High atop the Time Warner Center - NYC

Over the past month I’ve been fortunate to meet with many groups about the use of social media and investor relations.  This includes events in Chicago, Dallas, Toronto, Vancouver and New York.  I really enjoy getting out on the road and meeting with people face to face, it’s also great to sit on panels with really bright people like Serena Ehrlich, David Baer, Rhonda Bennetto, Doug Chia, Broc Romanek, Michelle Leder and Eric Jackson.

To prepare for this road trip my presentation and notes focused a lot on why companies should be including social media in their investor and corporate communication efforts. To help make the case I included stats like, 49% of institutional investors are reading blogs (latest Rivel research) and 85% of brokers under 50 are using social media (Ledermark study). Essentially, I wanted to “shine a light” on social media so people would see the irrefutable evidence that social media is a requirement now, not an option.

After the first couple of sessions it became clear that things had changed and that instead of “why”, attendees were now interested in the “how” of social media. I was pleasantly surprised to see the tide changing, considering the conversations I had with IROs across the country in previous years and really hard-selling them on the value of social media.

I don’t think this is representative of the entire market.  As I recognize that many of the naysayers out there aren’t the ones coming to sessions or meeting with me.  However, the key to overall market adoption is seeing the next wave of early adopters starting to use these tools and derive value from them.

On that note, here are my top 3 “How to” questions and answers for social media and investor relations:

1. How to manage Risk?
Managing risk is an integral part of investor relations so it’s not surprising that it’s always one of the main areas of discussion. Here are a few areas that I tend to focus on when discussing risk.

• I really believe the first thing every company should do is ensure they have a social media policy that covers disclosure and succinctly states that only previously disclosed information is to be shared.  In addition to disclosure, the social media policy should also govern the use of social media by ALL employees.
• The next area is to monitor the web and social media for mentions of your company, executives, key projects etc. I always recommend starting with free options like Google Alerts and Twitter Search and then depending on the volume and whether you need/want analytics on this data, moving up to a paid service.
• I believe the final aspect is to include legal early in your intention to use these tools and involve them in approving things in advance. For instance, preparing a list of quarterly Q & As that you plan to share through social media after earnings are released. Include these during your disclosure process so everything is handled and approved together.

2. How to convince Executives?
Convincing executives comes down to showing them real world results.  It doesn’t matter how many stats, charts and graphs about the use of these tools by investors. What is going to get their attention is your peer group using these tools and real world results.  To provide this I recommend you:

• Share case studies on how similar companies in your space are using the web and social media.
• Provide reports on what is being talked about your company online.
• Start small and track specific metrics. This can be one channel or one aspect of the business. The key to true buy-in is when executives will see real results for your company.

3.  How to measure ROI?
The BIG question always centers around what is the ROI of these efforts and how to track it? The answer to this is evolving as the market adopts and we learn from the early adopters what works and what the return of their investment has been.  My experience has shown there are 3 main parts to tracking social media ROI for investor relations:

• Increased awareness: when a company starts using social media in an investor context the most immediate and direct way to track these efforts is through increased traffic to the corporate website.  Related to this is also tracking the number of views that social media assets like videos on YouTube, Slides on SlideShare and photos on Flickr generate over time.

• Reduced incoming calls to IR for repetitive questions. During my panel in Chicago, Serena shared examples of how companies are publishing Q&A to their blog following earnings and how this has been instrumental in reducing incoming call volume. When presenting with Rhonda Bennetto, IRO from @TVIPacific in Vancouver, I learned that calls to the TVI investor relations group decreased from 50 calls a week to 2 a week after adopting social media.  Talk about ROI!

• Republishing of corporate content by investors and journalists. There is a lot of power of using social media for listed companies as is it allows investors and journalists to easily republish your information.  This in turn expands your company’s influence and helps to ensure your corporate message is consistent across the web. We have seen this with HP and their acquisition of Palm. Laura Graves from Cisco has also talked about this and Rhonda from TVI let us know that she is now seeing excerpts from her posts on Facebook showing up verbatim in Yahoo!Finance message boards.

