By Dominic Jones | Published: November 15, 2006 | 
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Cox’s Blog Post Gets 10x More Media Mentions Than Official Release
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.
By Dominic Jones (6 comments)
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.
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November 16th, 2006 at 1:03 pm
Dominic,
I’d like to address some of your specific statements:
You said: “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.”
While RSS is a great tool (and in fact, PR Newswire makes its content available through RSS), it only works when someone knows what they’re looking for and registers to receive that information. If you are a GM shareholder, it would make sense to register for an RSS feed of GM news, but what happens when a UAW announcement impacts GM’s share price? Or an announcement from Toyota? Investors need ALL information that could affect the stocks they own or are thinking about owning. And with a “pull” mechanism like RSS, public companies aren’t getting their message to prospective investors who may not have thought of investing in that company. PR Newswire and Business Wire have blanket coverage of every Bloomberg terminal, e-trading web site, news organization and consumer financial portals. The wires are true push mechanisms that also serve sites where investors pull information.
You said: “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.”
Seconds do count in the world of stock trading. Companies are under an obligation to disclose material news immediately, and actually, quite a bit of market-moving news is issued during trading hours. Yes, some announcements can be planned for outside of trading hours, but others are critical to release right away…and investors cannot be disadvantaged by relying on the public Internet, which cannot guarantee simultaneity. And if the stock market feels compelled to halt trading in a stock, it can be because they have reason to believe that information has been selectively disclosed, which can send a very negative sign to the markets, something that public companies clearly want to avoid.
You said: “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? ”
Your survey, while admittedly not apples to apples, is really more like grapefruits to kumquats. The Nov. 2 release you referenced was not distributed over a commercial newswire because major happenings at the SEC are covered by reporters assigned to that beat in Washington. However, if the SEC had chosen to use a commercial newswire, they would have not only generated coverage in the media outlets that regularly cover them, but would also have received guaranteed coverage on thousands of web sites and portals to which PR Newswire and Business Wire distribute customers’ news releases. And, the Nov. 2 release you referenced dealt with only one company, which is no longer publicly traded and thus of less interest to the media generally. Your comment about small-cap companies is also off base. The value they glean from releasing news in a broadly accessible, simultaneous manner is greater transparency. Even a thinly traded issue can be found when they use a commercial newswire. And where else can a small cap company be assured that their corporate message will appear on heavily trafficked investor web sites like Yahoo!Finance, MSN or Google? Small cap companies often rely on individual investors in their shareholder base and posting on investor web sites can be critical.
You said: “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.”
Pardon me while I shake the sand out of my ears. The PR Newswire MediaRoom product has company-specific RSS feeds for media and investors. But we’d never dare call them disclosure feeds because we do not have control over the funkiness of the Internet. One investor may get pinged in a second but a second data packet might have taken a path through a slow server or been rerouted around some damaged fiber. That’s why we have dedicated, simultaneous DNSS (Definitely Not Simple Syndication) feeds to all the disclosure media and stock exchanges (our newslines). We also offer 500-plus RSS feeds that relate to industries, subject codes (like earnings or product announcements) or geography. Again, they are not guaranteed to be simultaneous.
Well, I think that about covers it. I see you have taken a keen interest in the newswire industry and I think that’s great. I would welcome an in-person meeting with you, if ever you are in New York, or perhaps next time I make it to Toronto, and take some time to educate you on all the innovation and advancements we are making at PR Newswire.
- Dave
November 16th, 2006 at 1:56 pm
Dave:
Great response. I am aware of PR Newswire’s RSS feeds and I know that you’re not completely oblivious to new media releases and all that stuff.
Here’s where I’m driving towards: If every company has a disclosure RSS feed, why wouldn’t or couldn’t Yahoo! Finance and every other media and investment outlet simply pick up that feed direct from the company or an intermediary, including the SEC?
Why do companies have to pay a newswire to distribute the information?
If traders want a guarantee of getting this information via PR Newswire or some other service immediately, then they should pay, not the company which is already making its information available on a non-exclusionary, equally accessible basis to all and sundry via RSS.
If they don’t want to pay, then they can get it like everyone else.
November 16th, 2006 at 5:52 pm
If the time comes that RSS technology is sophisticated enough to transmit information to all points simultaneously, and if there are mechanisms in place to ensure that a single company’s IT meltdown will not result in selective disclosure, and if there’s a way to guarantee that hackers cannot easily break into a company’s systems and upload ‘news’ to be distributed without legitimate verification, and if all journalists and individual investors around the world are online and receiving RSS feeds, and if CNBC goes the way of the dinosaurs, no one listens to Bloomberg radio anymore and offline journalists become obsolete, then your argument might begin to make sense. Until then, we will continue to facilitate disclosure for more than half of the publicly traded companies in the U.S. by sending their material news over our secure and reliable global disclosure network using every conceivable platform, and targeting recipients – the media, individual and institutional investors and the general public - in the manner in which they elect to receive it.
My offer still stands to meet you in person either in NYC or Toronto, but until then, I must get back to my day job.
- Dave
November 16th, 2006 at 7:14 pm
[...] Read more here. Jones also noted that Cox’s reply to Schwartz on his blog received 10 times more coverage from the business news media than an SEC release during the same time period. Posted by Chris Roush | [...]
November 16th, 2006 at 7:29 pm
If that were the case, then we wouldn’t have Edgar because, well, it could be hacked. There is no way to guarantee any system, not even a newswire’s system, as this SEC litigation release illustrates. The summary: “Foreign Traders Used Computerized “Spider” Program to Fraudulently Steal Nonpublic Issuer Press Release Information from Commercial Wire Service”
Redundancy is standard today with most corporate websites, escpecially in the aftermath of 9/11. See here for one example covering 500 public companies. When Katrina knocked out most communications, the Internet was there.
Selective disclosure happens more often behind closed doors in one-on-ones, bus tours and site visits, not on an open medium like the Internet. There is no simultaneous access in practice, just in theory. In terms of access, a wire, an RSS feed, an Email Alert and even a website are equals.
You say “in a manner in which they elect to receive it.” I’m all for choice, but as of now there is no choice. It’s newswire only, due to regulations that pre-date the modern Web.
Unless someone else wants to chime in, I’m happy to leave it there until we meet.
November 17th, 2006 at 4:24 am
One small thought. Cox’s article was posted as a comment to an unrelated blog entry. That’s not a great way to ensure attention. And it still garnered extensive comment.
Actual disclosures would be posted as blog entries, probably on a blog specifically for the purpose of disclosure and with Atom feeds available for monitoring. I struggle to understand how anyone could argue that such a posting, which would naturally be monitored by serious investors as well as by news organisations, would not be at least as good as a newswire.
Seems to me that in fact having a single point to monitor is preferable to having a random scattergun being fired by “the newswire industry”. Doubtless those with vested interests will disagree.
November 17th, 2006 at 6:41 am
Simon — What a superbly crisp and clear comment.
November 19th, 2006 at 2:38 am
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