Posts Tagged ‘PR’

Investors, golf, cancer & social media

May 7, 2010

Two communication folks from American Century Investments, a mutual fund firm with about $60 billion under management, gave a great talk today at the Social Media Club of Kansas City on an online campaign building the company’s brand.

As investor relations and corporate communication people at many companies are exploring social media – dipping our toes in the water – I thought I’d share some lessons from the American Century experience. They’re privately held, but dealing creatively with interactive new media in our highly regulated financial world.

Brent Bowen and Jamie Needham of American Century gave a case study on the American Century Championship celebrity golf tournament at Lake Tahoe – and what the company does to promote its brand through social media from the event.

Of course, the event starts with some advantages. This is golf, with a network TV audience that also can be online. The tourney draws celebrities ranging from Charles Barkley to Ray Romano. They’re playing because the event is a benefit for Lance Armstrong’s LIVESTRONG campaign against cancer. And golf is somehow woven into the DNA of many investors – American Century’s audience.

So it’s a natural. But the American Century team did a nice job with social media approaches that I think would fit for small or large companies – even firms that can’t bring Michael Jordan to their event. A video is available here (uncut, so fast-forward to ~12 minutes to skip Social Media Club housekeeping stuff).

My own interpretations from the American Century experience:

  • An event helps ignite the online conversation. To get people you’re not paying to start posting on Twitter or their Facebook pages, you’re best to tap into their interests with something that’s happening. Could be an earnings announcement, but don’t expect that one to go viral. Social media focus most easily on events that build corporate brand awareness or help launch products. IR is a smaller part of the picture – but should be present.
  • A feel-good cause gives momentum to a social media campaign because people get excited about doing good more than about a company making money. American Century wisely put all the emphasis on LIVESTRONG and helping cancer patients – all except, of course, that the event is called the American Century Championship. People who are online get excited about supporting cancer patients in the battle of their lives. Or about their favorite sport. Or an art show or concert. Or defeating hunger or disease.
  • Listening comes first. American Century started with “no social media presence – no Twitter account, no Facebook account” – Brent says. They began by searching out 20 to 25 key words in the online interactive space. What are people out there saying about us, our cause and our partners? They asked people in the industry what they want to hear – and the answer was, in addition to just investment products, to learn what makes the company tick. Investment people asked for that softer side, in other words.
  • Plan the content. As Brent says, “Content plan, content plan, content plan.” Sure, tweeting looks all spontaneous. When people post to Facebook it’s personal and folksy. YouTube videos capture those wacky moments. But the corporate message comes through because it is planned. Spontaneous stuff comes from being flexible in addition to following the plan.
  • Legal can get comfortable with social media. American Century puts on webinars in which its investment officers help the investing community understand what’s going on in the markets. The communications team decided to “live tweet” a webinar – which means giving a series of 140-character messages summarizing what the speakers say, as they say it. Anyone who follows @AmericanCentury gets the tweets in real time. The “story behind the story” is that a compliance officer sits next to the person doing the live tweeting – it’s real-time compliance review. Hey, IR could do that.

If you’d like more, watch this morning’s video or explore American Century’s golf tournament site. Congrats to this Kansas City company on a cool national event.

© 2010 Johnson Strategic Communications Inc.

Advertisements

PR does matter

July 8, 2009

Media-and-manI know, I know. “It’s all about the numbers.” Investor relations people (and some CEOs and CFOs), steeped in accounting fundamentals and valuation formulas, are skeptical of public relations. We scoff at press interviews, photo ops … the “spin” stuff PR people do. Of course, no respectable fund manager or analyst would admit to being swayed by a press release, or getting an idea from a newspaper. “It’s all about the numbers,” they say.

Trouble is, influencing the market is not all about the numbers. It’s all about the numbers – plus getting the right people to pay attention.

Two recent studies from respected business schools analyze extensive data on the relationship between press coverage and the market for individual stocks – and conclude that broader dissemination of news has benefits in the capital markets.

The more comprehensive study, a doctoral paper by Eugene Soltes at University of Chicago’s Booth School of Business, looks at all US nonfinancial companies traded on NYSE, NASDAQ or AMEX, excluding the 100 largest by market cap. Soltes and his computer programs count and analyze all articles on these firms, 9.3 million bits of news in total, from the Factiva database for 2001 through January 2007. Then he crosses that information with annual trading data on the stocks, looking for long-term effects rather than a daily “pop” in market activity. Soltes concludes:

The press provides an important and highly visible system of communication between firms and investors. … Specifically, greater dissemination of firm news is found to lower bid-ask spreads, increase trading volume, and lower idiosyncratic volatility. …

By increasing the visibility of firms, greater dissemination may also reduce a firm’s cost of capital.

