Keeping bad stuff out: Making a play on social news sites?

About a month ago, some rumors were about that Google was about to acquire Sun Microsystems. The news got hot when blog stories claiming an acquisition was imminent were promoted to the front page on community/social new site Digg.com. It pretty quickly became clear that the rumors were largely unfounded. What hasn’t been quickly resolved is whether or not someone tried to manipulate Digg, possibly to cash in on speculative trading in Google or Sun stock.


The basic idea is simple: get enough shill users to vote for a financially-significant rumor to promote it to the front page, thus automatically getting more widespread attention, and hope that the burst of attention causes a temporary stock price adjustment that can be exploited. (For example, in an acquisition the price of Sun would almost surely increase, and thus gullible readers might start buying it and bidding it up; the scam artist could purchase shares in advance to sell at the inflated price, or sell it short at the bubble price and collect when price returns to normal.)
Digg claims that it almost surely was not manipulated, but it seems clear that such manipulation is possible in user-contributed content news sites. Recall how Rich Wiggins found that people could get flim-flam press releases fed into Google News (here and here), and how authors using pseudonyms have promoted their own books with favorable “reviews” on Amazon.com.
It appears that in the past Digg has been manipulated (though apparently as an experiment, not to manipulate stock prices).

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