Michael Arrington, who founded the blog TechCrunch, is also an investor… (Araya Diaz, Getty Images…)
The secret to Silicon Valley's success, we've been told, is its ecosystem: Where else in the world can you find such a large, symbiotic collection of expert visionaries, engineers, marketers, financiers?
How about influence peddlers?
Technology news bloggers' curious habit of accepting investments from the very people they're presumed to be covering objectively blew up last week over what might be termed the Path Affair.
Path, a San Francisco social networking company, got caught downloading users' address books from their iPhones without their permission. After New York Times tech blogger Nick Bilton picked up the story, he and his story became the target of vituperative attacks by tech bloggers Michael Arrington and MG Siegler, who happen to be investors in Path.
Their reaction earned them a vituperative counterattack by Newsweek tech columnist Dan Lyons, who identified them as part of Silicon Valley's "cadre of paid apologists and pygmy hangers-on." They promptly returned fire at Lyons, in much the same vein.
These exchanges spotlighted a cause for real doubt about the credibility of news sites covering the tech business. Many bloggers about technology drape themselves in the mantle of journalistic objectivity. But real journalists don't invest in companies they cover or seek investments in their own enterprises from companies they cover. Arrington and Siegler have done the former, and far too many tech bloggers in Silicon Valley are doing the latter.
Arrington is the godfather of tech blogging in the modern era. After he founded TechCrunch in 2005, his cantankerous persona made the site a must-read in the venture community. After AOL acquired TechCrunch in 2010, the online company said that it would also invest in CrunchFund, a venture fund Arrington was starting — but that Arrington would continue his relationship with TechCrunch.
This conspicuous nexus between tech journalism and tech investing produced so much controversy — Kara Swisher of AllThingsD, a Dow Jones tech blog, called it "a giant, greedy, Silicon Valley pig pile" — that AOL dislodged Arrington from TechCrunch. It maintained its investment in CrunchFund, however, although Arrington says the controversy soured their relationship.
Arrington, to be fair, is an equal-opportunity bomb-thrower. Consider his treatment last year of Airbnb, a start-up that connects property owners with people hoping to rent their homes or apartments for short terms.
Although he says he was trying to invest in the company at the time, Arrington publicized the complaint of an Airbnb client who said an Airbnb renter had trashed her place, and he lit into the company for failing to take responsibility for the damage.
"By writing that, I knew it would be very unlikely they would let me in," he told me. (He got to make the investment anyway.)
But while it's hard to find many tech insiders as freely obstreperous as Arrington, it's becoming increasingly common for tech bloggers to line up backing from venture industry insiders.
When the former TechCrunch writer Sarah Lacy launched her own blog, PandoDaily.com, her strategy for inoculating herself from conflicts of interest seemed to be to create more conflicts than you could possibly imagine, raising $2.5 million from 17 individual venture investors and firms. "We have half of the most active investors" in Silicon Valley, she told me proudly.
Shortly before PandoDaily's launch in January, by the way, Lacy wrote that the business model of tech blogs should be to find "a way to monetize their influence." That hardly points to "no favor asked, none given" reporting.
It's true that potential conflicts of interest are part of the modern news media landscape at nearly every level. Tribune Co., the owner of The Times, for years owned both the Chicago Tribune and the Chicago Cubs. (Tribune sold the team in 2009). From 2005 until last year, News Corp., the owner of the Wall Street Journal, also owned the social networking site MySpace, which competes directly with Facebook in the technology market the Journal's staff is expected to cover vigorously and objectively.
Yet unlike the attenuated financial strings connecting units of huge conglomerates to individual news writers and editors, the connections between venture investors and bloggers who cover them are painfully direct.
Lacy and Arrington both observed to me that it's hard to get a blog off the ground without raising money. Their theme is that if everyone does it, where's the harm? But that's not much of a defense. It's one thing to collect money from venture investors for a blog covering, say, model railroading, but quite another to collect venture investments for a blog covering venture investors.