Fortune on Blogs

Why There's No Escaping the Blog
Freewheeling bloggers can boost your product—or destroy it.
Either way, they've become a force business can't afford to ignore.
FORTUNE
Monday, December 27, 2004
By David Kirkpatrick and Daniel Roth

1 Early in the evening of Dec. 1, Microsoft revealed that it planned
to take over the world of blogs—the five-million-plus web journals
that have exploded on the Internet in the past few years. The
company's weapon would be a new service called MSN Spaces,
online software that allows people to easily create and maintain
blogs. It didn't take long for the blogging world to do what it does
best: swarm around a new piece of information; push, prod, and
poke at it; and leave it either stronger or a bloody mess. The next
day, at the widely read Boing Boing blog, co-editor Xeni Jardin
opted to do the latter.

She titled her critique of MSN Spaces "7 Dirty Blogs" and
hilariously sent up the fickle censoring filters Microsoft appeared to
have built in. MSN Spaces prohibited her from starting a blog
called Pornography and the Law or another entitled Corporate
Whore Chronicles; yet World of Poop passed, as did the
educational Smoking Crack: A How-To Guide for Teens. Within the
first hour of Jardin's post, five blogs had linked to it, including the
site of widely read San Jose Mercury News columnist Dan Gillmor.
By the end of the day there were dozens of blogs pointing readers
to "7 Dirty Blogs," a proliferation of links that over the next few
weeks topped 300. There were Italian blogs and Chinese blogs
and blogs in Greek, German, and Portuguese. There were blogs
with names like Tie-Dyed Brain Waves, Stubborn Like a Mule, and
LibertyBlog. Each added its own tweak. "Ooooh, that's what I want:
a blog that doesn't allow me to speak my mind," wrote a blogger
called Kung Pow Pig. The conversation had clearly gotten out of
Microsoft's hands.

Typically Microsoft would have taken the hits and kept powering
forward. That is the Microsoft way. For years such behavior has
done little but make people feel defenseless against the company.
But this time Microsoft deployed one of its most important voices to
talk back: not Bill Gates or Steve Ballmer, but Robert Scoble.

Scoble has been at Microsoft only 19 months and has neither a
high-ranking title (he's a "software evangelist" who works with
outside programmers) nor such corporate perks as a window in
his office. What Scoble does have is a blog of his own, Scobleizer,
on which he weighs in daily with opinions about happenings in the
tech world—especially the inner world of Microsoft. On a recent day
he posted nine remarks, each averaging a paragraph, on topics
ranging from how a company programmer had fixed a security bug
to the fact that his wife is becoming a U.S. citizen. Nothing too
profound or insightful, yet Scobleizer has given the Microsoft
monolith something it has long lacked: an approachable human
face.

When it came to the criticism emanating from Boing Boing, Scoble
simply... agreed. "MSN Spaces isn't the blogging service for me,"
he wrote. Nobody at Microsoft asked Scoble to comment; he just
did it on his own, adding that he would make sure that the team
working on Spaces was aware of the complaints. And he kept
revisiting the issue on his blog. As the anti-Microsoft crowd cried
censorship, the nearly 4,000 blogs linking to Scoble were able to
see his running commentary on how Microsoft was reacting. "I get
comments on my blog saying, 'I didn't like Microsoft before, but at
least they're listening to us,'" says Scoble. "The blog is the best
relationship generator you've ever seen." His famous boss
agrees. "It's all about openness," says chairman Bill Gates of
Microsoft's public blogs like Scobleizer. "People see them as a
reflection of an open, communicative culture that isn't afraid to be
self-critical."

The blog—short for weblog—can indeed be, as Scoble and Gates
say, fabulous for relationships. But it can also be much more: a
company's worst PR nightmare, its best chance to talk with new
and old customers, an ideal way to send out information, and the
hardest way to control it. Blogs are challenging the media and
changing how people in advertising, marketing, and public
relations do their jobs. A few companies like Microsoft are finding
ways to work with the blogging world—even as they're getting
hammered by it. So far, most others are simply ignoring it.

