November 22, 2011
November 18, 2011
I had several people comment to me this week that they would like to see more timely updates in response to breaking news on companies. For example, the Yelp S-1 was released on Thursday and I probably won’t post my analysis until Monday.
So what’s up with that? No, it’s not because I’m lazy or slow.
For starters, I am not equipped to compete in the “first” game that the media like to play:
- As much as I have formed a mutual admiration society with the folks at Bloomberg over the last five months, they haven’t (yet) comped me a Bloomberg terminal. I don’t get instant access to filings as they happen.
- Even though it seems like it sometimes, this is not a full-time job for me. I’m usually juggling clients, briefings and other responsibilities. Unfortunately, I can’t drop everything else.
But, just as important, I don’t value the “first” game. If you strive to be first, more often than not, you end up regurgitating management’s story. To me, posting a leaked memo that management wants out is not a “get.” A “get” is posting critical analysis or information that management would rather not see published.
My renewed interest in financial journalism was sparked by a supposed local expert who was raving about what a great company Groupon is shortly after their initial S-1 filing. He clearly hadn’t read it and it just posted management’s talking points. Too many reporters don’t read the underlying documents that they’re reporting about.
Then there’s the fact that the information isn’t immediately actionable. Because Yelp is a private company that won’t be trading for at least a month or two, it doesn’t really matter if I don’t post until Monday. Given that dynamic, I’d rather do a more thorough analysis than make mistakes that need to be corrected later.
November 15, 2011
November 14, 2011
One of the great innovators in online journalism, Jim Romenesko, resigned from his position at the Poynter Institute, a journalism think tank of sorts. Among journalists, Romenesko practically invented blogging. Some reporters who claimed to never had read a blog read Romenesko religiously. He aggregated links to some of the successes and excesses of journalists, while regularly driving traffic to original news sources. What tech blogs consider the slashdot effect, Romenesko provided to journalists.
Romenesko resigned after Poynter called out attribution errors in his work. He sometimes lifted passages from the original source without putting them in quotation marks. Although his intention was clearly not to plagiarize (he linked to original sources), the Poynter blog post on the subject left a bad odor.
I’m not going to rehash what happened here; many journalists have already done that.
I’m going to focus on what’s wrong with the state of journalism today.
A little background on me, for context: I majored in journalism at Northwestern University’s Medill School of Journalism. I did a number of reporting internships in college. I launched some of the first online newspapers. I also attended a leadership seminar at the Poynter Institute early in my career. (Which I thoroughly enjoyed and learned from.)
For the past five months, I’ve engaged my own form of journalism while covering Groupon and the lead up to its IPO. My own role doesn’t fit into conventional notions of journalism. I’ve done a lot more analysis than most reporters do and I’ve done a lot more original reporting than most analysts. When I’ve done media interviews, I’ve been variously labeled a blogger, business journalist, analyst, author, gadfly and artist.
Here are some of the things that I think are wrong with journalism, and especially financial journalism, today. I make no claims to knowing all the answers. I made my own mistakes in recent months and I will call those out too.
Focus on petty details over the big picture
Too many people in journalism focus on minor details instead of the big picture. This was the case with Romenesko. Would I do what Romenesko did? Probably not. I try to be very careful in my attribution and identify other people’s quotes. But Poynter’s reaction was way more aggressive than it needed to be. The fact that it was essentially a cover-your-ass move on Poynter’s part made its actions even worse.
The purpose of attribution is to ensure that the original author gets credit for their work. Romenesko certainly did that.
I see an emphasis on petty details in journalism all the time. Part of this is because that’s something that’s relatively easy to do. This correction from The New York Times is my favorite correction found while reading Groupon stories:
An article last Sunday about Groupon, the e-mail marketer, misidentified the heritage of Zeus, whose name the company’s writers invoke rather than mentioning God. He is part of Greek mythology, not Roman.
That correction, published on June 5, after the details of Groupon’s financials were made public, didn’t correct this statement: “Groupon is raking in more than a billion dollars a year from these featured businesses and is already profitable.“
The trivial detail of which mythology Zeus belonged to is something that editors can easily check. The big picture of a massive IPO by a company losing hundreds of millions was a bit harder to nail down. To be fair, Groupon went to great lengths to obfuscate its financials — but that’s all the more reason for diligence among journalists.
Objectivity is a lie
For a profession that presents itself as among the most honest, one of its core tenets — objectivity — is a lie. The Associated Press, NPR and others would like you to believe that their reporters and the stories they present are entirely objective and dispassionate. That’s bullshit.
Although they try hard to be objective, humans will innately give into bias. Source selection and story selection alone can cause bias. It doesn’t matter if you prohibit your reporters from attending the Rally to Restore Sanity as NPR and other outlets did; the fact that they wanted to go is the point. By prohibiting their participation, all you’re doing is hiding their biases.
This comes up all the time as news organizations struggle to adapt to social media. News outlets create social media policies to preserve the appearance of objectivity. These social media policies are fundamentally dishonest — they don’t eliminate the biases, they just keep the public from knowing about them. In its policy, The Associated Press says, “A retweet with no comment of your own can easily be seen as a sign of approval of what you’re relaying.” One journalist suggested that reporters modify the way they retweet to indicate that they didn’t endorse the item they retweeted. But merely the selection of what someone retweets can reflect bias.
My view is that it’s better to have that information out in the open. If a reporter has a bias, let’s get it out there.
