Who Needs Spam When You Can Advertise?
I was very impressed with Davis Freeberg's latest piece on advertising, Who Needs Spam When You Can Advertise?: Davis writes:
"After doing my research on GrowthStockGuru's most recent hot stock tip, I contacted the business press and asked for comments on why they would run an ad for a microcap company, whose former Director is married to a convicted stock promoter? I emailed Business Week twice and Smart Money once, but neither of them seemed to feel it was important enough to reply to. Forbes and Investor's Business Daily did reply though and unfortunately Forbes said that the print ads had gone out, but that future ads were being discontinued.
'Thanks for your note- we obviously take this very seriously given our
reputation in the industry. Just so you know Forbes.com and Forbes
magazine are separate organizations with separate sales teams. I had
some people here at Forbes.com run a check and it appears that we've
never shown those ads online. I can confirm that there had been ads run
in the print mag in the past but from what I'm told those are going to
be discontinued.'
While, it's unfortunate that Forbes ran the ad to begin with, I can understand how they could miss some of the details behind GrowthStockGuru's tip. Digging through the SEC files was like peeling an onion, the more I read, the more I wanted to cry. Forbes willingness to re-evaluate the history of the company and their decision to discontinue future ads, demonstrates that, while careless, they do care enough about their readers trust, to understand that the easy money, isn't worth the hit to their credibility.
Investors Business Daily on the other hand, did not seem to think that there was anything wrong with advertising a penny stock, in order to increase 'awareness' of the company.
'Thank you for your email regarding the advertising from GrowthStockGuru. Investor's Business Daily does have a policy in of rejecting display advertising that promotes penny stocks. Display advertising refers to the ads that are placed throughout the newspaper.
The ad you referred to ran in our Corporate News section. This is classified advertising section designed as a forum for public companies to increase awareness of their stock. Most of the ads that run in Corporate News are penny stocks. Many of our readers regularly read this advertising feature searching for new and interesting investment opportunities. The section is labeled as advertising and in no way is an endorsement by Investor's Business Daily. We also run a small disclaimer in the section stating that we can not guarantee the accuracy of the information in the ads.
Thank you for taking the time to share your concerns with us. We value your input and take all suggestions and comments very seriously.'
Read the entire article, because it is insightful. Davis is making an excellent point about how scam criminals are willing to pay the heavy advertising rates for Forbes, IBD and others, if they believe it can confer respectability and authority upon their enterprises. All the con criminal needs is to deflect the investors natural skepticism -even just for a minute.
The famous con criminal, the Yellow Kid, knew this. He would use a real brokerage's office, but at night, or palatial office, which was rented, or any prop which would add authenticity or authority, to complete his swindles.
The newspapers can arguably claim that they are unwitting enablers of this fraud, because they have no general duty to their readership to investigate the bone fides of the investment opportunities in their classifieds.
But do you think that IBD can maintain this pose, now that Davis has alerted them to the possibility that they are enabling fraud. Is this agreement between IBD and the grifters an actionable conspiracy? What do you think? Puffery or negligent misrepresentation?