That will get harder: According to blog search-engine and
measurement firm Technorati, 23,000 new weblogs are created
every day—or about one every three seconds. Each blog adds to
an inescapable trend fueled by the Internet: the democratization of
power and opinion. Blogs are just the latest tool that makes it
harder for corporations and other institutions to control and dictate
their message. An amateur media is springing up, and the smart
are adapting. Says Richard Edelman, CEO of Edelman Public
Relations: "Now you've got to pitch the bloggers too. You can't just
pitch to conventional media."

Of course, it's difficult to take the phenomenon seriously when
most blogs involve kids talking about their dates, people posting
pictures of their cats, or lefties raging about the right (and vice
versa). But whatever the topic, the discussion of business isn't
usually too far behind: from bad experiences with a product to
good customer service somewhere else. Suddenly everyone's a
publisher and everyone's a critic. Says Jeff Jarvis, author of the
blog BuzzMachine, and president and creative director of
newspaper publisher Advance Publications' Internet division:
"There should be someone at every company whose job is to put
into Google and blog search engines the name of the company or
the brand, followed by the word 'sucks,' just to see what customers
are saying."

It all used to be so easy; the adage went "never pick a fight with
anyone who buys ink by the barrel." But now everyone can get ink
for free, launch a diatribe, and—if what they have to say is
interesting to enough people—expect web-enabled word of mouth
to carry it around the world. Unlike earlier promises of
self-publishing revolutions, the blog movement seems to be the
real thing. A big reason for that is a tiny innovation called the
permalink: a unique web address for each posting on every blog.
Instead of linking to web pages, which can change, bloggers link
to one another's posts, which typically remain accessible
indefinitely. This style of linking also gives blogs a viral quality, so
a pertinent post can gain broad attention amazingly fast—and
reputations can get taken down just as quickly.

No one knows that better than Dan Rather. In a now infamous
episode, the anchor fell like Goliath to the political bloggers during
the presidential campaign. From the start, it was clear that these
nobodies with laptops were going to have an impact. Conservative
blogs, like the hugely popular InstaPundit, run by Glenn Reynolds,
a University of Tennessee law professor, and Little Green
Footballs, written by web designer Charles Johnson, or
left-leaning sites like Markos Moulitsas's DailyKos, were rallying
their hundreds of thousands of daily readers to whatever cause
they alighted on. Then, in mid-September, came what the
blogosphere—the term used in the blogging world for the blogging
world—calls Rathergate. On 60 Minutes, Rather scooped rivals
with memos that offered proof of George W. Bush's dereliction of
duty while in the Texas National Guard—or that seemed to. Within
a half hour of the broadcast, bloggers started questioning the
authenticity of the memos. Others picked up on the suspicions
and added their own thoughts and findings. After denying it at first,
CBS later admitted it could "no longer vouch" for the memos. Soon
after the election, Rather announced his retirement and the
blogosphere declared victory—to the chagrin of the mainstream
press. "We used to think that the news was finished when we
printed it," says Jarvis. "But that's when the news now begins."

Just as Rathergate was breaking, corporate America got its
clearest sign of blogger muscle—in this case, brought on not by
memos but by a Bic pen. On Sept. 12 someone with the moniker
"unaesthetic" posted in a group discussion site for bicycle
enthusiasts a strange thing he or she had noticed: that the
ubiquitous, U-shaped Kryptonite lock could be easily picked with a
Bic ballpoint pen. Two days later a number of blogs, including the
consumer electronics site Engadget, posted a video
demonstrating the trick. "We're switching to something else ASAP,"
wrote Engadget editor Phillip Torrone. On Sept. 16, Kryptonite
issued a bland statement saying the locks remained a "deterrent
to theft" and promising that a new line would be "tougher." That
wasn't enough. ("Trivial empty answer," wrote someone in the
Engadget comments section.) Every day new bloggers began
writing about the issue and talking about their experiences, and
hundreds of thousands were reading about it. Prompted by the
blogs, the New York Times and the Associated Press on Sept. 17
published stories about the problem—articles that set off a new
chain of blogging. On Sept. 19, estimates Technorati, about 1.8
million people saw postings about Kryptonite (see chart).

