17:26 PM

Venture Wire investigates blogger/FON connection

Venture Wire ran this story Thursday, a story we've been discussing here on SVW since Monday. It is about the PR support top bloggers gave to startup FON earlier this week.

Also, many readers of SVW were surprised to learn the business model for the market research analyst companies such as Gartner, Forrester and IDC. The analyst firms are paid by their clients to write research reports that include them. If you don't pay, you won't be in any magic quadrants.

Plus analysts will offer positive quotes for client's press releases (at least that's the only ones you get to see.) It is a case of "no pay-no say" with these analyst groups--and has been for many, many years.

Looks like another bowling pin that might totter . . .(let's not mention the PR bowling pin.)

Here is my Monday piece: "The battle for the last mile..."

And here is Venture Wire's investigation: • FON Blogs Highlight Possible Conflicts Of Interest In Medium

By Rebecca Buckman


When Spanish Internet start-up FON Technology SL tried to generate some buzz this past weekend about new funding it had snared from Google Inc. and eBay Inc.'s Skype Technologies, it pitched stories to traditional media outlets.

But the tiny company also got publicity from another source: influential commentators on the Internet who write blogs -- including some who may be compensated in the future for advising FON about its business.

Most of the nine members of FON's U.S. advisory board, including former newspaper journalist Dan Gillmor, technology author David Weinberger and Internet-law expert Wendy Seltzer, wrote about FON on their blogs late Sunday. That was right after FON founder Martin Varsavsky revealed on his own blog that the closely held company had raised $21.7 million in funding from Google, Skype and others, declaring it "a dream come true."

Messrs. Gillmor and Weinberger disclosed on their blogs that they are advisers to Madrid-based FON and also said they may receive compensation for their services. But Ms. Seltzer and other advisory-board members who talked up FON's prospects online didn't mention they might be paid by the company, though they did note they were FON advisers.

"It's still early in the first quarter," Ms. Seltzer wrote about FON, which is trying to build a global network of wireless hot spots where users in some cases could tap into the Web for free. But since the service has already snared 3,000 users, she said, "who knows how many might join the game as we move forward!"

Ms. Seltzer says her comments weren't influenced by any compensation she could receive from FON. She adds, however, that she "should probably add that [disclosure] at some point." On their blogs, Messrs. Gillmor and Weinberger said they weren't motivated by making money from FON. Mr. Gillmor added in an e-mail message that FON advisors are "among the most honorable people I know." Mr. Weinberger, who wrote on his blog that "the advisors are being financially compensated, but we haven't discussed the terms," said the advisers were genuinely enthused about FON's community-oriented plans. Mr. Varsavsky says no compensation agreements are in place yet between his company and the advisory-board members, though he plans to "make a proposal" that they get paid in some way.

The avalanche of blogging about FON, much of it from people now tied to the four-month-old company, highlights the rising influence of blogs in shaping opinions about tech start-ups, particularly in Silicon Valley. It also reveals the possible conflicts of interest such complicated relationships can dredge up.

Some lawyers and academics with expertise in the Internet said the disclosures by the FON advisers were adequate and appropriate. But Bob Steele, an ethics specialist with the Poynter Institute, a journalism organization in St. Petersburg, Fla., says bloggers with financial ties to companies -- disclosed or not -- have "competing loyalties" that could taint their independence as writers. "It's still a problem," he says. While many bloggers don't consider themselves journalists, anyone putting information into the public domain about people or companies has certain ethical responsibilities, Mr. Steele says.

That can be a murky issue in today's clubby blogosphere, where many people including venture capitalists, lawyers and journalists write about Web issues and companies -- and often, each other -- with little editing. The rebound in Silicon Valley's economy, coupled with the popularity of cheap, easy-to-use blogging tools, means there are more aspiring commentators than ever opining about start-ups and tech trends on the Web. And increasingly, it is difficult to discern their allegiances.

One popular blog that often writes positively about young tech companies, TechCrunch, is run by a lawyer and entrepreneur, Michael Arrington, who occasionally serves as an adviser to companies he has written about. He sometimes receives stock in those small companies, he says. But Mr. Arrington says he generally doesn't write about start-ups he's advising after he becomes affiliated with them -- and "if I did, I would put a disclaimer up" on the blog, he says.

And venture capitalist Bill Burnham, who writes a blog called Burnham's Beat, says he was criticized last year for blogging about a networking company called DataPower Technology Inc. in which he had invested. He calls such criticism unwarranted, since his blog at the time plainly listed his portfolio companies, and he wrote that he was "heavily biased" about the start-up. DataPower is now owned by International Business Machines Corp. Overall, blogs contain "lots of rumor-mongering," Mr. Burnham says, and many readers probably don't expect them to adhere to journalistic standards.

The possible conflicts associated with bloggers may be more nuanced than outright pay-for-commentary scandals, such as the Bush administration's payments to conservative columnist and radio host Armstrong Williams, disclosed last year, to promote its "No Child Left Behind" policy. Similarly, a high-profile former aide to presidential candidate Howard Dean alleged last year that Mr. Dean's campaign hired two political bloggers as consultants in the hopes they would say positive things about the candidate.

Glenn Fleishman, a blogger and free-lance journalist unaffiliated with FON, says the company's move to make so many prominent Internet commentators official FON advisers means that few of those bloggers might be moved to "poke holes in [the company's] business model." Mr. Fleishman, who says he was initially blown away by the "immediate, friendly blog coverage" he saw of FON late Sunday, is more skeptical about the company's prospects in part because the technology FON is relying on may not be up to the challenge.

Mr. Varsavsky, FON's founder and chief executive, says none of the board members who publicized FON did so "because they're going to get paid. ... These are people who love what FON is about." He says the advisers weren't even sure FON would be a for-profit company when some signed up.

But University of Minnesota journalism professor Jane Kirtley says that "even if it's prospective money, it seems to me the prudent thing" for advisers would be to disclose that relationship on their blogs. Ms. Kirtley directs the Minneapolis school's Silha Center for the Study of Media Ethics and Law.

David Isenberg, one FON advisory-board member with his own blog, says he expects to eventually receive some payment from FON, such as stock options or warrants. Though Mr. Isenberg didn't disclose that on his blog on Sunday -- his posting about FON was titled "Everybody have FON tonight!" -- he said he serves on the advisory board. "Usually, that means there's a business interest" in a company, he says. Mr. Isenberg also notes his blog post expressed some skepticism about whether FON's business was ready to be embraced by the general public.