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The Google-ICOA scandal: with millions at stake, making fake news is easier than you think

prweb

The tech world went into a tizzy yesterday morning after a release surfaced on the wire service PRWeb claiming Google had purchased the small wireless company ICOA for $400 million. The story was widely reported on sites, including this one, before Google and ICOA denied the story. PRWeb later issued a release blaming the mishap on "identity theft." It's not clear from PRWeb's brief statement whose identity may have been stolen or how that allowed a fake press release of this magnitude to pass muster. But talking with some veteran PR professionals, who asked to remain anonymous, The Verge was able to gather a rather grim picture of how the sausage gets made.

"Basically, you're paying for the SEO."

"The barriers to entry are practically non-existent. It costs something like $150 per release and you simply upload it, compared to PR Newswire and Businesswire, where you have to have an account with passwords, etc.," wrote one tech PR pro in an email. "Basically, you're paying for the SEO," explained another tech PR specialist by phone. SEO refers to search engine optimization, the multibillion-dollar industry of exploiting Google's search algorithms to improve a page's likelihood of showing up for certain search terms. "A lot of companies are confused at first about why it would be worth the cost, but it really does an impressive job of seeding your name out there."

Danny Sullivan, from Search Engine Land, has a detailed breakdown of how well this can work. "With PRWeb and other services, you can get whatever you want published and distributed verbatim into a wide range of news sources." Sullivan used the example of a spammy release for a company called Your-Best-Pills-Online.com, which is announcing the "news" that you, yes you, can buy Viagra from its website. PRWeb lets customers pay to have this info distributed to search engines and news outlets. For less than $200, this advertisement masquerading as news was picked up by outlets like The Houston Chronicle and various small sites which have nothing to do with the subject matter like Government Security News and New England Soccer Today.

While updates like Google's so-called Panda search algorithm have done a good job keeping this kind of spam out of users' results, writes Sullivan, Google News is an entirely different animal. As long as this Viagra ad is showing up on reputable sites, Google will treat it like real news and give it prominence accordingly. The other side of this coin is news sites, hurrying to be first on big stories, running items like the Google-ICOA deal without pausing to get confirmation from the companies in question — press releases are often considered infallible, assumed to be correct.

"Services like this are an incident waiting to happen."

A Viagra ad has obvious incentives, but what's the value of bogus news that will quickly be denied? There was speculation that yesterday's phony release was part of a "pump and dump" scheme, in which good (but false) news will be spread about a publicly-traded company with the hope that the stock price will briefly spike just long enough to sell shares and turn a fraudulent profit. Pump the price, dump the stock. Indeed, the thinly-traded penny stock for ICOA suddenly went into overdrive on the news, skyrocketing in value five-fold before plummeting again when the denials arrived an hour later.

Icoa-11262012
ICOA's stock chart for November 26th clearly shows the "pump and dump" in action

"They basically take it on faith that you represent the company."

"Services like this are an incident waiting to happen," groaned a PR rep at a major east coast agency. "I've signed up for some using an out-of-date email address. They basically take it on faith that you represent the company affiliated with the email." Asked what the security checks were like during this process, he couldn't recall any. "They didn't ask me anything. If they have a system in place, it's a total black box."

The notion that a fake email is all it takes was supported by the CEO of ICOA, who told MIT Technology Review, "I spoke with Megan from the PRWeb editor’s desk . . . inquiring who the heck gave them the [press release]. She told me it came from icoamail@gmail.com and the phone number was 297-555-2951. This email is fake, because it is not an ICOA email and the number is not from U.S. The 297 area code is from Aruba."

Trading on the stock was ultimately halted and the SEC, which regulates American stock exchanges, is investigating the matter. "Pump and dump" isn't just frustrating for publications and for readers, it's also a crime: a quick search of the Commission's press releases reveals dozens of criminal complaints against alleged perpetrators of similar schemes, often resulting in huge fines and multi-year prison sentences.

The Verge
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