Finally, on Sept. 22, Kryptonite announced it would exchange any
affected lock free. The company now expects to send out over
100,000 new locks. "It's been—I don't necessarily want to use the
word 'devastating'—but it's been serious from a business
perspective," says marketing director Karen Rizzo. Kryptonite's
parent, Ingersoll-Rand, said it expects the fiasco to cost $10
million, a big chunk of Kryptonite's estimated $25 million in
revenues. Ten days, $10 million. "Had they responded earlier, they
might have stopped the anger before it hit the papers and became
widespread," says Andrew Bernstein, CEO of Cymfony, a
data-analysis company that watches the web for corporate
customers and provides warning of such impending catastrophes.

Those who have tried to game the blogosphere haven't done
much better. Mazda, hoping to reach its Gen Y buyers, crafted a
blog supposedly run by someone named Kid Halloween, a
22-year-old hipster who posted things like: "Tonight I am going to
see Ministry and My Life With the Thrill Kill Cult.... This will be a
retro industrial flashback." He also posted a link to three videos he
said a friend recorded off public-access TV. One showed a
Mazda3 attempting to break dance, and another had it driving off a
ramp like a skateboard, leading in both cases to frightening
crashes. Other bloggers sensed a phony in their midst—the
expensively produced videos were tip-offs—and began talking
about it. Suddenly Mazda wasn't being hailed; it was being reviled
on widely read blogs. "Everything about that 'blog' is insulting,"
wrote a poster on Autoblog. Mazda pulled the site after three days
and now says it never intended it to have a long run. "It was a
learning experience," says a spokesman. Tig Tillinghast, who runs
the respected advertising industry blog Marketingvox.com, calls
Mazda's blogging clumsiness "the moral equivalent of doing an
English-language print ad that was written by a native French
speaker."

"If you fudge or lie on a blog, you are biting the karmic weenie,"
says Steve Hayden, vice chairman of advertising giant Ogilvy &
Mather, which creates blogs for clients. "The negative reaction will
be so great that, whatever your intention was, it will be
overwhelmed and crushed like a bug. You're fighting with very
powerful forces because it's real people's opinions."

It all sounds like so much insanity: a worldwide cabal ready to
pounce on and publicize any error a company makes. Yet it's not
as if corporations are just sitting ducks. For one thing, not every
negative voice is that influential. For every Rathergate or Kryptonite,
there are thousands of other posts that disappear into the ether.
Simply railing against Wal-Mart or repeating the latest conspiracy
theory about Halliburton doesn't guarantee that the blogosphere
will take notice.

More important, obsessive blogs can mean obsessive customers.
The witty blogger behind Manolo's Shoe Blog may bash
Birkenstocks and Uggs, but he drools over Coach, Prada, and, of
course, Manolo Blahniks. Before blogs, finding someone like
him—a person who probably helps others make buying
decisions—would have been difficult and costly. Now it's just a
matter of Googling or searching on any of the blog-specific search
engines like Technorati or Feedster. For those who want to go
deeper, firms like Intelliseek and BuzzMetrics use sophisticated
software to analyze the blog universe for corporate clients. They
use this growing online database of constantly updated consumer
opinion for marketing and product-development ideas.

But how to speak directly to this swarm? Wary of a Mazda-like
fiasco, most companies that want to blog try to walk a fine line:
telling employee bloggers to be honest but also encouraging
evangelism. Corporate propaganda almost always drives readers
away; real people with real opinions keep them coming back. At
the GM Smallblock Engine Blog, employees and customers
rhapsodize about Corvettes and other GM cars. Stoneyfield Farm
has several blogs about yogurt. Not surprisingly, the earliest
adopters have been tech firms. The biggest chunk of the 5,000 or
so corporate bloggers comes from Microsoft, but others work at
Monster.com, Intuit, and Sun Microsystems—where even the
company's acerbic No. 2, Jonathan Schwartz, gets in on the action.
(A recent Schwartz post openly criticizes competitor
Hewlett-Packard: "Yet another series of disappointing
announcements.")

