It wasn’t too long ago that keeping tabs on what internet chat room participants were saying was an investor relations officer’s worst nightmare.
Like fighting ghosts, IROs found themselves stamping out fires fueled by renegade chat room investors – with an axe to grind and an anonymous persona – with no way of holding these cyber-troublemakers accountable.
Take America Online. While the internet giant is celebrating its recently approved mega-alliance with Time Warner, a chat room brush fire in July 1999 had the company hot under the collar.
The posting, which appeared in Yahoo’s investor chat room, purported to be an announcement about an $89 mn strategic alliance between AOL and Canadian online auctioneer Bid.com International. While quick to denounce the posting as a hoax, AOL’s IR staff didn’t know who was responsible for the bogus release.
According to a report the following day on Bloomberg News, the fake announcement, which appeared at about 9:53 am on July 8, 1999, was retracted about 35 minutes later by a bulletin board user with the internet moniker ‘Jag98’. ‘Sorry guys about the post. That news was something I hope will happen…Sorry again guys, just letting some steam out,’ Jag98 wrote on the Yahoo message board.
The posting’s impact on Bid.com’s stock price generated some steam of its own. Trading at about $8 per share just before 10 am on the day the message appeared, Bid.com’s shares rose to $9 in a little more than an hour, rising even after Jag98 issued the retraction. More disconcerting was the post’s impact on share volumes in Bid.com. The company’s trading volume, which had averaged 154,000 shares per hour between 6:30 and 8:30 am that day, surged to over 957,200 shares between 9:30 and 10:30 am, and to more than 1 mn shares between 10:30 and 11:30.
AOL and Bid.com were hardly alone. In a more severe case of chat room skulduggery, Impath Inc suffered a far worse fate in June 1998 when the cancer information and analysis firm was forced to deny that it was under investigation by the US Securities and Exchange Commission. Even as the company was responding to rumors on the internet that it was the subject of such a probe, its stock price dropped from $38 to $30 within hours.
Fighting back
In 2001, investor relations officers have seen enough of these fraudulent web postings.
By working with web surveillance specialists like eWatch, Cyveillance, and IBNet, IROs have begun monitoring chat rooms and tracking what participants are saying. It’s a good strategy in the gung-ho era of the internet, some say, where the lines between corporate allies and enemies are blurred.
‘Online share dealing and the interest of investors in company activity has led to active bulletin boards and chat rooms providing the means for both legitimate and unscrupulous individuals to spread rumors,’ says Mark Ommanney, CEO of IBNet.
‘How do you know that they are not targeting your business or indeed your roster of clients?’
The fact is, you don’t. Thanks to the internet, people of all economic and social classes can express their views online, usually free of charge. The web is truly the great socioeconomic equalizer. One of the drawbacks, though, is that newly-empowered users can also express those views maliciously, anonymously, and in an unedited fashion.
‘The advent of the internet has changed the way we live, work and communicate,’ says Todd Bransford, director of product marketing for Cyveillance. ‘This new medium has revealed countless opportunities for businesses leveraging it to its fullest, but it has also unearthed unique ways companies can be victimized for the sake of revenue, traffic and their competitors’ credibility. The only way to mitigate these risks is for companies to fully understand their internet presence and maximize the impact they have on the web.’
That’s where the web surveillance specialists enter the picture. With the estimated number of pages available on the web at 2-3 bn, roughly the amount of pages stored in the Library of Congress, and heading to 4 bn in 2001 according to Cyveillance, it’s impossible for IROs to monitor what’s being said about their companies on the net.
Web surveillance companies can help frustrated IROs. Using a hybrid of new-fangled web tracking software and old fashioned shoe leather to monitor and identify chat room discussions in every corner of the globe, companies like eWatch, Cyveillance, and IBNet are helping IROs fight back against fraudulent internet posts. In doing so, cyber scam artists are finding that they’re suddenly being held accountable for what they say online.
‘All too often, IROs would wake up in a crisis scenario,’ says Nancy Sells, vice president of eWatch, a subsidiary of PR Newswire. ‘But with good web tracking tools, they’re in control. The ones who’ve worked with us know that the best way to use internet monitoring solutions is to deploy them before a crisis, before leaks and rumors and defamation get to the public’s attention.’
Blueprint for success
How do the web surveillance specialists work? Primarily by monitoring, searching and identifying just about anything anyone writes or says on the web. These companies scour the internet for evidence that someone is deliberately spreading rumors or denigrating a company, hoping to profit financially from the fallout. Using web surveillance, a company can keep tabs on untrue, unproven and maliciously motivated rumors.
Often these information gathering campaigns turn up former employees, disgruntled insiders or stock manipulators – the banes of an IRO’s existence – who usually hide from the companies they write about behind anonymous screen names.
While clues that identify truth-impaired chat room types aren’t easy to find, web surveillance firms find them. For example, perpetrators may have left some electronic footprints behind by filling out a web site guest book with the same cybersignature they use later for derogatory messages. Some clues appear to be fairly obvious in hindsight. Messages with phrases that may be problematic for a company like ‘Insiders are selling, time to dump this stock’ are easily tracked via web monitoring software.
Web tracking firms can also accumulate and maintain files on frequent posters and determine if they use more than one identity by watching for red flags like matching misspelled words or references to specific organizations or investment clubs that they might belong to.
Strategies for success
Once in receipt of such data, web surveillance firms ensure that response options for IROs are abundant. For instance, if the information posted on a chat room bulletin board is factually incorrect, an IRO can easily correct it by posting a link to a credible source like a Securities and Exchange Commission filing to set the record straight. For IR professionals interested in the ratio of pro and con internet postings regarding their companies, web surveillance firms can analyze those postings and provide live gauges showing the ratio of positive and negative internet messages at any given moment.
With the evolution of sophisticated web surveillance applications, IROs are beginning the transition from a defensive to an offensive stance. For example, IROs can monitor selected web sites to see if imminent company news, like the hiring of a new CEO or announcement of a new product, has leaked out ahead of time. When such news is officially released, IROs can hop onto these web sites and interact with chat room participants to find out what they think of the latest company developments. Not only is that a good information gathering exercise, it’s a solid community relations exercise as well. It’s not every day that investors have access to company officials.
If an IRO runs across a web site chat room that appears to be a ‘repeat offender’ (one that repeatedly allows fraudulent statements and claims to appear on its site unchecked) they can appeal to the site’s operators to develop policies against such posts. If they decide not to comply, the IRO can always report the site to the Securities and Exchange Commission (SEC), which has recently developed software to patrol message boards electronically.
Both IROs and the internet surveillance companies they work with agree that most web chat room participants are accurate, honorable and informative in their myriad postings. They recognize that message boards represent a revolution in the way information can spread to investors, and that the web represents an opportunity to communicate with investors.
As more troublemaking chat room participants begin to realize their words could be held against them, the jobs of IROs should become a bit easier, leaving more time to use web tracking software to enhance the way they interact with investors.
That, they say, should result in better relationships between public companies and their shareholders. That might be the best news of all.