In this paper, “dissemination” has to do with putting news out and getting it covered in the business press. Soltes says the average firm sent out 21 press releases a year, one every 12 trading days, covering deals, earnings and other news. (His tables give a median of 14 releases a year, just over one a month, a figure I like better as the midpoint in a range of small to large companies). For each release, business publications wrote an average of 1.5 articles – obviously, many releases get no coverage, while some get a lot. Soltes did not investigate why some releases get more coverage – being newsworthy probably is the key, although making connections with reporters also helps.

Soltes’ point is that more is better – more frequent issuance of news and broader coverage of it. Consider the impact of news dissemination on bid-ask spreads:

Based on an average sized trade, a 20% increase in press coverage reduces the average cost of a trade by $1.07. With the average firm having nearly 25,000 trades a month, this translates into a significant reduction in trading costs.

Soltes also finds more dissemination of news increases monthly trading volumes and decreases the volatility of individual stocks. Most companies – and institutional investors – value reduced trading costs, increased liquidity and lower volatility.

The other recent study, by Brian Bushee and three accounting colleagues at the University of Pennsylvania’s Wharton School, focuses on quarterly earnings news. This one looks at the three-day window around earnings (earnings release date, plus or minus one trading day) and yields more detail on immediate trading effects.

The Wharton study looks at quarterly announcements by 1,182 medium-sized NASDAQ firms from 1993 to 2004, excluding large cap companies based on an assumption that differences in coverage are more marked among lesser-known names. The authors analyze 608,296 articles on those quarterly results:

Our results indicate that, ceteris paribus, press coverage has a significant effect on firms’ information environments around earnings announcements. We find that greater press coverage during the earnings announcement window is associated with reductions in bid-ask spreads and improvements in depth.

The impact of media attention extends to retail and institutional investors:

We find that greater press coverage is associated with a larger increase in the number of both small and large trades. … For small trades, these results are consistent with the press providing information to a broader set of investors and triggering more trades. For large trades, these results are consistent with press coverage reducing spreads and increasing depth enough to reduce adverse selection costs and encourage more block traders to execute trades.

Both papers take a mechanistic view of corporate processes for disseminating news and how the media respond. These are data mining studies by accounting scholars – focusing on numbers of releases and press stories, word counts and similar measures of dissemination.

No attention is given to the qualitative nature of the news – positive, negative or nuanced. The authors also do not explore why reporters decide to write more, less or not at all. (The Soltes study does analyze “busy news days,” when a flood of business or nonbusiness news overwhelms XYX Company’s little press release, and confirms that issuing news on busy days has little benefit – although companies obviously can’t control when Michael Jackson dies or GM goes bankrupt.)

Neither of these studies venture outside of traditional “news” databases to analyze the impact of using social media, blogs and so on, to disseminate news. My guess is future studies will prove that the impact on markets comes from getting the word out, by any means, as long as you are reaching the investing audience.

Bottom line: Issuing news has a measurable benefit for public companies in the capital markets – increasing volume, reducing trading costs and reducing volatility. More frequent news is better. Getting more reporters or news outlets to write about the company amplifies the benefit. That’s what the quantitative evidence says.

So when PR people speak of “creating visibility,” it does matter in the market.

Reputation ‘now more than ever’

June 24, 2009

The financial and economic crisis has seriously eroded the trust people feel for business generally and specific corporations – and companies need a concerted, sophisticated effort to repair the damage – three McKinsey & Co. consultants write in “Rebuilding Corporate Reputations” in the firm’s June 2009 newsletter.

Today is an especially tough environment for corporate reputations, the consultants say. The onslaught of online participatory media, scrutiny from nongovernmental organizations, and waning trust for advertising make it harder to be believed. And all this comes at the same time that policy makers are eager to make an example of corporate executives and impose new laws and regulations on their industries.

Old-line PR tactics will no longer work in this environment, the authors say:

Now more than ever, it will be action—not spin—that builds strong reputations. Organizations need to enhance their listening skills so that they are sufficiently aware of emerging issues; to reinvigorate their understanding of, and relationships with, critical stakeholders; and to go beyond traditional PR by activating a network of supporters who can influence key constituencies.

A company fighting for its reputation must marshal a coordinated cross-functional response including investor relations, communications, marketing, legal and regulatory, and corporate social responsibility, the consultants write (OK, OK, they mention IR last). And reputation management must begin at the top:

… it’s the CEO who must lead a company’s overall reputation strategy, ideally with the support of a board committee focused on it. This may seem like a lot of firepower, but in today’s climate, with reputational issues threatening both shareholders and a company’s ability to achieve broader goals, that degree of high-level attention and integration is essential.

Investor relations professionals should be big-picture people, and the intersection of reputation, industry standing in the public policy arena and shareholder value is ample reason for IR to join in the effort to understand and build reputations.