Tuesday, September 1, 2009

Investor Relations and Social Media

Every generation has a point in the development of technology where they hit the wall. For my grandparents’ generation it was color TVs. My grandparents could never seem to be able to tune in their color TVs so that people looked normal – they always had a reddish or green tinge to their skins. For my parents’ generation, the people who were able to survive the Great Depression and World War II, cell phones have stopped them cold. Today’s seniors just don’t seem to be able to grasp what all those cool features on the phone are for – and why would you want a camera on your phone anyway? While I don’t claim to speak for my entire generation, for me, my technological Waterloo has been social media.

I don’t think of myself as a Luddite. After all, I write a blog, my business has a web site, I have an iPhone and I work on a computer most days. I’ve even learned how to send text messages on my phone, as it is the fastest way to get a response from my three college age children. But I confess that twitter and facebook have me stymied. I just don’t get it. Twitter because I’m incapable of saying anything in 140 characters or less and facebook because why would you want to put all that information out there in the public domain? And because I don’t get the social application of these services, I certainly don’t understand their application to investor relations.

First, let’s start with our friends at the Securities and Exchange Commission. The SEC has been very clear that all of the rules that apply to disclosure of information in other contexts also apply to social media. So I guess that means that if you inadvertently twitter a piece of material, non-public information, you must issue a press release as soon as possible thereafter. Of course, if you’ve taken the time to type out the information, I would question how “inadvertent” the disclosure was, which means that the press release should have been issued either before or simultaneously with the twitter. And how do you write a “Safe Harbor” disclaimer in less than 140 characters? These are the sorts of things that will drive your securities law lawyer to distraction, so they are quite possibly inclined to say that you would be better off not twittering about investor relations topics in the first place.

Secondly, who has the time? We all live days that are filled with lots of information flow, meetings, phone calls and other demands on our time. Do you really need another distraction, particularly one as unfiltered as social media tends to be? In a business context? I remember in the early days of email having a colleague extol the virtues of email because it bypassed all the filtering layers of a corporation, allowing anyone to communicate directly with you. These days I look at the constant stream of email that flows through my computer and sincerely wish for better filtering devices. And I don’t even work in a corporation, with its constant stream of emails from Human Resources, Security, IT, meeting and calendar reminders and notices of the annual golf outing, charity events and other odds and ends.

Finally, let’s not forget the primary mission of investor relations, which is relating to investors – making sure they understand your company and its prospects so that they can accurately value the company and its stock. Call me old fashioned, but I believe that this means that you actually have to talk to investors, listen to their questions and give them thoughtful responses. For that, the best, most efficient piece of technology that you have was invented in 1876. It’s called the telephone.

I suppose that over time social media will create a niche for itself in business, but for the present, to me, it seems over-hyped. I believe that truly sophisticated technology simplifies you life rather than adding more complications. And I don’t see how social media makes your life simpler.


Serena Ehrlich said...


Great post! I would say that there is one greatly overlooked point in your post, the amount of time platforms like Twitter and Facebook can save a person or a company.

Twitter is a fast way to share information with an info-hungry audience. When a company issues their earnings release, they could post the headline on Twitter with a link to their website.

It is easy to do. In fact, you can use a tool like Futuretweets.com to pre-schedule the tweet as a time saver.

Every company gets the same questions every - why not put the answers out on twitter and reduce the number of calls you receive on those topics?

Lastly, I would absolutely recommend setting up an RSS feed so you can see on a daily basis what is being said about your company on Twitter. This is an excellent and easy way to see emerging rumors that may affect your stock and allow you to get ahead of this curve instead of being reactive later on.

Thanks again, John!

TJ The Food Dude said...

Exibit A for Twitter...I found out about your blog through a tweet. I never would have heard of you and your blog without it. Thanks to twitter, in my world, you are no longer an unknown.

Jeffluth said...

A key characteristic of Twitter is that the practice of Tweeting creates a social context to information exchange and thus humanizes what might otherwise be a ‘cold, heartless’ process. This ‘humanizing’ effect is great for the social gibberish and Business-to-Consumer tweets (often nothing more than thinly disguised marketing tactics) that are increasingly clogging our inboxes. From a disclosure perspective, the key value of using 140 character tweets is to insert links (Tiny URL goes straight to the Web 2.0 Hall of Fame) that revert to publicly available information, and in this respect, Twitter can be a very valuable tool. It is when the IR practitioner gets “too human, or too social” that emotions and opinions get in the way, and that is when one approaches the danger zone.