To wrap up the post, this latest road trip really opened my eyes to the changes that are happening. Yes, we’re still early on but I can just imagine where we’ll be in the next year.

Do you have any answers to the “How to” questions above?  If so, please share in the comments below.

Cheers,

Darrell

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Download the latest Q4 Whitepaper on social media for public companies.

We’re thrilled to announce our latest report on the use of social media by public companies for investor relations.  If you’d like to get right to the report you can download it here.

Last year we released two research reports on Twitter for investor relations.  At that point, our sample of 350 companies told us that 35% were using Twitter for IR, in the current report you’ll see this adoption is now at 65%.

However, it’s not all about Twitter. So we expanded our research to include Facebook, LinkedIn, Blogs, YouTube and SlideShare.  Their respective adoption rates for IR came in at:

• 37% Facebook
• 29% YouTube
• 10% Corporate blog
• 10% SlideShare
• 93% LinkedIn

Social Media Used by Public Companies for IR

We included LinkedIn because company pages are created automatically and now anyone can “Follow” any company.

What impresses me the most about the state of the market is just how many companies are using social media . We’ve included hundreds of examples in this report and we’ve literally just scratched the surface.

The complete report is 96 pages and has tons of stats, charts and web links.

Register on the landing page and we’ll email you the whitepaper right away.

We hope you enjoy it.

Let us know what you think in the comments below! Is social media for IR reaching a tipping point?

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The founders of Agoracom are set to appear in front of the OSC at the end of April, where we assume we will all hear more details of the allegations and the defense of Agoracom. I, like many others, await more details before passing judgment on what really happened and to what degree fraud was committed (if at all).

In light of this recent situation, I wanted to take this opportunity to talk about the problems with message boards and the importance of transparency and trust and being successful online.

Similar to Yahoo!Finance message boards, Agoracom uses alias for all members. As you can see from the screenshot below, there no real names listed and there is no further information available on the site on who these people are.

The BIG problem here is the complete lack of transparency. Who are these people? What are their backgrounds, their day jobs, etc? In their current format message boards like this can’t be trusted if anyone can create an alias and “pretend” to be an investor.

The reason why social media works, is because of the trust that is built up over time between real people. This would never work if everyone used an alias and you didn’t know who they were. The best practice across all social media channels is to use your full name in your profile and/or links to further details about yourself.

What would Facebook be like if everyone used an alias? It only works because it’s real people connecting with real people. A great example of this can be seen in some of the Facebook pages used by companies to connect with investors. See TVI’s Facebook page (disclosure: TVI is a Q4 client)

Seeking Alpha is a great example of transparency, a part of their success has come from how transparent the community is, people connecting with people.

On Twitter there are many users that have an alias for the account name, however most people provide their real name within their profile. There are certainly many automated accounts and many fake accounts, however the people with the most influence and benefit to the company are those that are real people being transparent. I know in my own work with social media, being transparent and authentic is absolutely critical to connecting with people online and building trust.

Sure there are Twitter accounts today that are based on aliases and stock promoters are using them to create “fake awareness”. I hope the actions from the OSC sets a precedence that other regulators can use as an example to control this type of fraud.

Social media is about connecting real people. This is true across every line of business using social media, including marketing, public relations and investor relations. Transparency and trust are required to be successful.

I don’t think that these allegations apply to any PR or IR firm tweeting on behalf of a client, as tweeting for a client is very different than pretending to be an investor:

• When posting for a client it is being done under the company account and is being used to assist in the distribution of content and to build a following through engagement with stakeholders. There is nothing underhanded in this approach and this is within regulations and ethics.

• If an IR firm creates an alias account and then pretends to be an investor engaging in discussions with the company and other investors then this is simply lying and is not ethical in any way. Perhaps a case can be made that this is not securities fraud, but it certainly is business fraud and should not be tolerated by companies, regulators or investors.

