interactive.wsj.com
November 30, 2000
Reining In Stock Hype Strips
Silicon Investor of Its Luster
By JOHN R. EMSHWILLER
Staff Reporter of THE WALL STREET JOURNAL
Three days ago, the tiny stock of eToys Inc. surged 10%, and the
stock-message boards on the Internet chattered away about it.
Some of them, at least.
More than 500 messages went up on the
eToys discussion board at Yahoo! Inc.'s
Web site (yahoo.com), with many posters hoping that the online
toy-retailer would rise more. "Up Up and Away," wrote one Yahoo
poster.
Over at the eToys board on the Web site Raging Bull
(www.ragingbull.com), there were more than 100 messages. Several
postings noted that 34 million shares traded on the Nasdaq Stock Market,
and one crowed: "3 times friday volume!!!"
Then, there was Silicon Investor (www.siliconinvestor.com). Its eToys
board attracted just two messages. "Load up on" the stock, recommended
one. "I already have," responded the other.
So it goes these days at Silicon Investor, where the once-indispensable
Web site for online investors has lost some of its edge -- which, ironically,
may be due in part to the site's efforts to rein in stock hype.
In the go-go atmosphere of the late 1990s, Silicon Investor, also known as
SI, was a message-writing Mecca for aggressive online traders. Some,
such as a Manhattan burrito seller turned stock picker named "Tokyo Joe"
Park, became celebrities with large followings. Hot SI discussion boards
would attract tens of thousands of messages and help move the price of a
stock.
But this year, the number of messages posted at Silicon Investor, part of
InfoSpace Inc. in Bellevue, Wash., has dropped. During the past several
months, message-board postings are down about 40% from a year earlier,
based on statistics gleaned from SI's Web site. In contrast, Silicon
Investor's two major competitors, Yahoo and Raging Bull, say their
stock-message traffic is up from a year ago.
"SI is dying," asserts Gary Swancey, a Stockbridge, Ga., trader and
longtime Silicon Investor member who says he has been spending more
time lately at other Web-site operations.
No, Silicon Investor isn't literally expiring, but executives at the Web site
concede that message traffic is off. There "clearly has been a downturn,"
says Silicon Investor Managing Director Michael Coddington. He blames
the decline on falling stock prices and increased competition from other
stock-message operations. Silicon Investor doesn't release posting
numbers.
Mr. Coddington says the drop in traffic on the public message boards has
been partly offset by a surge in private messages sent from one SI member
to another. (Neither Yahoo nor Raging Bull offers such a private messaging
feature.) The drop in total messages -- both public and private -- is 10%
to 15% from a year earlier, he estimates. He adds that there has been a
"significant" rise in the number of visits to the site to read messages.
This increased "privatization" of one of the
Internet's most public forums also is a result of
the downturn in stocks, says Mr. Coddington,
as traders presumably are less willing to talk
publicly about travails than triumphs.
Interviews with longtime members suggest other forces also are buffeting
Silicon Investor and the broader online world.
For one thing, Silicon Investor, unlike Yahoo or Raging Bull, charges a
membership fee -- $10 a month, or $199 for lifetime privileges -- for
posting messages. Nonmembers are free to read messages.
As other Internet firms have discovered, many online consumers really do
expect a free lunch. Mr. Swancey, the Georgia trader, says that as new
legions of investors began coming to the message boards in recent years,
many asked: "Why pay for it when you could post for free?"
Free posting seems to encourage writing. Silicon Investor, operating since
1995, has been getting about 50,000 messages a week. Raging Bull, which
started in 1998, attracts about 375,000 messages a week, says a
spokeswoman for the unit of AltaVista Co. in Palo Alto, Calif. AltaVista is
majority-owned by CMGI Inc. A spokeswoman for Yahoo, which started
stock-discussion boards in 1996, says "hundreds of thousands" of
messages come in daily. Neither would give more specific figures. Unlike
Silicon Investor, overall public posting numbers can't be determined from
information available at the Yahoo and Raging Bull sites.
Silicon Investor's Mr. Coddington defends the fee-based system, which he
likens to a "cover charge" that "assures that those in the community are
serious about the community." He says membership has been rising, though
he declines to give specific numbers. Mr. Coddington characterizes the
drop in postings as temporary and notes that Silicon Investor is starting
some message boards that will allow nonmembers to post.
Besides raising revenue, a fee-based system helps keep better order on the
discussion boards, say Silicon Investor officials and members. Each
account is allowed only one online alias. This system makes it tougher for
an individual to post under multiple aliases in hopes of creating the
impression that a stock -- or a stock chatboard -- has more of a following
than it really does. "You are held more accountable on SI," says Jane
Gilbert, a Silicon Investor member in the Baltimore area who laments that
her favorite stock-discussion operation has "slowed to a crawl."
While Silicon Investor's tighter controls have helped elevate the level of
discussion, they also, unfortunately, have made SI a less interesting place,
says Jeffrey Mitchell, a Westport, Conn., software designer and longtime
member. These days, Mr. Mitchell says he spends more time on Raging
Bull "because that's where all the hypesters have gone."
Raging Bull and Yahoo acknowledge that members can, relatively easily,
post under multiple aliases, but say that other members actively watch for
such abuses and publicly identify culprits.
The flow of players has helped make Raging Bull a very active discussion
site for stocks listed on the OTC Bulletin Board, where some of the
wildest trading action has occurred in recent years.
Consider eConnect Inc., a San Pedro, Calif., Internet company that was
sued for stock fraud earlier this year by the Securities and Exchange
Commission in Los Angeles federal court (the company settled the case
without admitting or denying wrongdoing). The Silicon Investor board for
eConnect has attracted fewer than 10,000 messages this year, compared
with more than 250,000 at Raging Bull. Yahoo doesn't have message
boards for OTC Bulletin Board stocks.
Silicon Investor also has suffered, say some observers, from a loss of star
power as some of its best-known posters went on to other ventures and
either stopped posting completely or posted at a reduced level. For
example, Mr. Park, the former burrito seller, hasn't had a posting on
Silicon Investor since last year. He has been focusing his energies on his
own private, fee-based stock Web site. Since January, Mr. Park also has
been defending himself against an SEC suit filed in Chicago federal court
charging him with defrauding members of his private stock-advice Web
site. Mr. Park has denied wrongdoing.
Litigation weighs on the minds of some SI members. More than 100
lawsuits have been filed against online posters, often by companies that feel
they have been falsely or unfairly criticized. Silicon Investor's fee-based
system, which usually involves a credit-card payment, makes it easier for a
process server to track you down, argues Mike Grasso, a longtime Silicon
Investor member and frequent critic of small companies. "I like SI the
best," he says. "But I don't want to be sued." This trader says he is
increasingly posting on Raging Bull -- under various aliases.
Silicon Investor officials say they don't believe their members are any more
susceptible to litigation than posters at other sites.
In June, one concerned SI member, called "etc.", started the "What has
happened to Silicon Investor?" discussion board to share ideas on "what
went wrong" at what used to be "the hottest stock message board site on
the Internet." So far, this board has only attracted 79 messages. Etc. hasn't
posted a message on Silicon Investor for more than a month and didn't
respond to e-mails requesting an interview.
Write to John R. Emshwiller at john.emshwiller@wsj.com
KJC |