Twitter can be helpful in letting constituents know that the company ‘cares.’ I suggest that from an IR perspective, Twitter is best used as a socially-friendly portal to the company’s website or to other information broadly available to the public. In this respect, Twitter can be used as an adjunct to reach the financial “Mod Squad” and other folks fixated on gadgetry. Don’t even think of using ‘unregulated’ Twitter as a platform to talk about anything traditionally verboten from discussion in private meetings.

Darrell Heaps said...

Thanks for the post John. You raise a number of interesting points. Over the last while I've had a number of discussions with people that share your point of view.

Here are a couple of points to consider:

The channel we are having this discussion on is social media. Blogs, feeds, comments, etc. are a major component of the web today and are the baseline of social media. From an IR perspective and to @serena's point, using a blog and comments can allow you to be much more efficient rather than having to speak one on one with each investor. Using blogs (aka social media) in this way makes your life simpler and enables you to focus that valuable phone time with the investors that matter the most. There are a number of examples of this (Microvision, Dell, Google)

Similar to @TJ The Food Dude I also learned of this post through Twitter. In fact, I learned of it through the search filters for "investor relations". The reason this is important is because I do not need to be following the right people to learn of content that I'm interested in, the content finds me (so to speak).

Regarding how this can make your life simpler. There are now something like 20,000 press releases a day issued in the US. Add to this, the hundreds of thousands of articles (online and in print), blog posts, tweets and social network updates. It is impossible for anyone to be informed about everything. However using social media, following people with the same interests, using Google alerts, twitter filters, etc. I am able to have a steady stream of relevant content delivered to me. Without social media it would take up several hours of my day if I had to pour through this content manually.

From an IR perspective using social media is imperative to understanding what is happening in your market and what is being said about your company. Being informed of these online conversations is critical to being able to do a good job. The risk of sticking your head in the sand is a major problem happen on the web (and spread like wild fire through social media) and you having to answer the question from your CEO "how on earth did you miss this?? – Obviously not good for your company or your career!

Of further relevance is the importance for companies and their IROs to establish a "voice of authority" in the primary social networks. RSS feeds make it easy to begin populating social networks with content that is already being created. This approach does not leverage the conversation aspect of social media, but it does start the process and establishes your company in the key networks like Twitter, Facebook and soon StockTwits Desktop.

Should you need to address inaccurate rumors (like in the case of AMD and battery life) you have a channel that you can communicate with. You can't wait until a problem arises to start using social networks, as you will be behind the eight ball.

For IR, social media is like raising money. The best time to raise is when you don't need the money, if you wait till you're out of cash you either won't get the money or run the risk of unfavorable terms. Social media is the same, if you wait until you need to use it to try and figure it out, you're going to be in a lot of trouble.

As of March 09, 67% of the global online population uses blogs and social networks daily. This is up from 54% the year previous. The reason why every company and everyone in IR needs to embrace social media is simply because that’s where the market is.

(sorry for the length of the comment - if I had more time it'd be shorter :)

Dave Hogan said...


Lots of people in investor relations share your concerns about social media. Every new technology has issues to work through. In my opinion, however,the benefits of social media are compelling enough that social media will soon become part of mainstream IR best practices. As some previous comments have suggested, one reason for this is that the public is rapidly adopting social media. Facebook has more than 200 million users. It is going to be increasingly difficult for IROs to ignore social media.

As I travel with my company, it seems analysts and institutional investors are getting younger all the time. They are part of a generation for which text messaging and social networking come naturally. Social media fits their highly mobile, technology-rich lifestyles well.

As used by many public companies, Twitter is not so different from e-mail alerts. It is another tool to draw attention to previously disclosed news and to drive traffic back to the company's IR Web site.

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 legal counsel, corporate communications and the IT team.

All new technology has its risks. Social media is here to stay, however, so it makes sense for IROs to find ways to use it to their best advantage.

Susan said...

I just did an interview for IT Business Edge with Craig Carpenter at Recommind about the risk that Twitter users pose for their companies. You can read his remarks here:


Mike said...

Should i post a comment of a new site on a old blog????