New York Times Digital said it will tighten its policy on e-mail marketing to its newsletter subscribers after it sent two paid ads to nearly 2 million readers touting obscure stocks that were pumped up by a stock promoter with allegedly misleading information.
The online division of The New York Times Co. plans to label advertisements more clearly and subject them to greater scrutiny before they are sent.
NYTimes.com sends 105 million e-mails a month to just over 3 million unique subscribers, said Christine Mohan, a spokeswoman for The New York Times Co. The publisher said about 10 million e-mails containing advertiser-sponsored messages and editorial promotions are sent every month.
“We've put a couple of new procedures in place,” she said. “We also plan to add more explicit language in the headers and footers [of the e-mails].”
On Nov. 14, 500,000 NYTimes.com readers received an e-mail sponsored by financial portal StockTopics.com touting the stock of a company called UniverCell Holdings, which sells and rents cellular phones. On Nov. 16, NYTimes.com sent another e-mail from StockTopics.com touting a company called Liquidix Inc., which manufactures fluid seals and computer chip-making equipment. Both ads were paid for by Internet Marketing Solutions, a Rhode Island public relations firm, which owns StockTopics.com.
The Times would not say how much IMS paid for the advertisements.
Also running the same advertisements was online news portal CBSMarketWatch.com, which said in a New York Times story that it should have looked more closely at the company promoting the stocks.
The problem with the e-mails, The New York Times Co. said, was that both companies touted have no history and limited financial data on file with the Securities and Exchange Commission. Shares of both companies rose dramatically after the e-mails were sent. Both companies trade on the Over The Counter Bulletin Board.
According to documents filed with the SEC, Liquidix has a convoluted history of mergers and acquisitions. The company, formerly Learners World Inc. and based in Florida, started as a provider of child day-care services. In late September it acquired the Advanced Fluid Systems Inc. subsidiary of Nevada-based Liquidics Inc. Learners World suddenly found itself in the business of producing fluid-dampened products.
Calls to Learners World's Brooklyn office were returned by Janelle Ray, who said she was a director of the company. She also said she was unfamiliar with a company called Liquidix or Liquidics and deferred further questions to Salvatore Casaccio, who is listed in SEC documents as a former director of Learners World. He was unavailable to comment.
All materials touting Liquidix and UniverCell contained various telephone numbers that connect to the corporate offices of IMS. No one at the company was available to comment.
Mohan said the publisher became aware that the e-mail advertisements were suspect after its customer service desk received “a small number” of complaints from newsletter subscribers.
“Previously, content for advertiser-sponsored e-mails was reviewed by our e-mail products team and our ad traffic team,” she said. “Moving forward, there will be an additional review by Scott Meyer (general manager of NYTimes.com) and Lincoln Millstein (executive vice president of New York Times Digital) to ensure that e-mails are appropriate and consistent with our acceptability guidelines.”
Online financial news portal TheStreet.com also received the Liquidix and UniverCell ads but refused to send them to subscribers, director James Cramer said.
In a letter published on Jim Romenesko's Media News, a Web site featuring news about the media, Cramer said the ads were rejected as being illegal and unethical.
“For the record, Internet Marketing Solutions came to TheStreet.com, which the typical media would describe as a 'struggling Web site' to send out these bogus stock bulletins and we rejected them out of hand as illegal and unethical,” he wrote. “It didn't even rise to my level. The advertising department wouldn't take the stuff. It isn't that hard to police if everyone has a culture that says 'protect the reader from obvious scams.'”