Even the most ardent advocates of "citizen journalism" had to feel shaken by today's events on CNN's iReport, where user posts are carried unedited and unfiltered.This morning somebody fabricated the following story:"Steve Jobs was rushed to the ER just a few hours ago after suffering a major heart attack. I have an insider who tells me that paramedics were called after Steve claimed to be suffering from severe chest pains and shortness of breath. My source has opted to remain anonymous, but he is quite reliable. I haven't seen anything about this anywhere else yet, and as of right now, I have no further information, so I thought this would be a good place to start. If anyone else has more information, please share it."
Apple rushed to deny the report, and CNN later labeled it "fraudulent" and removed it from the site.
But the damage had already been done. When the false report surfaced, Apple's stock immediately plunged 10 points within minutes, to the mid-90's. The stock regained its value shortly thereafter, when Apple's denial was issued, so there was no harm done to the company itself.
However, if the perpetrator(s) of the hoax used it to short the stock in order to make a killing, NASDAQ's investigators may be able to uncover their identities The stock exchange confirms it is investigating.
Since the advent of the Web, there have been a number of incidents like this one, where false rumors moved markets. It's a risk with any system of instantaneous posting, which is why many sites add a layer or two of security. Editorial approval is one of the best ways to prevent these incidents, although clever hoaxes can trip up human beings on occasion. The "holy shit" factor when an amazing headline comes across your desktop is pretty hard even for a journalist to ignore.
In recent months, one memorable hoax was the doctored photo purporting to document a Stone Age Tribe in the Amazon raising their bows to shoot arrows at a passing aircraft. Yahoo's home page featured the story a number of times, until it was revealed for the hoax it was.
But, back to the CNN's iReport problem. How to prevent or minimize a repeat of this? I'd recommend requiring a verifiable, credible website for all citizen posts, as well as the standard verifiable email address. Then, in the end, good old common sense should be employed by readers, investors, and all consumers of the news.
"If it sounds too good to be true, assume that it isn't."