Update: Please see the comments by Dave Armon, COO of PR Newswire at the end of this post. Simon Phipps, Sun Microsystems’ Chief Open Source Officer, has also commented. While neither Simon nor I agree with Dave’s position, his willingness to take us on in such a public forum is a credit to him and PR Newswire.
EVER since U.S. Securities and Exchange Commission Chairman Christopher Cox posted a comment on the blog of Sun Microsystems’ CEO Jonathan Schwartz, the newswire industry and its allies have been dismissing the concept of blogs and company websites as disclosure tools.
But out of interest, I’ve conducted a quick study to see just how effective blogs are at getting out information to the public compared to traditional news releases.
By comparing search returns on Google News, I find that the unannounced blog comment by Chairman Cox generated almost 10 times more media mentions over the course of a week than a traditional SEC enforcement news release issued a day earlier.
These results will disappoint newswire services, which owe large chunks of their revenues to regulations that force companies to issue news releases in a wide range of circumstances.
Spokespeople for newswire services and their allies have come out swinging against blogs and websites as official disclosure sources, in part because they say they are ineffective for broad dissemination of corporate disclosures.
“A bad idea,” say newswires and their allies
In an article on Nov. 7, IR Magazine, which regularly carries full-page ads from newswires, said: “Many still view the press release via an established newswire as the single best way to ensure that new material information is available to the investing public.”
After quoting Business Wire CEO, Cathy Baron Tamraz and corporate blogging consultant Debbie Weil, neither of whom expressed support for the concept of websites and blogs as effective for disclosure, the magazine editorializes further.
“Above all, if web postings were deemed full disclosure, the public would have to go searching for news, and those individuals who stumbled across it first would have an advantage over everyone else.
“Chairman Cox’s enthusiasm for blogs may be dampened after his Friday afternoon posting on Sun’s site stayed mostly a secret for at least two days; the big news didn’t spread until it was picked up by the media on Sunday.”
On his own blog, PR Newswire Managing Director of Investor Relations Mark Hynes, wrote a piece entitled A bad idea for issuers and for investors in which he offered 10 reasons why websites and blogs could not be effective disclosure vehicles. His reasons, none of which I agree with, run from vulnerability of websites to hackers, to reliability, to simultaneity, to journalists not being able to use some formats.
In short, we have lots of fear mongering and not much careful consideration of the real issues.
Recommended five years ago — but then came Enron and Sarbox
Let’s be clear about this: no one is asking to let companies put market moving information on their websites whenever it takes their fancy.
They are simply asking that the SEC and other regulators, like the New York Stock Exchange, revisit recommendations made by former SEC Commissioner Laura Unger in a special study where she wrote:
“The Commission should make clear that options such as adequately noticed website postings, fully accessible webcasts and electronic mail alerts would satisfy Regulation FD.”
That was five years ago — December 2001, not long after 9/11, around the time that Enron was imploding, and a few months before we got the Public Company Accounting Reform and Investor Protection Act of 2002, otherwise known as Sarbanes-Oxley.
Not surprisingly, that recommendation didn’t go anywhere with all the other issues the SEC had to contend with.
But technology has come a long way since then. If adequately noticed website postings were good enough then, they are even better today because we now have RSS, Atom and soon XBRL.
RSS and Atom enable companies to push out information to subscribers and ping feed aggregators and search sites when new information is available. People don’t have to go looking for information, it can come to them.
The technology works efficiently, and while not as immediate as a news release (yet), most market moving corporate news doesn’t have to be immediately accessed because its usually released when the markets are closed, or if they’re open the stock will be halted until everyone has had a chance to analyze it.
From comment to MarketWatch in 30 minutes (not two days)
Anyhow, let’s look at what happened when Chairman Cox posted his now-famous reply on Schwartz’s blog, which has an RSS feed that anyone can subscribe to.
