October 08, 2008
 

The power of the internet, and Google in particular

Although I've been online for over 15 years now, I continue to find the power of the internet fascinating.

I'm fairly sure that rumours have impacted the market valuation of companies in the past, well before the internet became ubiquitous. But now, the reality is that news goes around that much faster. It isn't inconceivable that a company's stock price dips by 10% (or more!) in a span of a few minutes after rumours of job cuts, M & A, bankruptcy or the exit of marquee names hit the airwaves.

The worry though is that in the matter of 2-3 weeks, there have been two such instances.

On Sep 8, based on a crawl of the 'Sun-Sentinel' newspaper website, Google News started showing a story that UAL was filing for bankruptcy as the top news search result for that company. Immediately, the stock price took a battering, reaching a low of $3, and over 54 million shares were dumped (compared to a share price around $11-$12 and a daily trading volume of 11 million shares). It was then subsequently revealed that a combination of factors (low traffic volume resulting in a story accessed a couple of times showing up on a 'Popular stories' section at the #1 slot, the story not having a dateline, Google's indexing service unable to place a story as not being related to a current event and business press reporters not bothering to verify if the story was still current) had resulted in the error.

Last week (Oct 3), a false report on CNN's citizen journalism website (iReport) that Steve Jobs was being rushed to a hospital after suffering a heart attack was picked up by several agencies. Once again, the result was predictable, and disastrous. Apple's stock price dipped to $97 and over 80 million shares were sold (compared to 30-40 million on a normal day).

Does this mean news reporting (online and offline) needs to be regulated more? Perhaps. But, in my opinion, the fault rests with those investors or agents who did not verify the story. If you've put in so much money in a company's shares, the least you'd want to do is to verify a rumour!

Labels: apple, google, internet, rumour, united airlines