My last column explored printed news' decline at the hands of several concurrent Internet innovations. But if not on paper, where will we find news and information, particularly concerning investments? An avalanche of content has already moved to "blogs." By now, you've probably heard about blogs—maybe even read one and didn't know. Or you might be one of the web-savvy who follows a host of blogs regularly.
No doubt, blogging is now mainstream, and the lines between it and traditional media are increasingly blurry. But what the heck is a blog anyway? Merriam-Webster defines a blog (a contraction of the term "web log") as "a Web site that contains an online personal journal with reflections, comments, and often hyperlinks provided by the author."
Blog entries can take various forms, from pithy one-liners to lengthy opinions. Bloggers often post videos, photos, and excerpts from other news sources. There's more than one way to skin a cat.
Blogs cover an entire spectrum of topics from anthropology to zymurgy, with plenty of investment-related blogs too.
A shocking number of blogs exist today. Technorati.com, a site that categorizes and ranks the significance of blogs, tracks over five million. Of these, 45% have meaningful posting activity, meaning content is updated on a regular basis. eMarketer lists 27.9 million bloggers and 96.6 million blog readers (48.5% of Internet users) in the US alone.
How does all this affect investors? Today, a large number of blogs cater to the investing world—but you should be wary of information derived from these sources. The "blogosphere" is big and has three distinct differences from traditional media: 1) low barriers to entry, 2) no editorial filters, and 3) anonymous reader reactions (unless the blog bars reader comments). These features result in exciting, but equally perilous, consequences for investors:
1. Low barriers to entry
Anyone can create a blog. Online software guiding you through the process is effectively free and user-friendly. I know because I started my own rugby blog four years ago (sadly, no longer active). In only a matter of days, I was up and running—revolutionary stuff!
Investment blogs vaporize the high overhead costs of disseminating information via print, whether by a newspaper, magazine, or newsletter. The Wall Street Journal recently ranked their top 25 economics blogs and only 8 came from major news organizations. The others featured individual contributors. For example, the Becker-Posner Blog is written by two prominent University of Chicago professors who now broadcast their weekly opinions to the world instead of hoping to be just published in an academic journal or book. This means investors have more information at their fingertips than ever before—and faster too.
Conversely, anyone with an Internet connection and opinion can post blog content—credentials aren't necessary. The ability for an investor to discern quality and factual information then becomes more difficult. With your money at stake, reliable information is critical.
2. No editorial filters
Bloggers can say whatever they want. Authors decide on relevant content—not the editor's office—and can contribute first-hand experiences and expertise.
Sometimes, blogs can be more revealing than professional media sources. We can see the power of blogs in oppressed countries. For example, blogs in Iran are harder for the government to control than mainstream media channels. Here at MarketMinder, we often note that investing advantages can come from information not yet widely priced into the market. Since bloggers can update content with virtually no lag time, their blogs may reveal information or a way of thinking about something that's not yet widely recognized.
However, unlike traditional journalism, bloggers aren't required to remain impartial and present both sides of an issue or present factual information. Little accountability exists today for authors spewing bogus information. Bloggers have increasingly crossed the line into libel and insider information.
3. Anonymous reader reactions
Most blogs allow reader commentary after each posting. This interactive feature encourages readers to contribute their own opinion on topics, whether it's the health of a company or economic forecasts. Arguably, this adds to the experience since investors couldn't previously engage with authors or other readers using traditional print news in such a public and instantaneous medium. One investor may offer an interesting insight the author missed, enriching the overall discourse.
But be wary. Commenting readers can hide behind an anonymous posting or moniker, not giving their actual names and may demonstrate negligible accountability to say anything factual. Trusting information disseminated in these forums can be dangerous. Take the case of John Seigenthaler, Sr., a retired journalist who once worked on Robert Kennedy's staff. Seigenthaler discovered an anonymous poster had altered his Wikipedia entry to falsely read "he was thought to have been directly involved in the Kennedy assassinations of both John, and his brother, Bobby." Seigenthaler had no way to determine the responsible party.
Technology continues rapidly altering how we obtain information, but you've heard the axiom "just because you read it, doesn't make it true." The democratization of information dissemination via blogs offers many benefits, but requires investors to be on guard more now than ever before.