Media Ethics (Or the lack thereof) Business Models

We noted yesterday the spat between the NYT and Silicon Valley bloggers re Path and its (ahem) "data sharing features" (see here). This has now opened into a full blown blogspat, with Dan "Fake Steve" Lyons weighing in with some interesting thoughts of what the wanna-be-rich blogger may do:

First you establish yourself as an “influencer” by posting a lot of noisy stuff on a blog and building an audience. Then you need to “monetize” your influence. You tell all the VCs in the Valley that you are starting an “angel fund,” and you ask each one to give you, say, $500,000. They go along because (a) $500,000 is pocket change to these guys — so small, in fact, that they don’t care if they lose every penny of it; and (b) you’re an influential hack and they don’t want to piss you off; and (c) they figure you can maybe write nice things about their portfolio companies, which would be especially useful if/when one of their portfolio companies gets caught up in some scandal; and (d) if any independent journalists write something critical about one of the VC’s portfolio companies, you can can use your influential personal blog to savagely attack those journalists and try to discredit them.

So you raise $10 million or $20 million, and now you’re an “angel investor.” Step two is you go around to startups and tell them you’d really like to invest in their companies. Not big investments — maybe $100,000. They don’t need your money; they can raise money from anyone, and usually you’re one of 10 or 20 small investors in a round. But the value you add is that you’re an “influencer” and can be helpful when it comes to getting good press or offsetting bad press. (See paragraph above.)

You might think of this as a new kind of PR, only you’re way meaner and more effective than a PR flack, and instead of getting paid in billable hours, you’re taking payment in angel-round equity, which in a few years should be worth 10-100x whatever those billable hours would have been worth.

As Lyons notes, this is in fact just a new version of an old racket that used to be practiced in the tech space by “independent analysts.”, ie: “Pay seven figures a year to buy a corporate subscription to my newsletter and I’ll say nice things about your company, and when the press needs a quote, I’ll be there to puff you up. Or, don’t buy a subscription and I will bash you relentlessly.” Most big companies paid up and considered it a cost of doing business. (I believe in even earlier days this was called a protection racket, where you pay me to protect yourself from your foes - and from me)

Anyway, Lyons believes Mike Arrington's new vehicle, CrunchFund, is up to this now. And given his insightful Fake Steve Jobs satires, it is clear he probably knows of what he speaks. Naturally of course, Mr Arrington and other Ex TechCrunchers ride to their own defence. Arrington has a good point - why pick on just Path (and by extension, why pick on just Mr Arrington....), but - to my mind anyway - this is all still avoiding the underlying New Media business model issue, ie the conflict of interest of investing in the companies you write about, or take advertising from, etc etc - because getting a user to pay, and finding a sustainable business model, has proven very hard so far. In other words, big picture, will some form of independent media exist in the professional non-mainstream media arena?

Also, as Dave Winer (another old hand) notes, the initial underlying Social Media issue - the abuse of user privacy - is increasingly being lost in the noise:

It's fun to read, up to a point, because he says so well what we've been thinking about these guys. But there's a problem with all this, including Lyons' post. They're changing the subject. Making it about personalities not address books. Users are exposed, maybe millions of them, and the tech industry hasn't offered to help. Or even to stop.

Given we are entering the last phase of the Bubbletime, you can be sure the hype machine will still get a lot louder and shriller, but - as opposed to the dotcom years - it would seem that those who wish to puncture the bubble have better access to media too.

I can't help juxtaposing this with the ongoing Leveson enquiry into the UK media, dealing with mainstream media abuse of privacy (phone hacking, paying people for data, etc) and the emerging realisation that they are on the horns of a dilemma:

- firstly, regulate the mainstream media how you will, the blogosphere will still say everything they can't anyway, so any censorship is probably moot

- secondly, too much working for a clampdown means serious reporting is not commercially viable, so the regulated benefits may disappear and everything reverts to broadside blogs.

As we have remarked before, Bubbles have a role of washing away the old and bringing in the new, and we suspect that mainstream news media may well be collateral damage in this next Social Media Bubble cycle - the Old Media business model is not really working anymore, to my mind CrunchFund et al are looking for new ones. A blog protection racket may not be the end game for the New Media, but I was struck by something my colleague Martin Geddes noted yesterday about the binary "New Media Technology" market that is emerging, viz:

"Two stable states: user is customer, user is product. No viable space between"

I think he is on to something here.........and I think it will apply to Media. You will either pay for truth, or have to mine it yourself from the free media