The Gawker lessons and how it affects your investments

By: ispeculatornew
Date posted: 01.14.2011 (5:00 am) | Write a Comment  (1 Comment)

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You might have never heard about Gawker or you might be one of the millions that visit its blogs and websites every day. It is one of the largest blog networks on the web, competing with the Huffington Post among others. Like on this blog, visitors can post comments, discuss between each other. To do so, the users must simply register with a user name, email and password. Easy enough right? Most of you have probably done this on dozens if not hundreds of websites.

What happened to Gawker late last year is beyond the worst case scenario for most “digital companies”. Hackers were able to get access to the database that had the user names, passwords and email. Bad right? It gets worse in fact. They  then put up the file for download as a torrent file giving access to the information to millions of users. Some had no bad intentions but others did as you can imagine. So what can someone do with your Gawker password? Not much of course. But these hackers generally ran tests to verify if by any chance the users had the same password on their email, paypal account, etc.

Many users had the same passwords for their emails of course which gave hackers access to all kinds of information. Public relations nightmare! That means millions of users losing confidence in Gawker as a means of protecting their identity, their private information, etc. For a blog it is bad, but for other businesses it can get even much worse.

Google in China

It is well known by now that when Google decided to exit China, a big part of the issue was how Chinese hackers were increasing attacks on Google in attempts to get access to information from users. As data increasingly gets stored “in the clouds”, protecting information will become critical. Why? Because much of what Google does depends on the trust of its users. Why would you use Google’s email if you would be afraid that the company’s security is vulnerable?


Many of the initiatives that I wrote about when I posted about being CEO Mark Zuckerberg for a year depend on continued trust from the users. While I did write that I consider Facebook’s current $50 billion valuation to be a bargain, that could be destroyed quite easily if ever word got out of a security breach. Would users still feel comfortable communicating with friends, putting up photos and other information if they felt that at any time it could be compromised?

How it affects my investing

Personally, here are some things that I am putting more effort into when evaluating technology stocks:

-How much are they willing to discuss security?
-Are there any whispers or rumors about security issues?

There are no easy ways to monitor all of this but personally I would remain very vigilant and could very well go short a stock if rumors appeared about such a breach.

Disclaimer: No positions

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1 Comment

  1. […] that nothing would ever erase all backups? Google needs to take this seriously because one breach, hacking incident or data loss incident could turn out to be a big event for the search […]

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