Digital Media

"Unedited. Unfiltered. News."

That's the slogan CNN chose for its user-generated news site, iReport.com, a place designed to tap into the citizen journalism craze. At iReport, any member of the public is allowed to post stories, ostensibly as part of the cable network's news operation, simply by providing an e-mail address. CNN and citizen journalism are being criticized after someone used the site on Friday to spread the false report that Apple CEO Steve Jobs had suffered a serious heart attack.

Apple CEO Steve Jobs

(Credit: James Martin/CNET News)

The bogus story sparked a minor panic on Wall Street before Apple had a chance to deny the rumor. Trading in Apple's stock skyrocketed, and the share price briefly fell about 10 percent before rebounding later in the day.

How is it possible that a single fraudulent Internet report can wipe away millions or even billions of dollars of market value from one of the world's most powerful technology companies? That's the big question if you're one of Apple's investors. If you're an investigator for the Securities and Exchange Commission you're interested in who did it and why. According to CNN, SEC investigators are looking for the person who posted the fictional story to iReport.

Some of the other questions being asked are why mainstream news services didn't discredit the report before any damage was done? And who was minding the store for CNN? Surely, one of the country's most trusted news sources wouldn't allow just anyone to post a story under its banner without vetting it.

Also at the center of the controversy is Silicon Alley Insider, a New York-based technology and financial news blog that has earned enormous respect and popularity in a brief amount of time. SAI and CNN could see their reputations tarnished if they're found to be at fault, but I venture to say that in the wake of the controversy, everyone involved in online journalism is doing some self reflection.

This is a time of intense competition in tech journalism. A decade ago, newspapers used to write today's news for tomorrow's paper. Not anymore. Reporters are increasingly under pressure to publish news to the Web minutes after events occur. People who have been in the business for a while know what's often lost with this need-for-speed mentality is thoughtful writing and careful reporting. Following the phony Jobs story, many pundits placed the blame at the feet of CNN and citizen journalism. But the facts of the case raise questions about whether professional journalists behaved responsibly in their handling of the story.

"Severe chest pains"
The incident began when someone posted a report on CNN's iReport shortly before 4 a.m. PDT. "Steve Jobs was rushed to the ER just a few hours ago after suffering a major heart attack,"the post at iReport read. "I have an insider who tells me that paramedics were called after Steve claimed to be suffering from severe chest pains and shortness of breath. My source has opted to remain anonymous, but he is quite reliable."

What hasn't been widely circulated yet is that iReport was not the first place the fake story was sent. Arnold Kim, who operates the blog, MacRumors.com, wrote Friday that someone submitted the same rumor to his site using an anonymous IP address. Kim did some research on the rumor and decided it was a fake. Later, he tracked the report and found it being circulated by members of online message board 4chan. Kim also discovered the item was circulating on Digg, a popular news aggregation site. Digg users, however, voted the story down, meaning they also were skeptical.

The next place Kim saw the rumor was at SAI.

At about 6:25 a.m. PDT, SAI published this headline: "Apple's Steve Jobs Rushed To ER After Heart Attack, Says CNN Citizen Journalist." Within the blog, SAI informed readers that the report hadn't been substantiated but reporters were checking it out. To that point, no other mainstream media outlet had published anything about Jobs' health, according to Henry Blodget, SAI's founder and a former well-known tech analyst.

Blodget told CNET News that his staff tried to contact Apple and CNN representatives to confirm the story prior to publishing but were unable to reach them. SAI decided to post the item--with all the disclosures about it being unconfirmed--anyway.

At 6:41 a.m. PDT, Apple's stock price began to plummet.

At 6:52 a.m. PDT, SAI updated its story to report that an Apple representative had denied the iReport story, Blodget said. A few minutes after that, Apple's stock began to recover.

Blodget defends his site's story
Kim from MacRumors argues that it was SAI's post that gave the rumor credibility and spooked Wall Street. "The (iReport) story has been picked up by numerous sites as a failure of citizen journalism," Kim wrote. "It's nothing of the sort. The real reason it gained traction is the reporting of it on mainstream blog sites."

I asked Blodget whether SAI should have waited to confirm the information before posting. After all, the blog was dealing with a potential life-and-death report about one of technology's most influential leaders. Blodget said he has no regrets about going with the story when he did.

"The Steve Jobs report was the lead story on a site operated by CNN," Blodget said by e-mail. "It was highly relevant to anyone who cares about Steve or Apple...It was already getting notice when we heard about it. We never know how long it will take to confirm or reject information like that, and we knew our readers would want to evaluate it themselves. So we described exactly what the report was, said we didn't know whether it was true or not, and said we were investigating. Twenty minutes later we broke the news that the report was false."

