Message Board Talk, Sway Over Stocks Declined With Mkt
By RIVA RICHMOND
Of DOW JONES NEWSWIRES
NEW YORK -- The technology stock rout has quieted the Internet's financial message boards.
Gone is the get-rich-quick chatter and boundless optimism that had characterized these Web sites. Users are few and spend less time talking online. They seem bent on learning how to protect and grow the assets they have left.
"It's no longer, 'What's the next big home run, and I'll throw my money at it,"' says Jody Dodson, executive vice president of cPulse, a unit of Gartner Group Inc. (IT) that does research for Internet companies. "It looks like there's a major movement back to the fundamentals of investment."
A recent cPulse survey shows investors are increasingly dissatisfied with financial Web sites, and their No. 1 complaint is "irrelevant information." Message boards are out. Priorities now are research tools, analyst-level perspective and tutorials, says Dodson.
Boisterous investors once flocked to message boards to discuss hot stock movers and goad others to buy or sell. The sites were notorious for spreading rumors and abetting "pump and dump" stock-manipulation.
Message-board conversations have quieted notably since tech stocks tumbled. Raging Bull says postings fell 33% and user numbers fell 75% between February and December. AltaVista Co., which owns the site, is trying to sell it.
Yahoo! Inc.'s (YHOO) message boards, which tilt toward financial topics, are being used less too. Use from home fell 32% in December and use from work fell 20%, according to research firm NetRatings Inc.
The message boards' influence on stocks is down commensurately. The number of stocks moving on message board rumors is probably down 75%, says Jeff Haverlack, 34, of Vancouver, Wash., known online as "Trader J."
Many online traders who stoked rumors and fed on thinly traded stocks have been forced out of the market or forced to change their ways, Haverlack says. "We're trading on substance. We're less willing to trade on volume alone - volume and rumor."
"There's not that much hype around" right now, says John Ruela, chief executive of Wall Street Web Inc., owner of Stockrumors.com. "There used to be 10 rumors in a day. Now you're lucky if there's even one a day."
John Stark, chief of the Internet enforcement office at the Securities and Exchange Commission says site users are much more aware of online manipulation schemes. The SEC is logging fewer touting violations, but efforts to spread false information through message boards, spam and press releases have increased, Stark says.
The change in users' attitudes is forcing message boards to clean up their acts.
Most boards allow users to filter out authors they don't like and to report abusive messages, but some go further. Silicon Investor added a membership fee to discourage multiple aliases. Raging Bull added software that blocks spam, a popular feature that other message boards don't have. It also added "member power ratings," which allow users to rate other users.
Silicon Investor's "Ask DrBob," a message board heavy on technical analysis discussions on Silicon Investor is bucking the trend. DrBob's following has doubled in the last five or six months, says DrBob, who is Robert L. Woo, 49, of Huntington Beach, Calif.
The volatile market has sparked new interest in skillful use of fundamental and technical analysis, he says: "Investors are learning that they have to compete with the pros." Woo's by-request e-mail alert list now holds 11,000 addresses, he says, and Woo is developing an online technical-analysis tutorial program.
The Motley Fool, which has made individual investor education its mission, refocused long before the tech rout, said co-founder Erik Rydholm. The Fool offers instruction on personal-finance topics from basic investing to how to refinance a mortgage or plan for retirement.
Despite the market downturn, the Fool's visitor numbers are up 55%. Member registrations are up 50% and message-board posts are up 6%, a Fool spokesman said. The site hosted about 2.7 million users in December, which ranked it No. 2 among financial news and research sites, according to Media Metrix.
Some think message boards will never regain their peak popularity. But inevitably their usage will rebound with the market.
"Traders memories are shorter than most," says Haverlack, aka Trader J. "As the market is rallying, people are not going to want to be left out." Traders will chase rumors and hot stocks once again, and the message boards will busily record the voices of experienced investor and hopeful newcomer alike.
Others think scarred individual investors will continue to demand more and better information from message boards and other financial Web sites.
"If you gain a certain level of sophistication, you're not going to automatically lose that when the market gets better," says Peggy O'Neill, senior analyst NetRatings.
"What I do think is permanent is investors are going to look at companies' fundamentals. Now they have seen what can happen," says Keith Savitz, chief executive of B4Utrade.com Corp.
-By Riva Richmond, Dow Jones Newswires; 201-938-5670; riva.richmond@dowjones.com |
