Regulation Social Media is the new Regulation FD

July 2, 2013
social media adoption chart

This post was written by Joe Hassett, Senior Vice President

One of our clients shared with us two new social media studies released in June by the National Investor Relations Institute (NIRI) and Corbin Perception Group. NIRI examined the use of social media by corporate investor relations officers (IROs), while Corbin looked at social media use by institutional investors. Together, the results showcase findings about how investor relations officers, the sell side, and the buy side use social media.

If you haven’t read the reports yet, you might be thinking that you could take a good guess at what the researchers found — that few IROs and institutional investors use social media. After all, it’s no secret that many IROs have resisted social media, mostly due to the regulatory environment, while investors are still skeptical of the value social media provides.

But a closer review of the reports shows that IROs and investors have a mixed use of social media. Opponents and advocates of social media can use the findings to make their case. In fact, based on our experience in the area and a deep look at the findings, we see some of the strongest data to date illustrating social media’s growing importance in IR communications, and the benefits companies can gain from folding social media channels into their overall IR communications program.

CATCHING THE CURVE: Investors and IROs have lagged in social media adoption

Several of us were talking about these findings throughout the following days, and we distilled our thoughts into an internal memo to our client. We want to share a version of that memo with you to articulate what these reports really demonstrate. Here is a version of that memo, which we hope you’ll share with others who’d be interested in the studies or have already seen them.


The Corbin report shows that institutional investors have a mixed use of social media. About half of investors use social media in their work (52 percent), and about half don’t (48 percent). Social media is even less prevalent among IROs, with 72 percent reporting to NIRI that they do not use social media in their work.

Since investing is all about information, we need to recognize that good data is good data — and bad data is bad data — regardless of the source or channel. According to the Corbin report, 92 percent of institutional investors consider the information gleaned from social media sites as either “somewhat or not at all reliable.”

This isn’t surprising. Since social media is an open forum, it provides the ideal — even legitimate — platform for abuse, which, unfortunately, has been the bane of the investment community time immemorial, especially for microcap companies. It is possible investors see social media as just the most recent in a long list of communications vehicles that have been hijacked by unscrupulous self-promoters. And so the reputation of social media around the investment community has been tainted.

At the same time, 46 percent of institutional investors said the content on social media has influenced their investment decisions, according to the Corbin report. Various authorities have been analyzing sentiment and other attributes of social media to virtually gain a real-time sense of how a company’s customers view its products and how they use that data as part of the mosaic of information on which they base their investment decision. So, what is happening on social media is not being completely ignored by the investment community.

These results could also illustrate the difference between various generations of investors, with the younger generation being much more comfortable using social media than their older compatriots — traditionally late adopters. This shows that many investors are finding value in social media content, which contradicts the 92 percent who say the information is “somewhat or not at all reliable.”

That’s why the SEC’s recent announcement allowing companies to use social media to disseminate information is important. Forty-three percent of institutional investors say they will use social media more as a result of the SEC’s announcement, according to the Corbin report.

Similarly, 49 percent of IROs who don’t use social media for IR plan to reassess the issue within the next 12 months. This reassessment is mainly driven by the SEC’s new guidance, according to the NIRI report. These findings indicate that investors and IROs alike will be increasingly expecting to distribute and receive information via social media, creating an opportunity for companies to use these channels to meet their audiences’ needs.

Still, these findings only serve to reinforce the basic tenet of any communications program — adoption of social media requires an improvement in the quality of the content. To bring greater veracity to the information on social media channels, companies will have to develop defined strategies for their social media programs that align with their business objectives. Such a strategy includes publishing reliable information that meets the audience’s needs.

Here’s an idea. Go beyond the quarterly earnings release and publish additional financial insights on the company’s blog. Quarterly earnings are some of the most important information investors seek. In-depth blog posts on this subject matter provides greater value to investors and shares the information in more ways, depending on investors’ preferences or what they happen to see first online.

Any successful social media program, however, requires companies to better understand and serve their audience. Ultimately, the audience decides what is valuable to them and what isn’t. But that’s the beauty of social media. It is a two-way communications vehicle that lets companies easily open a dialogue with their audiences to understand their needs in real time. What’s more, companies can push valuable information into the market quickly and inexpensively.

Companies should test various topics, angles, and analysis in their social media communications. Study what sticks and what doesn’t. Publish about hot topics in fresh ways. Experiment with new ideas. Innovate beyond the basic publishing structure of the blog post, and build content strategies that feed other social channels and combine to achieve business objectives. These are just some ways companies can take the high ground with social media and provide thought leadership, not self-promotion.

The Corbin report also asked investors which sites they most often monitor for company and industry information. The largest pool (39 percent) said financial blogs. In contrast to corporate blogs, this observation suggests that independent financial blog publishers are viewed as media who provide solid research and analysis on companies. So much so, that investors are actually using their stuff.

Given the shrinking sell side, perhaps this is a portent of things to come. Some financial blogs, such as Seeking Alpha, already claim a following of over 1 million readers on their sites, and have reached over 115 million users on Twitter over the past 12 months, according to our social media analysis tools. Now consider that each blog reader and Twitter follower is not merely an individual, but a social network of hundreds of other readers, and you’re in front of a massive audience.

This is important from both a PR and social standpoint. In terms of PR, top financial blogs can be key pitching targets to generate buzz on a company’s news and thought leadership. From a social standpoint, companies can contribute thought leadership articles to these targeted financial blogs. These approaches would significantly expand a company’s access to its targeted audience.

Bear in mind, social media’s entrance into virtually any industry to date has been on a curve. There’s usually skepticism at first, slowly followed by early implementation, and then mainstream adoption. IROs and investors are exhibiting this same behavior. The trend is not unlike the early days of IR pages on websites. These pages were once met with skepticism, but are now one of the top places to go for investor information.

Companies’ social media sites show clear potential to be go-to sources for investor information in the same way — as well as provide a place for dialogue, debate, and discussion. The key is that the information must be accurate, informative, and meet the audience’s needs. The #1 rule of communications is, and always will be, know your audience. The audience will go to the communications channel where its needs are being met.

All in all, we see the findings as right in line with the general adoption curve. Companies that start implementing strategic social media programs now — or better yet, began these programs in the past couple of years — have a first-mover advantage to help drive positive industry buzz about social media and spark adoption of social media to disseminate reliable information that meet investors and IROs’ needs.

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