Violating age-old journalism protocol, the founder of Silicon Valley's most influential news site has begun investing in the companies and startups that his website reports on. On Wednesday, TechCrunch founder Michael Arrington said this "will all be fine" because he will continue to disclose his financial investments on his bio page. "I’ll still be very hard on companies I invest in when they deserve it," he promised. "And I will still be quick to high five a company that’s doing well even if I’m not an investor, or if I’m an investor in a competitor." The openness with which Arrington revealed the new policy change (in a blog post on TechCrunch) reveals the changing journalistic standards that have been happening in the media world for sometime now. But that's not to say Arrington's announcement is going over well with Valley watchers.
"It's about protecting a trusted relationship between reader and reporter, and equally important, reporter and source," writes tech blogger Tom Foremski, a former Financial Times reporter. He gives a number of reasons why this could be a bad idea. First off, startups have a choice when they select who they want to invest in their company. Arrington will be a veritable magnet because he's not just bringing his money, he's also bringing the influence of one of the Valley's most-read websites. "Wouldn't his readers prefer that he weren't using his role as Techcrunch editor to further his material interests? " At the same time, this could hurt TechCrunch's reporting. Startups may be more reluctant to share company secrets with TechCrunch out of fear that Arrington will share the information with competing startups he has money invested in. Or they may just avoid TechCrunch in general fearing bad press from a news site with ulterior financial motives. It's also more work for readers who have to consult Arrington's bio page if a conflict of interest isn't plainly stated up front. Lastly, Foremski says big media companies adhere to strict conflict of interest policies for a reason: "it matters to their bottom line." If readers grow to mistrust TechCrunch it will affect pageviews and therefore ad dollars.
But not everyone agrees with Foremski. Gawker's Ryan Tate concedes that Arrington's conflict of interest is unsavory but he says the mission of TechCrunch and its readership is unsavory to begin with. "The most prudent course for TechCrunch might simply be to drop all ethical pretense," he writes. "TechCrunch's readers aren't like New York Times readers; they're not coming to the site as conscientious citizens trying to make the world a better place, but as sharks trying to find the angle that will help them make a fortune. Arrington's conflicts just enhance his branding as one of them."
Still others think Arrington's disclosure is perfectly fine. In a revealing tweet, Mashable's co-editor Ben Parr says "If I had Arrington's money, I'd be investing in hot startups and savvy founders too." (Somewhat cryptically, Parr adds "that time will be soon," spurring a tangent of rumors about Mashable auctioning itself off). In any case, this is a debate that isn't going to go away anytime soon.
Update: Kara Swisher has more on what propelled Arrington to divulge his financial investments here