On a related note, in 2007 Whole Foods’ CEO John Mackey was caught posting messages on Yahoo! Under the name “rahodeb”:

Investigations were launched by the FTC (to block an acquisition) and by the SEC. Ultimately both agencies did not pursue the issue and Mr. Mackey got off. In his own defense Mackey said that he had the right to post under an alias because everyone else did on the message board. Mackey also said that he thought the posts of one man under an alias would never be able to move to the stock and that this was not his intention. However, with posts such as this one posted in Jan 2005, it’s hard to believe his intentions were ethical:

“13 years from now Whole Foods will be an $800+ stock before splits”
John Mackay, CEO of Whole Foods posting as “Rahodeb”.

There are other stories about the CEO of overstock.com using aliases on message boards to spread misinformation, attack his critics and even leak information.

Neither the CEO of Whole Foods or Overstock.com was charged by the SEC for these types of postings. However, it seems the SEC wasn’t doing much enforcement during this period (too many stories to mention here) and I have to wonder if these events happened today would the current SEC react in the same way? Their recent increased judgments related to Reg FD seem to suggest they would react differently.

If the OSC needs to set the precedent that companies and by extension IR agencies can’t create fake investor accounts, then I think this is good for all companies and investors.

As I said early in this post, we’ll all know much more about Agoracom and OSC at the end of this month. Until then I reiterate, I am waiting to get all the details before passing judgment.

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Robert said that Dell uses social media primarily to reach out connect with people who are interested in their company and want to access their information in different ways. He said that it was important to socialize SM internally with legal, finance and other executive positions, who may be concerned about risk, in order to help them understand the importance of being involved and the fact that you just can’t vet everything through the same DC&Ps. “The IRO is in a perfect position to handle social media because they understand the risks, they understand the story. And it’s not like they’re monitoring every phone call I make or every conversation I have with an analyst.”

One has to remember that when it comes to blogging there should be no material statements, no material events and no material omissions.

Laura admitted that at recently as a year ago she was saying, “Social media is not for me” but now she avidly uses it to reach both existing and new investor audiences. Laura said that it’s very important to get your internal people on side, which may be more difficult  with an older established company – you may have to do more work to bring them along but a few quick wins should help.

On this note Laura talked about the contract between Dominos pizza and the employee YouTube debacle, which was quickly addressed and quieted through social media and the Wendy’s ‘severed finger in the chili’ where the issue was addressed through more traditional channels and continued to haunt their brand for many months. (That story alone should be a wake-up call to most senior executives.)

Serena gave specific advice throughout the discussion. She said that it’s important to monitor what’s being said about your company online through sites like www.search.twitter.com , www.socialmention.com , or through RSS feeds. You can even index whether mentions are positive or negative. Serena also felt that issuers should have social media policies that include who represents the company on Twitter, Facebook and other SM. Serena also mentioned a number of other sites as information resources on social media and IR best practices including IR Café and Q4Blog.

Both Laura and Serena said that getting involved in SM doesn’t have to take up a lot of time for a busy IRO and instead, suggested finding someone with the company who is active in Twitter and excited to represent the company online.

Dick said that coordinating SM efforts between IR and PR was very important. He also said that investors are more likely to look for information on your corporate website than any other source and that it should be considered your primary source of information for investors. He offered a checklist as a handout, which he also provides on his site. He then said that a checklist is just the starting point, that a website should not be a filing cabinet and that issuers should look to provide more context for their investment proposition. (Q4 covered this topic previously in an IR website best practice presentation.)

Laura described a scenario which often happens and how social media provides a powerful tool to address misinformation. In the truncating of headlines by the media, often a message is dramatically altered which could significantly alter your stock. A company could issue a press release saying something like, “XYZ reports that sales are soft in Q1 but are expected to be strong in Q4”. The media shortens this headline to read, “XYZ reports that Sales are Soft”. A buzz begins and you can see your stock spiraling down – social media gives you a powerful voice to address these issues and correct the information. And if your company is actively involved in SM, people will know where to go to verify the misinformation.

She also suggested having a section on your site called “Hot Topics” where things like this can be flagged for investors to access further information.

