Digging A Little Deep On This One

from the don't-mess-with-digg dept

We recently noted the false rumor that Sun CEO Scott McNealy was retiring and the company would get bought out by Google, which then got spread around like a game of telephone, and amplified when it hit the front page of Digg. Now, SiliconValleySleuth is alleging that something much more sinister than a children’s game is going on, that the author of the rumor is using Digg to manipulate the share price of Sun Microsystems. Four times, the original author has penned a speculative piece on Sun and Google merging, and each time the story was pushed to the top of Digg, always by the same users. While it’s surprising that the rumor keeps getting pushed around, this doesn’t seem to rise to the level of stock manipulation. There’s no evidence that the stock’s recent rise is due to Digg, whle trading volume has remained steady, the stock has been volatile for some time. It’s latest run actually started before the original rumor was published. As for the same users pushing the story, it could just be that they read the author’s blog. Still, this does raise some interesting issues. Digg seems vulnerable to being gamed, which when combined with the enormous traffic from getting to the front page, makes an inviting site for tricksters. It seems like only a matter of time before the Digg mob does cause real harm.

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Comments on “Digging A Little Deep On This One”

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malhombre says:

SEC violation?

Back when the dotcom bubble started to tank, seems like I recall a number of stock-related chatroom posters were suddenly brought up on charges by SEC or sued by companies for making false statements to manipulate public opinion and therefor stock prices…wonder if this will happen here.

BTW, the companies would only sue for bad comments…good comments, although false, were tolerated much better (of course).

RocketSauce says:

Gaming documented before

The bloggers over at Web 2.0 have successfully documented “gaming” digg previously. It doesn’t appear to be all that difficult to accomplish. Digg’s response was far from adequate in my opinion, but it was similar to Google’s response to “Google bombs”.

However, if investors are taking unsubstantiated articles or blog posts from Digg’s front page and making decisions based on those posts it’s a shame. People…. Be smarter than that!!!

Kiwi Fireball says:

Blaming Digg

“Digg seems vulnerable to being gamed, which when combined with the enormous traffic from getting to the front page, makes an inviting site for tricksters. It seems like only a matter of time before the Digg mob does cause real harm.”

Interesting that one would be so hasty to push fault onto Digg. The people who might be foolish enough to rely solely on Digg.com to make stock decisions big enough to effect the market are the ones who could do the real damage.

Thomas Hawk (profile) says:

Stock Picking Based on Digg

While the saying may go “buy on the rumor sell on the news,” folks rarely get this right. Digg’s amplification is no different than the amplification that stock message boards provide. Professional investors have largely learned to ignore these sources as investment research and recognize that people try to post stuff to influence stock prices all the time.

While certainly some sucker may run out and go buy SUNW based on it appearing on Digg, they will get burned quickly if they consistently do this and quickly learn their lesson.

Personally I think Digg is a great news source and find that as long as you take it all with a grain of salt that it is in fact possible to seperate the wheat from the chaff. It would be chilling to free speech to see a world where only edited news was allowed to be consumed en masse. It wouldn’t be legal which is why stock boards flourish today.

Fortunately free speech trumps the fear of stock price manipulation and Diggers will digg on.

farlane (user link) says:

Mob Rules

To me, the news that folks are using (or trying to use) Digg to influence stock prices takes a back seat to the dawning realization that as our opinion-massing tools become more and more powerful, popular will is able to have a more powerful effect on real-world processes.

Today it’s just bringing down a server or pushing a stock a few points. When the big dogs of opinion pushing get into the game, I think we’ll be worrying about a lot more than a stock tick.

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