There’s a big difference between being objective and fair. My coverage of Groupon hasn’t been objective in the sense that journalists tout. Heck, one of my earlier pieces was titled “Why I Want Google Offers And The Entire Daily Deals Business To Die”. Everyone who has followed my work knows exactly where I stand.
But I also believe I’ve been fair. When I see positive uses of Groupon, I write about them or tweet them. When others smack down Groupon for reasons I think are unwarranted, I call it out.
Traditional journalism rewards a fake balance in the name of objectivity that in reality often distorts the truth. If 95% of the businesses I talk to had bad experiences, is it really right to quote one business who had a good experience and one that had a bad experience as traditional journalism would have you do? I don’t think so.
Objectivity also does a disservice to readers in another way: it robs readers of the expert opinion of those who are among the closest people to a story. A reporter who is on the same beat for years should gain enough knowledge to recognize bullshit when they hear it. And news outlets should allow them to do so.
Next up: Illnumeracy and lack of time.
The Poynter Institute is given express permission to republish this series, with or without attribution.
November 8, 2011
November 3, 2011
If you’d told me 5 months ago that I would spend a lot of 2011 studying accounting, talking to businesses and saying bad things about a company that everyone once loved, I never would have believed you.
It all started at Floyd’s Coffee in the Old Town section of Portland — which, ironically, was running the very first Google Offer. I had planned to spend the day there to understand what customers thought of Google Offers, how many people came in and how they interacted with the staff. At that point, I’d spent very little time looking at the space. That day, Groupon put out its first S-1.
The first analysis I read, by a supposed expert in the local space, raved about the company. He essentially pulled all of management’s talking points and put them in the story. I knew the company was nowhere near as good as the picture he painted; but I didn’t know how bad it would turn out to be.
Five months later, I’m more convinced than ever that this is a terrible company for investors, small businesses and ultimately for consumers. Unless the company substantially changes its business model, investing in Groupon will be like investing in a leaky bucket.
Among the significant challenges that remain:
- The daily deals business is past its peak. The best days for the classic Groupon are in the past. With its 3Q results, Groupon has largely proven that once it slows spending on marketing, growth stops. In its most established markets, Groupons sold are down more than 10%. In Boston, the number of merchants featured in 3Q is down a whopping 20%. Some look to Asia for exapansion: sure, Groupon can expand there. But the share of revenue it gets to keep in Asia is substantially lower than in the U.S. and Europe.
- The only area where Groupon seems to be able to innovate is accounting practices. New product lines like Groupon Getaways and Groupon Goods are retreads of long-established e-commerce categories. Groupon’s entries in these categories show zero innovation. In many cases, they are turning back the clock 10 years. In 2011, I shouldn’t have to call to make a hotel reservation.
- The future is all about targeting and self-serve. Smart businesses don’t want to blast a spam message to everyone in a region who might want a cheap massage. If I ran a spa, I’d want to reach people within 5 miles of my business, who weren’t already customers and who regularly spend money on spa services. I want qualified customers, not those who are “once and done.” And I certainly don’t want to discount to people who would pay full price. The Groupon daily deal model doesn’t support this. Once you target to this level, the volume and revenue on each deal is too low to support a sales force. The Groupon army that some people view as a moat will turn out be an anchor.
- The future is mobile. Offers will be searched for, purchased and redeemed on mobile devices. Google and Facebook have a huge advantage in mobile. They already have hundreds of millions of people using their apps. Although Groupon Now is an OK product, it has little distribution. To be a player in this space, Groupon would have to buy distribution. It will essentially have to pay to re-acquire customers. Then it has to hope that those people will change their usual behavior and go search in a separate app. Google’s launch today of its Android Offers app should terrify Groupon investors. Google could include Offers as a pre-load in Android. Or it could surface the offers into Google Maps — something that people already use.
- The management team seems to be incompetent. Groupon’s road to IPO has been an unquestionable shit show. They made up new accounting metrics. They ignored quiet period rules. They used a restaurant in their roadshow as a reference, apparently without checking to see if they’d say positive things. (The restaurant didn’t.) Management told employees they could sell on the day of the IPO. (They can’t.) They asked me to name confidential sources in exchange for access to the Groupon building.
All of that said, I’ve put in my request with my broker for shares in the IPO because Groupon has scientifically engineered their IPO to inflate share prices. Its float is one of the tiniest in the last decade. Most likely this thing will have a nice pop tomorrow.
If Groupon’s stock skyrockets tomorrow, it doesn’t mean I’ve been wrong about the company. But in the unlikely event it tanks, it’s a big sign that I’m right. (I realize that this might sound like the kind of thing that Groupon’s accountants would say, but it’s true.) We’ll need to wait at least 9 months to really know.
Maybe Groupon will find a real business model in that time.
I’d like to thank a few people whose help has been invaluable in all of my Groupon coverage: Jonathan Gaw, Ed Ketz, Mark Rogowsky, Brian Roemmele, Conor Sen, Semil Shah and Rick Summer. They’ve read early drafts, provided valuable insight into areas that I’m not an expert in and helped to keep me in check.
On the media side, I’d like to thank Dylan Tweney, Heather Kelly and Mo Marshall at VentureBeat; Herb Greenberg and Juliet Mendez at CNBC; Emily Chang, Cory Johnson and Diane Anderson at Bloomberg West; and Erick Schonfeld at TechCrunch.