A first in financial reporting
In southern US parlance, the traditional annual report may be 'just a red-headed step-child' (an obligation with no purpose). Thus Atlanta, Georgia's Craig Patterson describes the inspiration behind a first in annual report history: on September 1, Seagate Technology became the first US company ever to publish its annual report in a national daily newspaper instead of sending a traditional bound book. The summary annual report in a four-page spread in the Wall Street Journal was combined with an online annual report, a webcast interview with the company's CEO. The campaign was then followed up with a form 10K mailing, both in hard copy and on CD-Rom.
This Scotts Valley, California storage device maker's 'brand promise' is 'information the way you want it' – a tag line taken quite literally by EAI (Executive Arts Inc), the Atlanta graphic communications consultancy that has been producing Seagate's annual report and at which Patterson is Seagate's project manager.
As described by Seagate's director of communications Phil Montero, EAI's pitch went like this: 'Instead of doing a traditional, glossy annual report – printing a couple of hundred thousand copies and sending it out to shareholders 30 days after all the information was available – why not go in a new direction?'
EAI's two basic assumptions were that the Journal is a primary communications vehicle for investors on a daily basis, and that online financial information is becoming more and more critical to the decision making of institutional as well as retail investors. 'If that's the case, and we want to deliver on our brand promise, we should do away with this big annual that people get in the mail and for the most part either toss away or keep just for the shareholder letter and 10K information,' advances Montero.
Patterson says the idea of putting Seagate's annual report in the Journal came out of lunchtime brainstorming in response to Seagate CFO Charles Pope's loathing of the traditional annual report. 'It's an obligation the SEC requires of companies, and not an effective communications tool because by the time an analyst or portfolio manager gets it the information is three or four months old,' Patterson says. 'We thought, ''How can we turn this SEC obligation into a communications opportunity?'' And that became the mantra of the planning stage.'
Perking up
With a fair measure of advertising talent on staff, EAI decided to treat Seagate's annual as a product launch or the roll-out of a big event. 'It's the age-old marketing paradigm,' muses Patterson. 'We've got to get people to be aware, got to perk up their interest, got to create some desire in them, and hopefully they'll be spurred into some kind of action.'
Those lunch-time bull sessions were also underscored by MSNBC playing in the background with the stock ticker rolling across the screen, prompting the EAI team to consider those companies whose stock symbols are instantly identifiable – such as KO or MSFT. Another goal was to make SEG just as well-known – 'an awareness campaign plus an annual report,' Patterson says.
It was but a short step from those musings to the idea of hitting the Journal's 2 mn readers with the annual report and making it a well-promoted event along with the launch of the online annual report and CEO webcast.
But wait a minute: is this legal? Patterson spent hours at the SEC explaining Seagate's plans. 'There's a little fuzziness there because they've never looked at anything like this, and they're very precedent-oriented – if it's been done, it's legal,' he says. The commission had the company file a formal letter of intent and while it didn't say yes, nor did it say no. That meant a green light to go forward, though one last minute change in response to the SEC was to identify the Journal spread as a 'summary' annual report instead of just 'annual report' as Seagate and EAI would have liked.
The next battle was with the Wall Street Journal. Naturally the Dow Jones ad men were ecstatic over the project – here was an incremental revenue stream they had never even imagined. Indeed, the Journal was so excited that it ended up running Seagate's summary annual report a second time for free. The problem for Montero and Patterson was the Journal's initial insistence that the placement be described as a 'special advertising supplement'. Seagate and EAI were adamantly opposed to this term, and had to play their trump card: 'If they wanted to participate, they were going to have to bend their rules. We got them to back down because this is very good for them money-wise,' Patterson says.
Custom tailored
As the launch date drew near, other factors of the campaign were underway. EAI's sister company, Elemental Interactive, designed the online annual report especially for the web instead of taking a printed piece and translating it to the online medium. 'It was exactly how we thought information should be presented online,' says Montero.
'We also wanted to make the online annual report deeper and richer so there would be a reason to go there,' adds Patterson. 'So we thought of the webcast – a more in-depth look at things we hinted at in the Journal, a straight-from-the-horse's-mouth message from CEO Steve Luczo.'
Montero says the webcast was intended to include 'more future-looking statements in a forum that everyone can have access to.' He points out that research commissioned by Seagate from Rivel Research indicates that professional investors like to have a one-on-one dialogue with the CEO and CFO as often as possible. The webcast interview of Steve Luczo by Alexa McCloughan, an industry analyst with International Data Corp and a former securities analyst, was designed as a substitute: 'What's the latest and greatest? What is your vision of where Seagate and the whole storage industry are going in the future?'
The whole campaign was promoted heavily with banner ads on the Journal's online edition and on sites such as the Motley Fool and CNNfn specifically targeted at retail investors, who hold around 30 percent of Seagate's outstanding shares. Meanwhile, communications agency Ruder-Finn worked to set up interviews for Luczo on the likes of MSNBC's Power Lunch or Moneyline. But in the end these activities were squashed by the CEO. Considering that Seagate had announced with its Q4 results that it would be challenging to be profitable in Q1 and Q2, Luczo was concerned that the gloomy outlook for the disk drive industry would overshadow the news about the annual report launch. That put paid to at least four broadcast opportunities, as well as radio and press interviews that had been lined up in the two weeks leading up to the launch.
Shake & stir
D-day arrived on September 1, and the innovative annual report launch caused a fair stir. Seagate got feedback from a variety of sources, even competitors, with many wistfully wishing they had thought of it first. One disappointment was the lack of interest from the major business press. Montero says Seagate's usual Journal reporter 'couldn't touch it with a ten-foot pole' because it was too close to home, while Investors Business Daily and the New York Times ignored the news because their number one competitor was a key player.
Patterson points to the benefit of being able to measure the impact of the campaign day. 'Usually there's no definite delivery date. We could measure click-through rates from internet banners, web-site traffic, and readability in the Journal. We could even look at what the stock did that day.'
Seagate is now waiting to see how many other companies will follow suit. From a cost standpoint, it is hard to dispute the benefits. This year's annual report budget was the same as last year when it printed 190,000 annual reports of around 60 pages. By using the Journal as a vehicle, it increased that reach tenfold for no additional cost. In fact, the total cost came out at $10-20,000 less, even including the extra costs of the PR campaign around the launch. And there are more ways to save, says Montero, for example by including the Journal spread in negotiations for an annual advertising commitment.
While Montero admits the strategy may not be right for every company, 'We definitely believe it's right for us, and highly doubt that we'll ever go back to a traditional annual report,' he says. 'We say information the way you want it. Do we really mean that or is it just a catchy tag line? I think we showed everyone our out-of-the-box thinking.'