“But social media for investor relations won’t work for my company!”
The use of social media is radically changing the way our society communicates – and the investment community is no exception. But many investor relations officers still refuse to use social media as an IR tool. I’ve heard any number of reasons why “social media for IR won’t work for my company.” Our business model is primarily B2B. The retail shareholder base is small. Our market cap is less than $500 million. My corporate counsel tends to be conservative regarding disclosure. Notwithstanding the huge volume of research that supports the use of social media in IR, I think it would be easier to land a lunch with Warren Buffett than to convince the typical IRO to set up a Twitter account.
I recently spent a whirlwind of a week focused on social media in investor relations. The NIRI Westchester Connecticut chapter invited me to serve on a panel discussion entitled, “Investor Relations and Twitter – To Do or Not to Do?” with Darrell Heaps, president & CEO at Q4 Websystems (@darrellheaps), Dan Dykens, co-president at Meet the Street (@meetthestreet), and Doug Chia, senior counsel & assistant corporate secretary at Johnson & Johnson (@dougchia). I was pleased to see that more than half the room had at least been on Twitter. Two questions seemed to preoccupy the audience: “what should we know about using Twitter,” and “how can we use it as part of an effective IR strategy?”
Twitter is important, but it’s far from the only way to use social media as an IR messaging tool. Given the wide range of social media platforms – each with its own etiquette and user ecosystem – the easy, low-risk way for an IRO to get started is to set up a social media monitoring program to keep track of conversations that are going on about the company on the Internet. Several tools are available to help organize and streamline the monitoring process. SMA has listed some of them in a handout, which can be accessed here.
A social media monitoring program will uncover who is talking about the company; the industry journalists who are on Twitter; the influential bloggers; traders who are sharing stock tips; competitors’ social media practices; potential customers; employees’ usage, and other kinds of useful information. A comprehensive social media monitoring program also should keep tabs on the practices of companies with an established social media presence, like Cisco. (More about Cisco below.) Understanding how similar companies are using social media makes it easier to take the next step, which is to determine what combination, if any, of the social media platforms (blog, Twitter, Facebook, video, etc.) will best support the company’s IR program.
Earlier that same week, NIRI’s Boston chapter hosted a “Social Media Debate” moderated by Serena Ehrlich (@serena), SVP Social Media at Startup Army and featured an expert panel that included Laura Graves, director, global investor relations at Cisco, Adam Feuerstein, senior columnist at TheStreet.com (@adamfeuerstein), and Megan Gates, attorney at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. There certainly was truth in the title here as a lively debate ensued.
Cisco has successfully incorporated social media into its outreach program through a corporate blog, video posts on YouTube, Twitter and a Facebook page. Their strategy is to leverage existing content and public statements by repurposing them via social media to strengthen or “clarify” the company messages. For example, when announcing a new product, Cisco will post answers to its most anticipated questions on the website and direct incoming inquiries to that page. They report that this strategy has noticeably reduced the number of incoming calls after an announcement.
Ms. Graves was presented with a variety of questions and statements from IROs concerned that this strategy could get them in trouble with the SEC. One participant questioned why Cisco would not include the information from any anticipated questions in the news release, while another shared concern about clarifying messages via the blog.
It’s important to note that Cisco’s market cap is $150 billion. What works for a large cap might not necessarily work for a smaller company. Another hurdle might be convincing management and legal counsel that implementing a social media strategy is necessary and worth the risk. This may be easier said than done, so we recommend maintaining a “social-media clippings book” of content found online, such as tweets or blog posts that mention the company. The sheer number of mentions likely to turn up will support the need to develop some type of formal social media program – if only for defensive purposes, initially.
Finally, before creating a corporate IR presence on social media platforms, it’s important to implement a social media disclosure policy with clear employee usage guidelines. It can be an eye-opening experience for companies to discover what their employees are sharing about their business online.
Social media may seem intimidating at first, so a monitoring program is a good place to start. What you find may surprise you.
Dennis Walsh (@DWalshIR)
Senior Associate & Social Media Specialist