting investments from the very people they're presumed to be covering objectively blew up last week over what might be termed the Path Affair.
Path, a San Francisco social networking company, got caught downloading users' address books from their iPhones without their permission. After New York Times tech blogger Nick Bilton picked up the story, he and his story became the target of vituperative attacks by tech bloggers Michael Arrington and MG Siegler, who happen to be investors in Path.
Their reaction earned them a vituperative counterattack by Newsweek tech columnist Dan Lyons, who identified them as part of Silicon Valley's "cadre of paid apologists and pygmy hangers-on." They promptly returned fire at Lyons, in much the same vein.
These exchanges spotlighted a cause for real doubt about the credibility of news sites covering the tech business. Many bloggers about technology drape themselves in the mantle of journalistic objectivity. But real journalists don't invest in companies they cover or seek investments in their own enterprises from companies they cover. Arrington and Siegler have done the former, and far too many tech bloggers in Silicon Valley are doing the latter.
Arrington is the godfather of tech blogging in the modern era. After he founded TechCrunch in 2005, his cantankerous persona made the site a must-read in the venture community. After AOL acquired TechCrunch in 2010, the online company said that it would also invest in CrunchFund, a venture fund Arrington was starting — but that Arrington would continue his relationship with TechCrunch.
This conspicuous nexus between tech journalism and tech investing produced so much controversy — Kara Swisher of AllThingsD, a Dow Jones tech blog, called it "a giant, greedy, Silicon Valley pig pile" — that AOL dislodged Arrington from TechCrunch. It maintained its investment in CrunchFund, however, although Arrington says the controversy soured their relationship.
Arrington, to be fair, is an equal-opportunity bomb-thrower. Consider his treatment last year of Airbnb, a start-up that connects property owners with people hoping to rent their homes or apartments for short terms.
Although he says he was trying to invest in the company at the time, Arrington publicized the complaint of an Airbnb client who said an Airbnb renter had trashed her place, and he lit into the company for failing to take responsibility for the damage.
"By writing that, I knew it would be very unlikely they would let me in," he told me. (He got to make the investment anyway.)
But while it's hard to find many tech insiders as freely obstreperous as Arrington, it's becoming increasingly common for tech bloggers to line up backing from venture industry insiders.
When the former TechCrunch writer Sarah Lacy launched her own blog, PandoDaily.com, her strategy for inoculating herself from conflicts of interest seemed to be to create more conflicts than you could possibly imagine, raising $2.5 million from 17 individual venture investors and firms. "We have half of the most active investors" in Silicon Valley, she told me proudly.
Shortly before PandoDaily's launch in January, by the way, Lacy wrote that the business model of tech blogs should be to find "a way to monetize their influence." That hardly points to "no favor asked, none given" reporting.
It's true that potential conflicts of interest are part of the modern news media landscape at nearly every level. Tribune Co., the owner of The Times, for years owned both the Chicago Tribune and the Chicago Cubs. (Tribune sold the team in 2009). From 2005 until last year, News Corp., the owner of the Wall Street Journal, also owned the social networking site MySpace, which competes directly with Facebook in the technology market the Journal's staff is expected to cover vigorously and objectively.
Yet unlike the attenuated financial strings connecting units of huge conglomerates to individual news writers and editors, the connections between venture investors and bloggers who cover them are painfully direct.
Lacy and Arrington both observed to me that it's hard to get a blog off the ground without raising money. Their theme is that if everyone does it, where's the harm? But that's not much of a defense. It's one thing to collect money from venture investors for a blog covering, say, model railroading, but quite another to collect venture investments for a blog covering venture investors.
Arrington says, quite rightly, that the one remedy to conflicts or the appearance of conflicts is disclosure. But that only dodges the question of how much disclosure is enough, or even whether any amount is adequate medicine. The partially venture-funded BusinessInsider.com is one of the most disclosure-intensive blogs in the field. When its chief executive and editor in chief, the former Wall Street analyst Henry Blodget, wrote a post about a rumored takeover bid for Yahoo in December, his disclosure statement ran 141 words and concluded: "So, basically, I'm conflicted out the wazoo."
Cute. Yet what is the innocent reader supposed to make of it? Blodget may have been carrying water for someone in this post, but how would you ever figure out who?
News sites, moreover, tend to define disclosure narrowly, as applying to cases in which the subject of a posting or article is a company backed by one of the site's investors. What about occasions when the subject of the piece is a competitor of a company owned by an investor? Or one that an investor has his eye on, and perhaps wants to butter up to take his money? Lacy acknowledges that it's impossible to cover all such eventualities, and some might take hours of digging for a blogger to even unearth. "We disclose a conflict if we know there's a conflict," she says.
Is that so? Shortly after the Path uproar broke, Lacy announced on Pando that she would be interviewing Path CEO Dave Morin at her monthly public event (sponsored by Sequoia Capital, a prominent venture firm). She said that the interview wouldn't be hard-hitting: "Our plan isn't to lynch Morin, so leave the torches and pitchforks at home. If you want a 'Gotcha!' interview ... this won't be the event for you."
Should the post have mentioned that Path and PandoDaily share investors? (And not only Arrington and Siegler.) Lacy said she thought it would be sufficient simply to disclose the relationship at the event, with Morin on stage. In any case, the post reminded me of the investigative journalist I.F. Stone's definitive judgment on presidential hagiographer Theodore White: "A writer who can be so universally admiring need never lunch alone."
Insidiously, the financial ties between tech bloggers and tech moneybags may blind the former to the implications of behavior by the latter. Arrington and Siegler defended Path in part with the argument that its casual invasion of users' privacy was merely standard operating procedure in social networking. But as my colleague David Sarno has reported, the undisclosed snarfing up of personal information by Path, Twitter and other companies is a big story and no laughing matter.
The basic question is: Should you trust what you read in some of these blogs? In many respects, the answer is no.
That's especially so when a tech site goes beyond information gleaned from documented sources and renders subjective judgments about companies without track records or products that haven't even been released yet. For a struggling start-up, a positive mention from Siegler or on PandoDaily can put it on the map. You think a venture investor with money in a tech blog is above exerting subtle, or unsubtle, pressure on said blog to get a good review? Think again.
It would be unfair to suggest that tech bloggers aren't earnest about trying to produce good reporting on Silicon Valley. They haven't exactly sold their souls by taking money from the people they cover. But what they have sold was worth a lot more than the money they got for it.
Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at firstname.lastname@example.org, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.