Within 30 minutes (not two days as IR Magazine claims) after the SEC Chairman posted his blog comment at 2:30 pm PST (5:30 pm EST) on Friday Nov. 3, MarketWatch reporter Siobhan Hughes wrote a story.
The reporter’s story was posted at 6:09 pm EST on Friday — 39 minutes after Cox posted his comment and letter. Note I’m allowing 10 minutes for the reporter to actually write the story and have it edited before it appeared, so that’s why I’ve used the half-hour window.
Now following this article, there was a bit of lull in the mainstream media. Hey, it was Friday evening. Still, there was discussion of Cox’s blog comment elsewhere on the Internet, such as on Saturday in Italian on the Portmeirion blog and on SunMink, a blog by Simon Phipps, Sun’s Chief Open Source Officer. That was followed by a piece on the IPCentral Weblog on Sunday morning.
Bloomberg, blawgers, AP and the blogosphere echoes
From what I can tell from searching Google News for “SEC Cox Blog,” the next mainstream media pick-up was by Bloomberg on Sunday Nov. 5, a piece that was published on the International Herald Tribune website on Sunday night in Paris, which is where I saw it before writing my own little story early Monday morning.
Following that, the Wall Street Journal Law Blog picked up the story, followed by other law blogs. By Monday night, the news was big.
Associated Press Washington reporter Marcy Gordon wrote a piece that hit news outlets Monday night that referenced the blogosphere chatter. Her first paragraph said Cox was “intrigued by the idea of letting companies use Weblogs to disseminate important corporate information.”
That piece opened the floodgates. Using Google News search, I count no less than 90 media outlets covering the story, from the New York Times to The Washington Post to the Sydney Morning Herald. On blogs, the article was referenced literally hundreds of times.
Now the SEC’s traditional news release
Is 90 media mentions good or bad? That’s what I wondered, so I decided to test another SEC statement, this one an official SEC news release issued on Nov. 2, the day before Cox posted his comment on Schwartz’s blog.
The release concerned the SEC filing settled charges against eight former officers and directors of Spiegel, Inc. Pretty serious stuff, you would think.
On Google News again, I searched for “SEC Spiegel” and found nine media mentions. On the blog search engine Technorati, I found just three posts mentioning the news.
That means that in my admittedly unscientific study, Chairman Cox’s unannounced comment on Jonathan Schwartz’s blog got 10 times more media mentions than an official SEC news release.
Of course, we’re not comparing apples with apples here. The Chairman of the SEC posting his first comment on a blog is by definition more newsworthy than news about crooked executives. As sad as it may be, crooked executives just aren’t that newsworthy anymore.
However, I think this little experiment also shows that news releases are not all they’re cracked up to be. How many thousands of news releases go unread and become cyberspace junk? How many small-cap companies are forced to pay for newswire releases that few people ever read and which don’t provide any real benefit for investor protection?
Feed Crier — the new PR Newswire?
I understand where the newswires are coming from, I really do. From their perspective, this issue is about people’s jobs and the lives of their families.
But trying to defend what cannot be defended is a surefire way to disaster for the wire services. Instead of trying to fight the inevitable, I would urge the wire services to look for opportunities to help companies take advantage of RSS for what I call investor relations or disclosure feeds.
The new model that is emerging will create opportunities for aggregators of companies’ disclosure feeds. There is still lots of time. Only 30% of companies currently have RSS feeds, and most of them haven’t yet figured out how to use them properly.
The biggest risk to newswires is not the SEC recognizing website postings, but the danger posed by companies like FeedBurner, Feed Crier and others they’ve probably not heard of yet.
Ultimately, a new model may emerge. Instead of companies — and all of their shareholders — paying the bill for a few big players to make millions on lightning fast execution, perhaps those who profit from short-term information will pay for it themselves. Meanwhile, everyone else will just go to companies’ websites, read their email or skim their RSS readers.
The point is that the landscape is changing and wire services have a lot to lose if they keep burying their heads in the sand.