For companies there seem to be a trillion reasons why they should start using and paying attention to Social Media. The use cases range from creating loyal customers to getting feedback about products and services, from offering an additional channel for customer service to pushing out marketing messages, from informing existing and potential clients/consumers about products and events to staying updated about what competitors are doing. Give yourself a few minutes and you probably will come up with dozens of more reasons.
But there is one benefit of Social Media that is remarkebly absent from all the top lists you find online about why companies should start to use Twitter, Facebook, Blogs, YouTube and so on: To improve investor relations (IR) and to disseminate firm-initiated disclosures and news. By using Social Media channels, especially smaller and medium-sized companies can reach out to existing and potential Investors and keep them informed.
On IR Web Report, a web site specialized in publishing research and news about online investor relations practices, we found an interesting interview with Hal White, assistant professor of accounting at the Ross School of Business at the University of Michigan. Together with a two other researchers from the same school Hal has created an academic paper trying to answer the question whether companies now – while being able to use direct-access information technology – can act as their own information intermediaries.
One of their key findings is that Twitter appears to be an effective way for firms to communicate with investors and to disseminate information to the stock market. And this is especially true for those firms which are too small, insignificant or simply too young to catch the mainstream and industry media’s attention. Funny enough these are the companies that usually have the biggest need to establish investor relations (e.g. technology startups looking for funding).
For people who are enthusiastic about the new ways of communication enabled by the digital revolution – like us at Twingly and probably most of you, our dear readers – this doesn’t come as a big surprise. But as IR Web Report author Dominic Jones states, for many people in the IR community the common believe is rather that Social Media is a waste of time.
In the extensive interview, the researcher Hal White gives some deeper insights into the study the report is based on. The three professors took a sample of technology firms (due to their qualification as early adopters), analyzed their tweeting patterns and looked at whether Twitter messages, especially those based around news-events and press releases, had a significant impact on the information environment of the company. Usually, it had. And usually, tweeting was clearly beneficial for the less visible companies but not so much for the more visible companies that are already getting attention (often with the help of newswires).
Hal White also gives en explanation of why it is mainly Twitter that has been embraced by IR departments. He assumes that this is because of Twitter’s short messaging style, which makes it easy to spread a news even to people on their mobile phones, and to do so in real time. It’s the best way to reach out to investors who often are on the go and who need to be as efficient as possible in their news and information management. The researchers also looked at blogs but found that there was a lot of opinion and two-way-communication rather than a strong focus on distribution of press releases and news (which, as boring as it sounds, is what investors need, at least in the initial stage).
Assuming that the report is right (which we don’t have any doubts on judging from our own experience with using Twitter for Twingly-related news), the best thing you as a small or mid-sized company can do is start using Twitter for publishing your corporate news, following venture capitalists, business angels and other seed investors, serial entrepreneurs, and of course the financial press. Some will follow you back. Let’s see if it will help you to create and improve your investor relations (and eventually get funded).