Is the IR profession underestimating social media?
It’s been nearly five years since the bell rang to initiate Twitter’s IPO on the NYSE, marking a significant milestone for the company that reinvented modern-day communications.
Despite the company’s own participation in the equity markets, debate still rages among IROs regarding the role the Twitter feed should play in communicating financial information.
Attitudes toward digital IR methods are evolving
In today’s digital environment there are few corners of the communications industry that social media hasn’t touched. Traditionally, financial communication has been one of the slower sub-sectors to embrace these changes, but it is making strides nonetheless.
Two studies from 2015 demonstrate why IROs should be considering using social media as part of their program. First, BNY Mellon’s Global Trends in Investor Relations report identified a growth in companies across all sectors and geographies using social networks for investor relations purposes, and found it was the bigger companies that were most likely to do so, with 54 percent of mega-cap corporates saying their companies used the likes of Twitter and Facebook for IR. This compared with just 26 percent of mid-cap firms.
So what is it that’s driving large corporations to lead the charge when it comes to social networks and IR? The short of it is this: when used properly, social networks can be used by companies as additional tools to communicate with their key stakeholders in order to further control their external reputation. A good example of this is how some companies, such as Salesforce, are using Twitter feeds as an extension of the IR website, offering an alternative, live forum for investor and analyst engagement in addition to traditional media.
It would be foolish to suggest that traditional regulatory channels are about to be replaced by 280-character posts sent from an iPhone, but there should be little doubt that in 2018 there is a need for a well-rounded, multi-channel approach to financial communications.
Investor appetite for social networks
Despite increasing engagement across the profession, there remains an element of reluctance when it comes to social media in IR, and those companies that are still not engaging often cite a lack of demand from institutional investors. This may, however, be a slight misinterpretation, as there are clear signs investors are looking at new access points for company information, with many turning to social media.
Market intelligence firm Greenwich Associates, also in 2015, questioned 256 corporate and public pension funds, insurance companies, endowments and foundations in the US, Europe and Asia on how social networks influence the investing process. Contrary to many assumptions in the market, 80 percent of institutional investors said they used social media as part of their regular activities, with 30 percent of these admitting it influenced their investment decisions.
Emerging from this research is an evident mismatch between how some investor relations teams and some institutions view social media. Corporates, large and small, still appear to be underestimating the power it has as a tool for attracting new investment and maintaining existing relationships.
Moreover, firms need to consider what using social media says about them. For a technology firm, for example, it might be more appropriate for its IR team to be seen using social networks than for the team at a b2b construction company. While the substance of what you say will always remain of greatest importance, in today’s world, how you say it is increasingly important, too.
Clearly, there are regulatory considerations to be aware of before diving head first into a Twitter outburst (as Elon Musk is no doubt learning) and some channels will always remain necessary and integral to an overall investor relations program, as social media alone is very unlikely to be sufficient. But one thing is for sure: social media as a means of financial communications is here to stay.
Ambrose Fullalove is senior account executive for financial services at Instinctif Partners