The Evolving Role of Social Media in Investor Relations

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In 1995, only 14% of Americans used the internet, 20 years later and nowadays less than 13% of Americans live without internet as a part of their everyday lives[1]. The creation and resulting explosion in popularity of the internet quickly transformed the corporate website from a nice to have to a necessity. Looking back, only forward thinking companies included an IR section on their website whereas now that very section is not only expected but the SEC has implemented specific guidelines describing how a company must use its corporate website for the purpose of disclosure. While the internet has revolutionized investor relations, IRO’s have been hesitant to adopt social media as part of their investor communication arsenal. NIRI’s 2016 social media for investor relations survey found that the majority of respondents (72%) do not use social media for IRO functions noting the “lack of interest in the medium by the investment community”. As with the evolution of the internet, the social media environment is rapidly evolving. A recent Greenwich Associates report[2] revealed that almost 80% of institutional investors regularly use social media. Furthermore, 30% of respondents stated that information gathered through social media platforms directly impacted an investment decision or recommendation. Looking forward, 40% of institutional respondents expect to increase their use of social media in the coming year. These results underline the importance of integrating social media as a natural extension of an external communications strategy and a successful IR program. While IRO’s have been slower to adopt these mediums, those who successfully leverage social media provide investors with an improved experience and ultimately meet investor expectations of having easier access to improved information. The most popular and important social media platforms investor relations teams must integrate into an external communications strategy are LinkedIn, Twitter and YouTube.

LinkedIn is a vital component of an IR social media strategy as the audience is highly educated, relatively mature and professional; 38% of linked in users are college educated and LinkedIn is the only top social network that has higher penetration rates with the 50-64 age bracket compared to the 18-29 age range[3]. With 52% of institutional investors using LinkedIn and 85% of those investors admitting to (at minimum) weekly use[4], LinkedIn can be a useful tool to reach the retail and institutional investor. Given the professional user base, LinkedIn is best leveraged to disseminate corporate content including corporate presentations, corporate blog posts and market updates.

Next to LinkedIn, Twitter is the most popular social media platform used by investor relations officers largely because the 140-character limit places little demand on IRO’s to create content. Twitter provides real time insight into investor sentiment. Companies can use their “cashtag” – a corporation’s ticker symbol with a $ in front that creates its own feed – to monitor conversations investors are having about their company. This real time feedback allows IR teams to detect patterns in conversation and proactively reduce the quantity of misaligned messages. Twitter’s influence was solidified in 2013 when the SEC allowed companies to tweet corporate activity. The platform is such a force in the investment world that high frequency trading programs are now integrating algorithms that scan the “twitterverse” for key words and grade these words as neutral, positive or negative to help determine their investment philosophy. Twitter provides the ideal platform to space and communicate corporate information like earnings results, which can be particularly helpful to small and mid-cap companies who struggle to reach investors through more traditional information distribution formats. IRO’s can improve investor engagement by tweeting directly with investors things like questions they have for conference calls, providing giveaways and leveraging influencers. A recent Brunswick group survey found that the importance of traditional media declined 13% as a result of digital media replacing this void with twitter usage among institutional investors increasing an astounding 19%[5]. Statistics clearly reflect that Twitter is here to stay and successful IR teams must recognize this.

YouTube now represents over 25% of all google searches[6]. Creating a YouTube channel and video content is an effective way to deliver messages to the investment world. YouTube represents a unique instrument to creatively reinforce corporate messaging and improve investor engagement. An example validating the impact YouTube can have on share price comes from Dell. The company unintentionally posted an interview with Dell’s CFO commenting on Q2 results prior to releasing such information to the wire services. Before the company was able to issue a press release, blogs began chattering, Bloomberg picked up the story and within 23 minutes Dells 23 million shares shot up 6 percent. Companies also benefit from increased visibility when video content on YouTube goes viral. When CEO Wendell Weeks presented to institutional investors and analysts at a Corning Incorporated investor day, the investor relations team decided to share his presentation with the public via YouTube. While his initial presentation received muted applause, the video quickly spread. Today, “A day made of glass” is the most viewed corporate presentation of all time consequentially helping Corning gain significant exposure.

Social media is quickly becoming a valuable, perhaps vital, part of the communications strategy of a successful investor relations program. Daunting as the myriad of social media platforms may seem, at the end of the day they all provide additional platform to communicate to investors. IRO’s should embrace social media as an effective mean to emphasize their corporate story. As investors move away from traditional content seeking methods and increasingly adopt social media platforms, it is clear that IRO’s should not only simply understand social media but those that are best in class must integrate a social media strategy into their daily job function.

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