Q4 Blog

Earlier this month, Dave Hogan, presented his paper “Reaching Shareholders Online: Trends and Best Practices in Online Communications and Social Media in Corporate Investor Relations” at the 2009 Annual Conference of the International Association of Online Communicators in Washington, D.C.

The focus of the paper is how online communication tools, in particular social media, are influencing the communication practices of corporate IR departments at public companies of all sizes. It also examines the question of why corporate IR departments have been slower to adopt social media communications tools than their marketing and corporate communications counterparts.

Dave currently splits his time between teaching public relations in the Department of Journalism and Mass Communication at Abilene Christian University in Texas and works as Director of Investor Relations and Corporate Communications for First Financial Bankshares, Inc. (Nasdaq:FFIN).

While I highly recommend that you take the time to view the presentation in its entirety (below), I have summarized some of the key findings.

LETTING OTHERS TAKE THE LEAD

The use of social networks by public companies has increased, although many companies are still sitting on the sidelines watching to see what evolves. The following stats indicate that the realm of investor relations has been slow in the adoption of social media:

• A study by Barnes and Mattson, confirmed that 57% of all large charities use blogs, compared with 41% for colleges and universities and only 16% for Fortune 500 corporations.
• The same study also found only 28% of the corporate blogs linked to Twitter accounts, 21% linked to corporate videos and only 10% linked to podcasts.
• An informal survey conducted by Bulldog Reporter’s IR Alert of 270 IROs and CFO’s, found that only 12.5% of respondents use social media to disseminate financial information to shareholders and the financial markets.
• Further, large companies (as defined in Bulldog’s study as those with $500 million or more of annual sales) fared even worse, with only 3% using social media as part of their IR communications.

The reluctance of IR departments to pursue social media is surprising given the evidence that institutional investors and analysts are using social media tools for both business and personal reasons:

• A survey of 455 analysts and institutional investors in July by the Brunswick Group found that 42% read blogs and that 20% stated they had used the information on a blog to make an investment decision or recommendation.
• The Brunswick study also found that 58% of its respondents believe social media will become increasingly important in helping them make investment decisions.

Institutional investors and analysts are already using corporate websites to seek out company information. A study by Rivel Research Group supports this, reporting that 75% of institutional investors look for information on corporate websites “weekly if not daily”.

Evidence is growing that institutional investors and analysts, already accustomed to searching corporate websites for information, are now turning to social media. For example, sites such as Seeking Alpha, the largest financial blog aggregator, has hundreds of blogs by ex-analysts, professional investors and fund managers.

LEGAL AND REGULATORY CONCERNS

While some IRO’s are sitting on the sidelines because they don’t yet see the value of social media, the primary holdback to adoption is both legal and regulatory issues.

The SEC has sent mixed messages since they issued their “Commission Guidance on the Use of Company Web Sites” in August 2008. On the one hand, the report praised the Internet for allowing companies to make information available to investors “quickly and in a cost-effective manner”. On the other hand, the same report cautioned that the antifraud provisions of federal securities laws apply to blogs and to electronic shareholder forums in the same way they do to traditional forms of corporate communication.

However, while the SEC may not have given the definitive green light to using social media for IR, some feel they are showing tolerance and they recognize that companies are still trying to figure out whether these newer forms of online communications fit into their broader communications strategy.

There is a general consensus within the IR field that social media is a supplement to existing disclosures and won’t replace news releases, SEC filings or conference calls in the near future, if ever. In a recent webinar hosted by Business Wire, Carol Stubblefield, a securities and corporate law specialist with Baker and McKenzie reinforced the aforementioned by stating “You should do social media on top of what you are already doing, not as a replacement”. She then emphasized the importance of establishing social media disclosure policies and informing employees about the company’s policy toward their use of Twitter, blogs and other channels for discussing company business.

SOCIAL MEDIA PIONEERS

Despite the ambiguity of legal and regulatory issues, a small-but-growing number of companies are using social media for IR. Within this group, Twitter has emerged as the early favorite due to its simplicity and ability to link back to news releases, conference call announcements and other disclosure information thatresides on the company’s website.

Research that supports this includes:

• A recent study by Q4 which identified that 55% (of a sample of 80 companies with Twitter accounts), are using Twitter for IR, with the companies mainly providing links back to their earnings release, conference call notice and webcast.
• A few of the companies included in the study – eBay and CGI group even live-tweeted the earnings call. Both of these companies type the tweets out ahead of time, which are derived from the conference call script, ensuring that they only post words on Twitter that are being communicated on the conference call.
• Other uses of Twitter by public companies include reporting from annual shareholder meetings (J&J and EMC Corp) and analyst days (eBay).
• Dell does have a Twitter account, but they are believed to have the first corporate blog dedicated to investor relations – each quarter, Dell records a video conversation (Vlog) with its CFO to announce and explain recently disclosed earnings results.