CNN responded to this by saying that while iReport is relatively new, the company has been involved in user-generated content since August 2006 and this is the first time that any mainstream news site has mistaken some of its user-generated content for CNN-vetted material. Jennifer Martin, a CNN spokeswoman, said that though CNN owns and operates iReport, it is very clear that the information on the site is, like the slogan says, unedited and unfiltered. In iReport's "About" section is written this statement: "CNN makes no guarantees about the content or the coverage on iReport.com."

That may be true but a visit to iReport reveals there is little to distinguish user-generated reports from those filed by professionals. CNN often does fact-check some of the user-generated stories. If they're accurate, the network will use them on TV broadcasts or CNN-branded Web sites. Martin said these vetted reports are clearly identified with the label "Now on CNN."

What are the lessons?
As for Silicon Alley Insider's part in this mess, Blodget suggests that CNN's ownership of iReport gave credibility to the false Jobs story. But some Apple investors might say the same thing about SAI's report. The former analyst was once a Wall Street insider and his staff has been loaded with seasoned reporters from publications such as Forbes and Variety. Even if SAI prominently noted that the iReport story was unconfirmed, the fact that SAI had written about it and was checking it out may have given the report some credibility.

This isn't the first time that a respected blog has found itself answering questions about why it reported on a bogus tip. In May 2007, Engadget received what appeared to be an internal Apple memo that indicated the launch of the iPhone was going to be delayed. The memo was a fake and after the gadget blog reported the false rumor, Apple's market cap lost $4 billion. Engadget, like SAI, did not confirm the story first with Apple before publishing.

There's no doubt that both CNN and SAI will move forward and continue to produce important and accurate news stories. Maybe CNN will take a closer look at how it displays its user-generated reports. As for journalists, citizen and professional, maybe the takeaway for us is to slow down just long enough to make one more phone call, talk to one more source.

The public is less interested in us getting the story first as it is in us getting the story right.

Updated 4:50 p.m. PDT with Google comment.

Officials at the U.S. Securities and Exchange Commission are wondering if there was any improper conduct behind the online release last weekend of a 6-year-old news story that lead to a 75 percent drop in the stock of United Airlines on Monday, according to The Wall Street Journal (subscription required).

The SEC has opened a "preliminary inquiry" into the online distribution of a Chicago Tribune article from 2002 about United Airlines' bankruptcy filing, people familiar with the matter said.

The Tribune Co. said in a statement on Wednesday that it believes a single visit to the archived story on the site of its South Florida Sun-Sentinel newspaper during a low-traffic time period resulted in the computer system displaying it under a tab titled "Popular Stories Business: Most Viewed."

The article was then picked up by Google News and displayed with no indicate of the original date of publishing. It was later distributed by Bloomberg.

Google's automated search agent "Googlebot" misclassified the article because it is unable to differentiate between breaking news and frequently viewed stories on the newspaper Web sites, the Tribune said, adding that it had asked Google to stop crawling its sites month ago, but the process had continued.

Asked for comment, Google spokesman Gabriel Stricker said: "The claim that the Tribune Company asked Google to stop crawling its newspaper Web sites is untrue."

Google's crawler had no reason to suspect that the article was old, according to a Google News blog that was first posted on Monday and updated on Wednesday. "The article failed to include a standard newspaper article dateline, but the Sun-Sentinel page had a fresh date above the article on the top of the page of "September 7, 2008" (Eastern)," it said.

This is the latest in a series of false market rumors. The SEC brought a case earlier this year against a short-seller who allegedly spread false information about a pending takeover, and is also investigating short-selling of Bear Stearns and Lehman Brothers stock, according to the Journal.

John Reed Stark, head of the SEC's office of Internet enforcement, declined to comment on whether the agency is investigating the posting about United Airlines, which emerged from bankruptcy in 2006.

"Anytime anyone spreads false information over radio, TV, Internet message boards, or chat rooms about a public company that will raise questions as to whether someone is committing securities fraud," he told the paper.

Google acknowledged late Thursday that it may have made a bad bet on AOL.

The search giant said in a filing with the Securities and Exchange Commission that its $1 billion investment for a 5 percent stake in Time Warner's Web unit "may be impaired" and that it may have to take a charge in the future:

Based on our review, we believe our investment in AOL may be impaired...We will continue to review this investment for impairment in the future. There can be no assurance that impairment charges will not be required in the future, and any such amounts may be material to our Consolidated Statements of Income.

The December 2005 investment secured a renewal of Google's search advertising deal with AOL, preventing its largest ad partner from defecting to Microsoft. The deal gave AOL a valuation of $20 billion at the time.

Google didn't estimate in its filing what AOL might be worth today, but observers have suggested a figure closer to $10 billion.

Google's deal allows it to demand that Time Warner spin off AOL in an initial public offering of stock or buy back its stake, which would result in a $500 million loss for Google.

Time Warner, perhaps signaling its intention to dispose of AOL to focus on its media business, announced Wednesday that it will split AOL's dial-up unit from its advertising business by early 2009.