21st: Wired's "stealth" investors

Let's Get This Straight: By Scott Rosenberg. Wired's cover feature on CUC leaves out one important fact.

Published October 30, 1997 8:00PM (EST)

A headline on the November issue of Wired magazine reads: "CUC: The stealth company with $1 billion sales on the Web." Inside, a lengthy feature by "Webonomics" author Evan Schwartz profiles this new-model direct-marketing home-shopping-club giant, whose netMarket business (formerly known as Shoppers Advantage) is a leading experiment in electronic commerce.

CUC -- which recently merged with franchise operator HFS to form a new company called Cendant -- is hardly a household name; it's "low profile by design," according to an industry observer quoted in Wired.

But there's more than one kind of stealth at work here: Among CUC's many investments is one in Wired Ventures, the company that publishes Wired Magazine. Yet the Wired article makes no mention of the relationship.

It's hardly the first time Wired has used its pages to hype businesses it has relationships with (among other examples, the magazine promoted the Inktomi search engine before adopting its technology for its HotBot site, and ran a feature praising the founders of Suck after buying them out). But it's the first time the magazine has so blatantly broken a basic rule of good journalism: Disclose your interest in a story.

James Daly, the Wired features editor responsible for the article, admits that the omission looks bad and says, with chagrin, that it was a simple error: He didn't know CUC was a Wired investor. "Just to note that parenthetically would've made it seem much more on the up-and-up. If I had known I would have put something in," he says.

Schwartz says he did know about CUC's Wired investment -- because he'd read about it in Wired itself. Indeed, a short item about CUC in the August Wired had mentioned that CUC had "made small investments in dozens of other tech firms, among them Wired Ventures."

According to Schwartz, by the time he was reporting the article, the relationship "wasn't in the forefront of my mind," and he just assumed Wired's editors would take care of any disclaimer. He adds, "It's important to remember, A, that it was a valid story to do, because this is a very interesting company, and B, there's no way bias could've crept into my mind -- I couldn't care less about the investment."

It's clear from the August article that Wired isn't allergic to disclosing investors' identities. On the other hand, since the failure of its IPO last year the company has been cagey about identifying the names of the private investors that stepped in to keep it afloat.

"Part of the problem," says Schwartz, "is this new-media world, where everyone is investing in everyone else. Sometimes it's hard to keep everything straight."

True enough. It's hard for anyone -- Wired, or CNET, or Salon, for that matter -- to be a "player" in a field like the online business and also to cover it without the appearance of impropriety. But keeping stuff like this straight is how publications win credibility -- or squander it.

Daly says he's going to suggest that Wired run a clarification note as soon as possible -- but since he's leaving the magazine this week, he doesn't know whether it will actually appear. Wired has, in fact, had a great deal of editorial turnover lately. If the magazine is smart, it will take measures to keep its new editors better apprised of potential conflicts of interest.

How about, say, handing out a list of the company's investors, and having editors tape it to their monitors?

By Scott Rosenberg

Salon co-founder Scott Rosenberg is director of MediaBugs.org. He is the author of "Say Everything" and Dreaming in Code and blogs at Wordyard.com.

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