Robert Williams, Director of IR for Dell was interviewed for the report and said he’s “surprised” that more large-cap companies have not followed Dell’s lead and established IR blogs. He cites the following three reasons:

1. The small size of most IR departments. Unlike Dell, which has seven people on its IR team, the average company has only one or two employees dedicated to IR.
2. A lack of understanding about blogs. Williams said many corporate executives worry that blogs will be difficult to manage and that they won’t be able to answer users’ questions.
3. The fear of disclosure mistakes and shareholder lawsuits.

Williams feels that it would be hard for a small (one or two person) IR department to manage a blog along with all other expected tasks, but in a recent webinar he listed five things for larger companies to consider before starting an IR blog:

1. The blog should not be used as a substitute for news releases, SEC filings and the traditional means for communicating material information.
2. It must be credible by communicating factual and accurate information and avoid expressing opinions on investor issues.
3. It should be strictly for investor communications and should not be used for marketing the company’s products and services.
4. An IR blog can be an effective tool to counter misperceptions about the company without responding to specific rumors.
5. It’s important to view the blog not only as a means for distributing information, but as a way of listening to what your investors are saying.

Public companies who are using social media for IR are finding they can leverage their time and investment by coordinating their efforts using multiple social media tools together. For example, both Dell and eBay use Twitter to announce new postings on their blogs and Dell posts its Vlogs on YouTube. This can significantly expand the audience and drive more traffic back to their website and blog.

OTHER SOCIAL NETWORKS

As stated, more companies seem to be using Twitter for IR than are using Facebook, LinkedIn and YouTube. For example, although Facebook is being used by public companies the pages appear to be managed by corporate communications, PR or marketing departments, not by IR.

Many companies in this study were found to include links from their corporate websites or blogs to accompanying information on Twitter, Facebook, LinkedIN, Flickr and YouTube. No companies were identified that use MySpace for IR.

Another emerging category of tools are document-sharing or “content” sites that allow IROs to expand the distribution and improve the display of existing types of corporate documents, such as news releases, presentations and SEC filings.

For example, SlideShare is one of the more popular document-sharing sites that enable companies (and individuals) to post PowerPoint presentations, PDFs and other document formats on a public site where they can be viewed. In a recent webinar by Q4, SlideShare was described by Q4’s co-founder and CEO, Darrell Heaps as “the YouTube of presentations”.

SlideShare makes it possible for a company’s presentation to go “viral” and be spread from investor to investor, either via e-mail, embedding on a blog or website, or through a host of other tools.

Lastly, Docstoc is another document sharing site with an emphasis on content other than presentations such as news releases or reports, which can then be shared by readers or embedded on their website and blogs.

IR & SOCIAL MEDIA: LOOKING AHEAD

According to Dave, “A growing number of IROs already understand the potential of social media, and it may be only a matter of time before social media tools become as mainstream as websites and conference calls in modern corporate IR work. The SEC could encourage this development by providing more definitive instructions to guide companies as they chart their way through these new waters. Those instructions would help eliminate the most worrisome objection to the use of social media at this time, the fear of regulatory and legal risk. Hopefully the SEC will partner with NIRI, the stock exchanges and other interested parties to develop critical guidelines for the use of social media in corporate investor relations practice.”

I completely agree, and (without dating myself too much) remember the day when people worried about having conference calls – now the investment community raises an eyebrow if a company doesn’t have an earnings call! More direction is needed by the SEC – while some companies are taking the first steps and becoming pioneers in their use of social media, others need some guidelines to help them get started.

I previously blogged about tips that can help IROs get the C-suite on-side with adopting social media for IR. Perhaps if concrete guidance is put out by the SEC, IROs could use this guidance (in addition to research that shows that public companies are using social networks for IR), to provide to their legal and management teams as evidence that social media can be used effectively if executed within regulatory guidelines for IR.

Related posts:

1. Social Media and IR Trends Webinar Wrap-Up
2. Social Media, Investor Relations and Web Disclosure
3. Webinar Replay – IR Website Best Practices
4. CICA’s Corporate Reporting research documents highly valuable to IROs
5. Q4’s CEO Discusses all things Twitter, Social Media and Investor Relations

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Best Practices, Social Media Best Practices, investor relations, IR 2.0, IR Websites, NIRI 2009, Reg. FD, SEC guidance, Social Media, web disclosure