Channel, Weekly Digest

Investing in Social Media: is Social Media for Investor Relations Risky?

Social media has become a major force in communications, with many consumers getting news, product reviews, and other information from these sites instead of, or at ahead of, traditional channels.

social likeAs of June 2013, Facebook reported that it had 819 million monthly active users of their mobile products (using smartphone and tablet apps) and 1.15 billion in total. In May, Twitter’s number of users topped 550 million. YouTube attracts more than 1 billion visits every month, reaching more 18 to 34-year-olds than any cable network.

Social media is popular with companies wanting to reach consumers, but most have been slower to adopt the medium for investor relations. According to a 2013 survey by NIRI Analytics, 72% of IR professionals were not using social media for their work — but 49% of those said that, in light of recent SEC guidance, they plan to reassess the issue in the coming year.

FINRA Regulatory Issues

One obstacle preventing may public first from using social media to reach investors is confusion over how FINRA rules would apply to the medium. Thanks to the SEC’s guidance update in March of this year, the rules are a little clearer. That, along with the SEC’s promise to issue ongoing releases as part of their “IM Guidance” series, may make IR professionals more comfortable using social media.
A few things to keep in mind when communicating with your investors via social media include:

  • You need to keep good records. You may be subject to FINRA spot-checks of your social media communications, and keeping a record of every interaction is key.
  • Designate and limit the people you authorize to post on behalf of your company — just as you would for press releases or media interviews.
  • Familiarize yourself with the rules, and make sure everyone authorized to post on your behalf is clear on them, as well. Come up with a plan for your social media campaign that includes items that are strictly off-limits.

Best Practices

Once you’ve got everyone on board with the regulatory requirements, it’s time to work on your social media plan. Start with solid research using the very social media channels you plan to adopt. How are people talking about your company, which sites are they using, and what misconceptions, if any, are being spread about you online? You’ll also want to know what sorts of things your competitors are sharing on their profiles, and who’s following them.

Next, check the sites you intend to use for any analytic tools they may offer to corporate users. These stats will help you determine the success of your social media strategy, as well as which direction you may need to go next.

Build a solid social media strategy with clear goals. What do you want to achieve with your social presence? Do you want to take an active role in keeping investors informed about your industry and events your company may be sponsoring or participating in? Or is your main goal just to monitor and respond to chatter already going on about your business?

If you’re going to be active, you’ll need to plan time to develop or source industry educational content as well as making sure that all posts about your company meet IR guidelines. You can keep investors informed on company activities between quarterly reports, share relevant news and other updates about your industry from other sources, or share links to important posts on your other social channels. You can’t offer opinions or mix your IR activities with other marketing initiatives.

Social media has become an important communications hub, and can be a useful tool in your investor relations program — as long as you have a clear plan and are well informed on FINRA rules.

Elizabeth Gooding

Elizabeth Gooding is the editor of the Insight Forums blog and president of Gooding Communications Group

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