There are many articles and examples supporting the benefits of social media applications and how you can leverage their attributes to sit alongside traditional forms of investor communication to enhance exposure to investor communities, including the IR Society’s guide. Likewise, there are as many that highlight pitfalls and new problems that are posed by embracing this form of communication. However, as with most technologies it is easy to get lost in the jargon of the electronic vehicles of the web and the internet of things and lose track of the point of it all.
So what’s it all about?
Stripping it back to the bare bones, the goal of the IR department is not that different to the goal of the marketing department. The marketing function is always exploring and measuring the best routes to market to sell the company’s products and services. Likewise, the IR function needs to sell the investment proposition of the business through a similar process.
A marketing department would want to profile their target audience, tastes, behaviours, and ultimately define the best communications channels to reach them. No business-to-consumer marketing would neglect to consider social media as an important element of their communication mix. Likewise, the role of the IR team, having profiled their target investors, is to analyse their communication behaviour and find the best channels to reach them.
Social media has historically been the playground of the young, but with people aged 55-64 to be more than twice as likely to engage with brand content than those 28 or younger, it is obvious that the landscape is ever changing. If you still don’t see the relevance, the largest growth in the US since 2014 has been in the 65+ age group! Facebook is no longer the children’s playground it once was!
So, armed with this information, you might reconsider that there is a growing number of active retail investors currently choosing social media as a tool to keep them up to date with investment information.
Where do you stand in the debate?
Companies that have developed coordinated communications through YouTube, Facebook, Twitter, Linkedin and other popular social media venues, are publishing investor information, presentations, and videos in much the same way as is possible on their corporate and investor relations website. However, they are able to reach a greater audience using these channels and open up a stronger two-way dialogue with them.
Issues around selective disclosure, are most often cited as a reason for IR departments to avoid social media. But the fact is, social media is mostly public so any material non-public information that is inadvertently disclosed on Facebook or Twitter is much less “non-public” than the same information disclosed in a private setting, such as in a phone call with an analyst or in a private group or one-on-one meeting with management. Companies can also take steps to ensure that their activities on one network are syndicated to followers on other networks and to their corporate websites. So in theory, a well structured system should help to avoid one of the major disclosure sticking points.
Understanding the various applications, their strengths and weaknesses and where they could sit in your armoury of media tools is important. Twitter for instance is a great platform for delivering short text updates globally to followers, however, it has a maximum limit of 140 characters per ‘tweet’ (although this has recently been updated to ensure any attached media or user handles aren’t included in your character limit), which is a particular issue if a notice requires a disclaimer. Then for a more visual update, you could use Instagram to sharing images and shorter video content.
The explosion of usage of social media has also led to a number of security problems, such as in 2015, when Selerity shared Twitter’s earnings for Q1 2015 early, leading to a number of people selling their shares. Ineffective company policies have also been compromised, such is the case for many companies who have suffered from rogue ‘employees’ posting unofficial messages. This highlights another issue within the organisation which needs addressing - who is an authorised spokesperson and what are they allowed to say?
So if you are yet to open a two way corporate dialogue through social networking, learn from the mistakes of many companies who are not coordinating the implementation properly and are not managing or engaging in their company’s activities within the social media environment. Many companies have adopted a ‘me too’ approach to having a social media presence, without proper thought on effective implementation and have suffered/are suffering the consequences.
Commitment to the process needs to be from the top to be successful. Before adopting any new social media initiatives, the key is for the investor relations team to have clearly defined strategies and objectives. The company also needs to develop a written policy to guide social media usage and offer instruction to employees. All of this should be done with cooperation and input from a legal perspective, corporate communications and the IT team.
This may seem like a big investment, but if it achieves the result of driving more traffic to your corporate site, and allows you the opportunity to develop relationships and followers that are measurable and finite, you can get closer to measuring the return on investment in a way that certainly couldn’t be achieved through any traditional methods. The metrics for measuring this success would be not only by share price and performance but also by the the number of ‘subscribers’, ‘followers’ and ‘friends’ engaged with a company. These subscribers will stay engaged with that company, if they can find it easily (which means participation with social media), if they have interesting content to view (presented creatively, using the best media for the message), and if their enquiries are responded to quickly and they feel wanted.
In fact the more you think about it, the more synergy modern IR has with the marketing function in this changing environment!