Media Maneuvers: Another reason to Google

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Published October 13, 2006 at 7:44 AM

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It's official. The deal scoop, once the stock-in-trade of big newspaper M&A reporters, has entered the blogosphere.

Reports about a possible Google Inc.-YouTube Inc. hook-up first surfaced on Friday, Oct. 6, not in a newspaper or online news site, but in a Silicon Valley blog known as TechCrunch that's less than two years old.

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The report, which TechCrunch's Michael Arrington labeled a "Completely Unsubstantiated Google/YouTube Rumor," was quickly followed by the Web sites of, among others, The New York Times and The Wall Street Journal, each of which confirmed the information through their own anonymous sources but dutifully credited TechCrunch for floating the idea first. Each paper then ran large stories in their Saturday print editions, again crediting TechCrunch, but also adding the requisite caveats about how talks can fall apart. But the talks kept going, and by Monday, Google and YouTube announced their deal, valued at $1.6 billion — the exact price TechCrunch had put on the transaction.

To be sure, bloggers have been breaking stories in the nondeal world for what feels like an eternity now. But this is one of the first instances where they've entered M&A reporting, where scoops, at least during the last merger boom, were the coin of the realm. The idea that dealmakers could leak to their favorite newspaper reporters and negotiate where and when a story would run seems wholly out of date now; bloggers post information as soon as they get it and are well-plugged into the industries they cover. A lawyer-turned-entrepreneur, TechCrunch's Arrington, for example, was dubbed "a go-to person for VCs and tech execs looking to leak corporate tidbits or announce news" by Business 2.0 magazine.

Indeed, in TechCrunch's item on YouTube-Google, Arrington said he received an e-mail about the possible deal and that "[a] quick phone call to a VC confirmed that the rumor is circulating (he also confirmed the price), but that is far from confirmation that this deal is happening. I'm digging for more but the source on this one is very good." That's more information on the newsgathering process than any paper is ever likely to provide — the media rarely likes to admit to even listening to rumors — and it certainly isn't the norm with all bloggers. But the perceived stakes are lower in the blogosphere. Float a rumor that proves to be just a rumor, such is life. But get something true, and the media becomes your amplifier.

The Wall Street Journal scored a nice little scoop in the private equity world Oct. 10 when it reported that the Department of Justice had started looking into possible anticompetitive behavior among big buyout firms, particularly those that team up on club deals. Though it was hard to discern just how far along or serious the inquiry was, the piece caused a ruckus in deal land and was followed by the Journal's rivals, who were then, aaaarghhh, forced to credit their rival for breaking the news.

Not content to let the WSJ have all the glory, however, The New York Times pointed out on its Dealbook Web site that it had explored the topic of collusion among private equity shops in a Dealbook column that ran back in October 2005. That column also made a brief appearance in The Times' Oct. 11 follow-up to the Journal story: "Some lawyers involved in the inquiry speculated that the list [of targeted buyout shops], which is likely to grow, may have started with firms mentioned in a newspaper column published in October 2005 that explored the subject of collusion in the industry."

Why the paper didn't just say that the "newspaper column" was its own is anybody's guess; chalk it up to The Times' wacky ways. But while we're mentioning discussions of collusion issues in private equity, we'd like to note our own contribution to the sum of human knowledge on the topic. (Warning: shameless self-promotion to follow.) The Deal, back in October 2005, explored club deals and all their potential pitfalls, including charges of collusion, in a three-story package, which, by the way, appeared two weeks before the Dealbook column. So there.

A few weeks ago, we railed against The Times' coverage of the Securities and Exchange Commission's investigation into possible insider trading violations by Morgan Stanley CEO John Mack. The Times had broken the news of the probe in a front-page story this summer that fingered Mack for possibly passing on nonpublic information to hedge fund Pequot Capital Management Inc., based on allegations leveled by Gary Aguirre, a former SEC lawyer who claims he was fired by the agency after requesting to interview the politically well-connected Mack. We were concerned that The Times would give short shrift to any development favorable to Mack, including a decision by the SEC not to bring charges.

On Friday, Oct. 6, The Times did carry the news, which CNBC broke, that the SEC had notified Pequot and Mack that it will not recommend enforcement action against them. The paper flagged the story on its front page and ran the piece on its business section front, so it can hardly be accused of burying the news. But its sympathies are still with its star source, Aguirre. "It's exactly what I expected," the paper quoted Aguirre saying. "The SEC has been pretending to conduct an investigation over the last few months and now they've stopped pretending." The trouble is, The Times has yet to reveal any evidence Aguirre has to support his charges against Mack (and the SEC); nor has it provided any of its own. But that's exactly what we expected.—Yvette Kantrow