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Attack Of The Blogs
On The Cover/Top Stories
Attack of the Blogs
Daniel Lyons, November 14, 2005
Web logs are the prized platform of an online lynch mob spouting liberty but spewing lies, libel and invective. Their potent allies in this pursuit include Google and Yahoo. Gregory Halpern knows how to hype. Shares of his publicly held company, Circle Group Holdings, quadrupled in price early last year amid reports that its new fat substitute, Z-Trim, was being tested by Nestlé. As the stock spurted from $2 to $8.50, Halpern's 35% stake in the company he founded rose to $90 million. He put out 56 press releases last year.
Then the bloggers attacked. A supposed crusading journalist launched an online campaign long on invective and wobbly on facts, posting articles on his Web log (blog) calling Halpern "deceitful,""unethical,""incredibly stupid" and "a pathological liar" who had misled investors. The author claimed to be Nick Tracy, a London writer who started his one-man "watchdog" Web site, our-street.com, to expose corporate fraud. He put out press releases saying he had filed complaints against Circle with the Securities & Exchange Commission.
Halpern was an easy target. He is a cocky former judo champion who posts photos of himself online with the famous (including Steve Forbes, editor-in-chief of this magazine). His company is a weird amalgam of fat substitute, anthrax detectors and online mattress sales. Soon he was fielding calls from alarmed investors and assuring them he hadn't been questioned by the SEC. Eerily similar allegations began popping up in anonymous posts on Yahoo, but Yahoo refused Halpern's demand to identify the attackers. "The lawyer for Yahoo basically told me, ‘Ha-ha-ha, you're screwed,'" Halpern says. Meanwhile, his tormentor sent letters about Halpern to Nestlé, the American Stock Exchange, the Food & Drug Administration, the Federal Trade Commission and the Brookhaven National Laboratory (involved in Circle's anthrax deal).
But it turns out that scribe Nick Tracy of London was, in fact, a former stockbroker in Oregon named Timothy Miles--and Miles himself faces SEC charges that he took part in a pump-and-dumpstock scheme in 2000. He was tried in June and awaits a verdict. No matter: Circle Group stock fell below a dollar in a year of combat with Miles and the anonymous bashers on Yahoo (and after Nestlé dropped Z-Trim). Halpern's stake is down $75 million, and he blames Miles and his acolytes; he has sued for defamation. "Some of these bloggers have just one goal, and that is to do damage. It's evil," he says.
Blogs started a few years ago as a simple way for people to keep online diaries. Suddenly they are the ultimate vehicle for brand-bashing, personal attacks, political extremism and smear campaigns. It's not easy to fight back: Often a bashing victim can't even figure out who his attacker is. No target is too mighty, or too obscure, for this new and virulent strain of oratory. Microsoft has been hammered by bloggers; so have CBS, CNN and ABC News, two research boutiques that criticized IBM's Notes software, the maker of Kryptonite bike locks, a Virginia congressman outed as a homosexual and dozens of other victims--even a right-wing blogger who dared defend a blog-mob scapegoat.
"Bloggers are more of a threat than people realize, and they are only going to get more toxic. This is the new reality," says Peter Blackshaw, chief marketing officer at Intelliseek, a Cincinnati firm that sifts through millions of blogs to provide watch-your-back service to 75 clients, including Procter & Gamble and Ford. "The potential for brand damage is really high,"says Frank Shaw, executive vice president at Microsoft's main public relations firm, Waggener Edstrom. "There is bad information out there in the blog space, and you have only hours to get ahead of it and cut it off, especially if it's juicy."
Some companies now use blogs as a weapon, unleashing swarms of critics on their rivals. "I'd say 50% to 60% of attacks are sponsored by competitors," says Bruce Fischman, a lawyer in Miami for targets of online abuse. He says he represents a high-tech firm thrashed by blogs that were secretly funded by a rival; the parties are in talks to settle out of court. One blog, Groklaw, exists primarily to bash software maker SCOGroup in its Linux patent lawsuit against IBM, producing laughably biased, pro-IBM coverage; its origins are a mystery (see box, p. 136).
The online haters have formidable allies amplifying their tirades to a potential worldwide audience of 900 million: Google, Yahoo and Microsoft, plus a raft of other blog hosts. Google is the largest player; its Blogger.com site attracts 15 million visitors a month, more than each of the Web sites of the New York Times, USAToday and the Washington Post. An upstart, Six Apart in SanFrancisco, owns three blogging services--TypePad, LiveJournal and Movable Type--that together run a strong second to Google.
Google and other services operate with government-sanctioned impunity, protected from any liability for anything posted on the blogs they host. Thus they serve up vitriolic "content" without bearing any legal responsibility for ensuring it is fair or accurate; at times they even sell ads alongside the diatribes. "We don't get involved in adjudicating whether something is libel or slander," says Jason Goldman, a manager at Google's blogging division. In squabbles between anonymous bloggers and victims Google sides with the attackers, refusing to turn over any information unless a judge orders it to open up. "We'll do it if we believe we are required to by law," he says.
Attack blogs are but a sliver of the rapidly expanding blogosphere. A hundred thousand new blogs are created every day, more than one new blog per second, says Technorati, a firm in San Francisco that tracks the content of 20 million active blogs. Some big blogs attract millions of readers. Weblogs Inc., a Santa Monica, Calif. outfit that just got bought by America Online for a reported $25 million, publishes 90 blogs and could bring in $2 million in ad sales this year, says cofounder Jason McCabe Calacanis.