I wrote yesterday about some of the privacy and trust issues that had been raised by Path uploading their users’ address books without either asking or telling.

Today, I’m sharing more thoughts on the next level of the story, which is in some ways surprising, and in others, not at all.

Dan Lyons does a great job of laying out the landscape, the players, and the plays below – I will let you get all that from him. What bothers me most is that the echo chamber that is Silicon Valley is starting to spill outside in dangerous ways.

While it may be fine and good for VC firms to spend hundreds of thousands of dollars for the positive opinion of people – who happen to call themselves journalists – we start to see the true negative impacts of this when these people start to take down real, actual journalists.

Combine this with the recent rash of companies who have never turned a profit going public (I’m looking at you, GroupOn), and we have what, in my mind, could be thought of as a startup mortgage scandal where we are privatizing the gains and socializing the losses.

In more than one sense, these piles of cash are being built on the backs of the iPhone-toting masses. These Silicon Valley companies, including Path, are creating massive amounts of perceived value through data provided by users for free. Users aren’t receiving equity shares. These aren’t co-ops. The same is true for Facebook, though they have actually generated some revenue.

In the short run, this riff will be ugly, but it will settle. In the long run, I think these increase valuations, lack of revenues, and house-of-cards style companies evoke more Enron and Andersen than anything resembling an actual business.

What we are seeing now is merely the tip of the iceberg – there are many more stories like this. Whether and when they come out will be up to those journalists whom Arrington and Seigler are so adamantly opposed to these days.

Hit men, click whores, and paid apologists: Welcome to the Silicon Cesspool

 

 

It’s tough being a journalist, especially if you’re covering technology and living in Silicon Valley, because it seems as if everyone around you is getting fabulously rich while you’re stuck in a job that will never, ever make you wealthy. What’s worse is that all these people who are getting rich don’t seem to be any brighter than you are and in fact many of them don’t seem very bright at all. So of course you get jealous. And then you start thinking maybe you could find a way to cash in on this gold rush. But how do you make gobs of money when your only marketable skill involves writing blog posts?

This is the conundrum, but lately I’ve been thinking of a business plan that sounds like it could work. 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.

In fact this is a new version of an old racket that used to be practiced in the tech space by guys who called themselves “independent analysts.” Their deal, back in the day, was this: “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.

Well, this is the model I was thinking about, but it turns out someone beat me to it — it’s called CrunchFund, and in the past few days we’ve seen the machine in action, and it is indeed a beautiful thing.

This started when Nick Bilton of the New York Times posted an item criticizing Path, which had been caught up in a firestorm when it emerged that Path had been uploading entire address books from people’s iPhones. Bilton made the legitimate point that it’s now become a routine for Valley companies to do something sleazy, get caught, then quickly apologize and get hailed as heroes by the Valley for the quality of their apology. (It’s all about being able to fake the sincerity, as George Burns once said.) Bilton’s point was that Path didn’t just grab those address books by accident. They did it on purpose. It probably took weeks of programming. To just say, “Whoops! Sorry!” seems a bit disingenuous.

Anyway — Path comes under fire, and guess who rides to the rescue? Michael Arrington, who runs CrunchFund, an investor in Path, launches a blistering critique of Bilton himself, comparing him to a pit bull who attacks a dog that is already lying on its back, defenseless, saying that Bilton’s column was “a safe way to do business, but not very noble.”

Almost before you could stop throwing up in your mouth at the idea of Michael Arrington accusing a Times journalist of being less than noble, Arrington’s partner at CrunchFund, MG Siegler, weighed in with his own attack in which he basically said Bilton is a nice guy who was either too lazy or too busy to do a good job. From this Siegler leaps off into a long diatribe about how most tech reporting is utter bullshit written by idiots who are all in a hurry to chase page views.

So: Path comes under fire, and straight away, the paid hit men – Arrington and his sidekick, Matty the Angry Chihuahua — spring into action to smear Bilton and try to discredit him.

I’ll give them this much. They’re good at what they do. Siegler especially is a nasty little ankle-biter who has developed some level of expertise in launching ad hominem attacks. He did one on me a while back. Then he did one on Josh Topolsky at The Verge.

Now it’s Nick Bilton’s turn.

Thing is, just last October Arrington was praising Bilton as a superhero tech journalist and “our number one desired hire” when Arrington was at TechCrunch. Even funnier is that in that post Arrington was “reporting” that Bilton had been offered “$1.5 million+” to leave the New York Times and join CBS/CNET. Thing is, that wasn’t true. And, Arrington had been told, explicitly, by people at CBS/CNET that his numbers were incorrect. But he went ahead and ran the story anyway, knowing his numbers were wrong.

Now Arrington and Siegler have appointed themselves the watchdogs of tech journalism, eager to point out the irresponsible and inaccurate reporting that they see all around them. This might ring a little less hollow if they hadn’t been such egregious violators themselves, and if they weren’t writing this stuff to protect the people they’re in bed with financially.

Siegler also went after Ryan Tate of Gawker, who had criticized Path’s CEO, Dave Morin, for saying, a while back, that Path didn’t collect personal data from users.

