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Nov 17, 2010

IROs remain cagey about social media

Roundtable participants are cautious but actively looking into the options available

Communications professionals are not yet fully convinced of the value of social media for investor relations, according to the participants at a roundtable hosted by IR magazine in association with Hemscott.

This fact was backed up by the results of a survey undertaken by IR magazine as research for the roundtable, which finds a majority of European IROs do not use social media for investor relations purposes.

The survey – which garnered responses from 50 IROs, including names from some of the biggest companies in Europe – finds 78 percent do not use any form of social media for IR.

But the roundtable participants expressed an interest in developing a social media strategy for IR, provided that strategy could overcome concerns about compliance.

An air of caution was evident at the roundtable, as the participants discussed how social media strategies already being used in other departments at their companies could be transferred to investor and analyst communications.

One key obstacle is compliance risk. One participant said, with regard to senior management blogs, that it is hard to say ‘anything interesting that’s not commercially sensitive.’

Another participant, who works in the financial services industry, said he has to be very careful about what is said in public about his company’s products, as special rules apply to financial products. ‘Our biggest problem is compliance, what you can and can’t say about different products,’ he explained.

A third participant discussed the difficulty of getting anything new or innovative past the legal department. He explained how lawyers at a previous company had encouraged him not to publish his own consensus estimates, as few other companies were doing it at the time. The problem, he said, is that lawyers are very cautious to sanction a break from the norm.

Of the survey respondents who do not use social media for IR, the majority said they did not feel it was of interest to the investors and analysts they are trying to reach.

‘I don’t think it’s relevant or interesting for the institutional investors that represent our focus,’ said one.

While cautious, the roundtable participants were interested in exploring ways in which social media could be used to aid IR teams.

One participant said he is looking into the possibility of doing something as part of a wider campaign by his company to investigate the scope of social media tools. ‘People may not be coming onto our website, but we still want to influence them – we want to tap into that source,’ he said.

Participants agreed that the annual general meeting would be a great opportunity to use the power of social media. As one attendee pointed out, the event involves great amounts of time, effort and money – and then might be attended by only a small number of minority shareholders. ‘There must be a better way of engaging at the AGM using technology,’ he said.

The survey reveals that just over a fifth (22 percent) of respondents use some form of social media for investor relations purposes. Of those who do, the most popular tool by far is Twitter, with 75 percent saying they use this medium. The next most popular tool is YouTube (42 percent), followed by Facebook and a corporate blog (both 33 percent).

Retail investors and the financial media are seen as the main audience of IR departments’ social media output, but a significant number of survey respondents say they view analysts (36 percent) and institutional investors (25 percent) as the end-users.

One roundtable participant said the debate about IR and social media reminded him of the discussions that grew up around the use of bulletin boards, when company websites were first being set up.

‘What is the best way to respond? That’s a tough one,’ he said. ‘The challenge is changing people’s opinions. But there is no point trying to influence what most people regard as tittle-tattle.’