At best, these blogs can act like tranquilizers in an elephant:
slowing a maddened charge against a company but not stopping
it. Macromedia three years ago set up a few employee blogs to
give customers a one-stop place for info and tech support. The
blogs, and the employees running them, quickly became an
important resource to customers—as well as to the company.
When Macromedia in 2003 released software that was
maddeningly slow, the company bloggers quickly acknowledged
the need for fixes, helping ease some of the tension. "It was a
great early-warning system and helped us frame the situation,"
says senior vice president Tom Hale. "It accrued a huge benefit to
us."

"I need to be credible," says Microsoft's Scoble. "If I'm only saying,
'Use Microsoft products, rah rah rah,' it sounds like a press
release, and I lose all ability to have a conversation with the world
at large."

Unfiltered conversations aren't exactly the kind of things in-house
counsel encourage, though. And employees have been fired at
Starbucks, Harvard University, Delta, and social-networking
software company Friendster for blogs the organizations
apparently deemed offensive, though none will comment. Even
blogging boosters Microsoft and Sun have hit bumps. Microsoft
fired a temp who posted photos of Apple computers sitting on a
company loading dock. Sun CEO Scott McNealy was urged not to
blog after he showed trial posts to company lawyers and
colleagues. "I've got too many constituents that I have to pretend to
be nice to," he says.

As big companies try to maintain a delicate balance, it's often the
smaller players who are nimbly working blogs to their advantage.
Entrepreneurs like Shayne McQuade have learned that bloggers
can be an easy—and free—marketing arm, if used right. McQuade,
a onetime McKinsey consultant, in 2002 invented a backpack with
built-in solar panels that enables hikers and Eurotrippers to keep
their gadgets charged. He spent $15,000 getting the company up
and running, outsourcing design and manufacturing to jobbers in
Asia and warehousing and shipping to a company in New Jersey.
The only thing left for him was getting the word out: He ended up
outsourcing that to bloggers.

In late September, just after McQuade received an early sample of
the Voltaic Backpack, he asked a friend, Graham Hill—who runs a
"green design" weblog called Treehugger—if he'd mention the
product. Start up the swarm! Within a few hours of Voltaic's hitting
Treehugger, the popular CoolHunting blog mentioned McQuade's
product, which got it seen by Joel Johnson, editor of Engadget
competitor Gizmodo. Each step up in the blogging ecosystem
brought Voltaic to a broader audience. (Yes, for all its democratic
trappings, there are hierarchies of influence in the blogging world.)

In came a flurry of orders. Ironically, McQuade—who had helped
research Net Gain, a seminal book on how the Internet would
change business—was unprepared. "Overnight what was
supposed to be laying a little groundwork became my launch," he
says. "This is the ultimate word-of-mouth marketing channel."

These are still the early days of blogging, and the form is still
morphing. Blogs that host music and video are popping up,
people are starting to blog text and photos from their phones, and
sites like NewsGator, using a technology called RSS, allow people
to subscribe to blogs. Plus, an arms race is building behind the
scenes. Venture capitalists last year invested a still tiny $33 million
into blog-related companies, but that was up from $8 million the
year before, according to research firm VentureOne. Blog ad
companies, which place ads and pay per response, are enabling
bloggers to earn money from their sites. And blogging publishers
have emerged. Two of the most prominent, Jason Calacanis and
Nick Denton, are going head-to-head with stables of popular blogs
(Engadget and Autoblog vs. Gizmodo, Gawker, and Wonkette,
among others). More important, some of the most competitive
companies in tech are throwing their weight behind blogging.

