The following Wall Street Journal article, written on November 30th, 2000, has some useful insights into the decline of S.I.
*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 |