Following this one of the delegates asked how she could keep up with addressing everything negative that was said about her company online. Serena responded by saying that this wasn’t necessary, and that sometimes these negative comments are coming from people who are not widely followed anyway. She suggested to measure how much traffic some of these negative bloggers get (before determining where it was necessary to respond) through sites like www.compete.com , www.quantcast.com , and www.alexa.com

Both Robert and Laura said that V-logs (video logs) were very good ways to address issues and to put investors in touch with more people inside the company. (In fact Dominos CEO addressed their issue through a video.) Robert said that they use V-logs to address 5-6 questions on the quarter and this has been a very effective strategy for them. 

How to get started – read Reg. FD with a ‘blog mindset’, and find a mentor. Put a calendar together to ensure regular blog posts. You’ll find that you won’t have to spend a lot of time thinking up things to blog about as issues will come up that provide blog topics.

There were a lot of good points made in the session, some of which I may not have captured in this post. I welcome comments from any of the participants or panel members to provide additional information.

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The 2008 Year in Review � Securities Litigation and Enforcement, is the first of a regular webcast series on related topics from Securities Docket(an online publication that tracks securities litigation and enforcement developments on a global basis).

This one hour presentation touches on all the big stories: the financial crisis; Siemens bribery; Mark Cuban and a host of other litigations (both successful and not); the Madoff scandal (could you have scripted it better – that the pronunciation of his name is: Made-off ?); the liability exposure of the major accounting firms; the culpability of the SEC in some of the year’s financial disasters and its need for a makeover…

Kudos to Securities Docket for assembling such an impressive speaker panel, all of whom have very worthwhile blogs – which inspired me to write this post:

Kevin LaCroix – an attorney and Partner in OakBridge Insurance Services, an insurance intermediary focused exclusively on management liability. Kevin is a prolific writer of the D&O Diary blog, which he refers to as “a journal from the world of Directors & Officers Liability with Occasional Commentary”.

Tom Gorman – former Senior Counsel with the SEC Enforcement Division, now Co-chair of ABA White Collar  Securities Section and Chair of Porter Wright Securities. Tom’s blog SEC Actions covers SEC investigations, civil and criminal, class actions and internal investigations. Today’s post poses a poignant question,The SEC and the Madoff Scandal: can the Commission Restore Confidence in its Ability to Protect Investors?

Francine McKenna – with a background at PwC, KPMG/BearingPoint, JP Morgan and Jefferson Wells/Manpower, Francine advises professional services firms. Her blog re: the Auditors is an insightful, highly engaging and often very funny look at Corporate Governance issues, the 4 big audit firms, securities regulation, the markets in general…

Walter Olson – a regular contributor to the NY Times and Wall Street Journal and a senior fellow at the NYC think tank . The Manhattan Institute, Walter’s popular blog Overlawyered provides commentary on the American litigation system – it’s anything but dry.

Bruce Carton – editor of Securities Docket, was a former senior counsel in the SEC’s Division of Enforcement. A blog pioneer, Bruce is the author of Compliance Week’s Enforcement Action.

If you’re looking to stay plugged into capital markets issues, these blogs are worth a look.  We’ll write a future post soon on other great blogs that we follow.

At the end of the presentation on the Year In Review, each speaker was asked to provide their predictions for 2009:

• Kevin – we will see an unprecedented surge of securities class action suits, far outstripping 2002. (I told my son he should go into securities law!)
• Tom – predicts a significant reshaping of both the compliance and enforcement divisions of the SEC (and he doesn’t think it makes sense to merge the SEC with the CFTC).
• Francine – says that one of the Big 4 audit firms will be pushed to the brink of failure. (One of her blog readers is egging her on to create a pool predicting timing on this.)
• Walter – believes that a formerly rated Triple AAA firm will either have its executive indicted or will be revealed to be insolvent. (He also made reference to the fact that Triple AAA will soon regain its former meaning as a reference to a bad car accident that required Ambulance… Apolice? Afire truck?  what else starts with “A”?)
• Bruce - predicts that 90% of lawyers will begin to use Twitter for PR. (I hope Twitter can keep up; yesterday it was sooooooo slow.)

With the exception of Bruce’s prediction, sadly none of these are surprising.

For 2009 I peered into my crystal ball, read the tea leaves in my cup and consulted the psychic who left a pamphlet on my windshield  happily 2008 was all about lessons learned (again). The coming year sees us all older and hopefully wiser.

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