The newest kid on the blog block, Microsoft, has already seen
what the sites can do for it. Now it thinks it has a chance to grab
the youth market. Blake Irving, the VP who oversees Hotmail, the
e-mail service, with 187 million users, and MSN Messenger, with
145 million IM accounts, views MSN Spaces as "the third leg of the
communications stool," one that Microsoft hopes to turn into an
advertising-fueled business. MSN is already selling ads on some
Spaces for things like Lacoste shirts at Neiman Marcus online.
E-mail is for old people, says Irving; kids prefer to communicate by
phone and IM, and, now, by keeping blogs. So Spaces is tightly
integrated with the latest version of MSN Messenger. Says Bill
Gates, who claims he'd like to start a blog but doesn't have the
time: "As blogging software gets easier to use, the boundaries
between, say, writing e-mail and writing a blog will start to blur.
This will fundamentally change how we document our lives."

Google, the company that Microsoft is playing catchup with (its
Blogger.com division is the largest blogging service right now),
also expects blogs to become as important as e-mail and IM.
Right now, it's working on ways to better help people find content
they want in blogs, says Jason Goldman, Blogger's product
manager. But if Google's internal use of Blogger is any indication,
it also sees it as an essential business tool. Since 2003, when it
bought Pyra Labs, the company that launched Blogger.com,
Google's employees have created several hundred internal blogs.
They are used for collaborating on projects as well as selling extra
concert tickets and finding Rollerblading partners. Google's public
relations, quality control, and advertising departments all have
blogs, some of them public. When Google redesigned its search
home page, a staffer blogged notes from every brainstorm
session. "With a company like Google that's growing this fast, the
verbal history can't be passed along fast enough," says Marissa
Mayer, who oversees the search site and all of Google's consumer
web products. "Our legal department loves the blogs, because it
basically is a written-down, backed-up, permanent time-stamped
version of the scientist's notebook. When you want to file a patent,
you can now show in blogs where this idea happened."

But when you live by the blog, you die by the blog (or at least feel
serious pain). Perhaps the best example comes from Mena and
Ben Trott, the husband and wife team who founded Six Apart,
creator of Movable Type, the blogging software that now runs
some of the most prominent blogs on the web, including
InstaPundit and Jarvis's BuzzMachine. The Trotts, both 27, started
the company after the success of Mena's blog, Dollarshort.org. ("A
day late and a dollar short," she says. "A lot of my stories were
about people picking on me and being a dork.") Unhappy with the
software she was using, Mena enlisted programmer Ben to
design their own blog software. They announced the product in
October 2001 with just a post on Mena's blog, and had 100
downloads the first hour. Companies paid a flat rate of $150 and
individuals were invited to pay what they thought the product was
worth. "If we got $50 or $60, that was nice," says Mena.

The Trotts soon started a hosting service for blogs, called
TypePad, and lured $11.5 million in venture financing—along with
some big customers, including Disney, the U.S. Air Force, Fujitsu,
and Nokia. Yet until May, Six Apart was relying on its original
pricing scheme. The Trotts decided to upgrade. Mena posted a
long message describing the new fee structure on her company
blog, Mena's Corner. Less than three hours later, the first
comments started rolling in. "Looks like I'll be dumping Movable
Type soon" was the first. Many others echoed that outrage in what
became a total of 849 customer comments in about ten
languages.

Six Apart didn't erase any of the comments, even the most negative
ones. Mena read every comment in full, then kept posting notes
explaining why the company had changed the pricing structure and
that it was still working on revising it. Looking back now, she says,
"We made people feel heard." And she knows that sooner or later,
the process will start all over again. Says CEO Barak Berkowitz:
"When everybody has a tool for talking to the rest of the world, you
can't hide from your mistakes. You have to face them. Once you
commit to an open dialogue, you can't stop. And it's painful." As the
impact of blogs spreads through global business, that pain—and
promise—will be something companies will have to deal with. And
if they don't? You're bound to read about it in a blog.