Rush to judgment?
As more people go online in search of stock quotes, trades, and banking, upstart financial news Websites such as MarketWatch, The Motley Fool, and CNET’s News.com are crunched between tightening deadlines, getting the facts right, and the euphoria of today’s bull market. “The Internet is perfect for financial news,” says Kramer. But not always perfect for accuracy.
So learned Coyote Network Systems, a Southern California provider of telecommunications equipment and long-distance services. Last December, TheStreet.com reported that it could not locate one of Coyote’s main clients, Crescent Communications, and suggested in several stories that the company did not exist, and that insiders were preparing to dump their shares. Coyote’s stock fell 45 percent in one day, to 7 13/16, and NASDAQ temporarily halted trading in the company to investigate.
Coyote issued a flurry of angry denials, and Crescent was identified as being incorporated in Nevada and based in Long Beach, Calif., though its founder was in Mexico. Upstart financial news sites are increasingly crunched between tight deadlines, getting the facts right, and the euphoria of a bull market. Paid subscribers to its site and about 10 million page views per month, stands by its reporting, citing it as one of its finest series of articles to date. But Coyote has asked the SEC to investigate trades on its stock for market manipulation and is considering a lawsuit against. “Our lawyers are looking into it,” says Coyote spokesperson Tony Squeglia.
Online investing is becoming more popular. Thirty-two percent of people online track their stock portfolios there, and 11 percent trade stocks on the Net, according to an AOL/Roper Starch report. MarketWatch and its competitors expect those numbers to increase, as more people catch online trading fever. And they hope that readers will trust them to deliver the news accurately and at the speed of light. Investors are banking they will. MarketWatch has a trusted brand name and, consequently, lots of traffic-some 3 million page views each day.
With CBS owning 50 percent of the three-year-old venture pre-IPO (and Data Broadcasting Corp., which provides all back-end services such as Website hosting and engineering, owning the other half), the site has been able to gather a solid reputation as a trusted source quickly. Reporters for the site often appear as commentators on CBS Evening News, which reaches 11 million homes each night. In its agreement with CBS, the network provides $30 million in advertising through 2002 to the Website. Print and TV ads show a smiling CBS news anchor Dan Rather with the optimistic upward arrow of the CBS MarketWatch logo. Consequently, online trading sites might pay up to $1 million a year for ad links to their sites on MarketWatch.