Siegler says Morin was telling the truth — because Path didn’t start collecting data until after Morin had issued that denial. In other words, when Morin said Path didn’t collect data he didn’t mean they would never do it, just that they weren’t doing it right then.

Nice, right?

But of course Ryan Tate is the bad guy here. He’s the nasty, unethical, irresponsible sleazebag in this situation — not the CEO who said he didn’t collect data right before he started doing exactly that.

From this Siegler transitions into a rambling hand-wringing essay about how tech journalism has become so sloppy and terrible because you have all these bloggers who don’t really know anything and they’re just trying to generate page views by writing something that isn’t necessarily true but will get people to click.

What makes this so hilarious is that Siegler is by far the biggest click-whore in all of tech blogging, a guy whose only real skill, in fact, is the kind of page-view-chasing he now derides.

If nothing else, he is entertaining, though it’s often inadvertent. Last year he took time out of his busy schedule to explain to younger bloggers how he he had accomplished his meteoric rise to the top of the blogging world and become the greatest blogger of all time and then had become bored with blogging and had set out to find new challenges. This was done without a hint of irony or, apparently, even a shred of self-awareness, which made it all the more fun. The real secret to Siegler’s traffic, however, is that he is pals with Gabe Rivera, who routinely drives traffic to Siegler by giving his pieces top billing on Techmeme. (That’s right, kids. Techmeme is rigged.)

Siegler is constantly mocked by readers who regard him as a laughable troll — a mean-spirited, egomaniacal buffoon who is not very bright but thinks he’s the smartest guy in the room. He is a self-styled “big thinker” who compares Google to movie villains (Le Chiffre, Voldemort, Harvey Dent) and who, in all of his manic blogging, has left a string of cock-ups and false “scoops” behind him.

Last year he generated lots of traffic for TechCrunch with a “scoop” about the Amazon Kindle Fire. He said he’d actually used one — but then he got almost every fact wrong, including the name of the product. Later, he defended himself by saying that, yes, his original post got the facts wrong, but in a later “update” (that’s blogger-speak for “correction”) he fixed all that. So there.

Then there’s the post in December where MG got into his Angry Chihuahua mood again and thought he’d uncovered some kind of huge conspiracy when he accused Google’s Android chief, Andy Rubin, of deleting a tweet. A few days later Siegler had to recant (sans apology, of course) when it turned out that, um, nope, Rubin hadn’t done that. Of course there’s a simple way to avoid bonehead moves like this — you do the reporting before you publish the accusation, not after.

Then there’s the case where Matty got all upset and threw a tantrum like some kind of junior high school kid because Google+ wouldn’t let him use a profile photo in which he’s giving the finger. His stock in trade is the rant where he declares that “XYZ is dead!” (this week it’s tech journalism) or “If you think XYZ, you’re a fucking idiot!”

Now he thinks it’s wrong to go chasing clicks and page views with sensationalized garbage. How odd and inspiring it is that Siegler’s profound change of heart should happen after Path, a company in which CrunchFund has invested, is getting criticized.

Arrington and Siegler can try to play journalism police all they want, but the fact is they have turned themselves into hacks for hire and as such have lost all credibility. They’re not the only ones working this racket. Now we have PandoDaily, a new tech blog crated by their TechCrunch pal Sarah Lacy and funded by CrunchFund and a bunch of other VCs and angels whose companies PandoDaily aims to cover.

PandoDaily is working the same deal as CrunchFund. You invest in our site, and now we’re business partners, so at the very least you’ll have a friendly media outlet whose “influence” you can call upon.

These folks will say they never promised any special treatment to the VCs when they went around with their hands out asking for money. Maybe that’s true. But I have talked to people on the other side of those transactions and this is definitely what the VCs were thinking when they were writing the checks.

The line from one VC firm that invested in CrunchFund was this: “A few hundred thousand is a rounding error for us. We don’t care if we never see the money again. It’s so small it doesn’t even affect our results and isn’t even considered material enough to be reported to our limited partners. And it couldn’t hurt to have Mike as a friend.”

Separately another VC recently told me his firm recently had passed on opportunities to invest in some new tech blogs that were proposing a business model he described as “hush money.” Potential investors were being offered “most favored nation” status for themselves and their portfolio companies if they put money into the site.

This is what now passes for “journalism” in Silicon Valley: hired guns and reformed click-whores who have found a way to grab some of the loot for themselves. This is perhaps not surprising. Silicon Valley once was home to scientists and engineers — people who wanted to build things. Then it became a casino. Now it is being turned into a silicon cesspool, an upside-down world filled with spammers, liars, flippers, privacy invaders, information stealers — and their grubby cadre of paid apologists and pygmy hangers-on.

The most delicious part of Siegler’s rant on the tech media is the final paragraph:

The only thing I can offer is the advice to take everything you read in the technology press with a grain of salt. Perhaps several. The likelihood that at least part of it is nonsense is very strong. And stronger by the day.

For once, I could not agree more.

Posted via email from Shay

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