If you haven’t convinced management yet that your financial information should be on the net, get your resumé together: either your company won’t last long or, it doesn’t listen to you. If you are responsible for the decision, shame on you.
Why? According to Jeff Vilensky, a research analyst at Bear Stearns, ‘If investors are telling companies that they aren’t getting information from the internet, they are lying.’ Vilensky argues that initial research is rarely done by the senior analyst anyway: they send young associates to gather information – anywhere they can. ‘Nowadays,’ says Vilensky, ‘that means the internet. You have to remember that the net’s not new to recent college grads.’
So should IROs create interesting IR web sites in order to lure investors? Or should they hang tight and deliver just enough information to be able to say, We have a site? Investor Relations magazine brought together a panel of experts in a discussion moderated by Morgan Molthrop, IR director at Georgeson/ Thomson Investor Relations. The panel was as follows.
Basil Lyden, CNBC-Dow Jones.
Roberta De Tata, vice president, C-call.com.
Bill Adler, PR Newswire.
Nancy Slome, managing director/new media, Addison.
Molthrop: Are you still finding that you’re spending more time educating potential clients than selling your services?
Lyden: In the beginning, a year-and-a-half ago, we were primarily educating the marketplace. Now, within the last six months, we’ve seen an increasing number of savvy clients who know what they want when they walk in the door. Still, most people want to see examples of what other firms are doing – business is beginning to feed on itself.
De Tata: I think we’ve passed the ‘internet for idiots’ stage. We’re in the ‘fasten your seatbelts’ stage. When I was an IRO, I was dealing with so many different providers and vendors, just managing them was a part-time job. And, of course, there is a lot of overlap between vendors. IR professionals are now looking for one-stop shopping.
Adler: The biggest change I’ve noticed in the last six months is that IROs are far more discerning about what they want. We’re starting to get strategic questions. In the early days, clients were just happy to be somewhere on the web. Our first product simply archived press releases. Ultimately, this just wasn’t enough. We did more research and built our offerings to meet increased demand.
The first requirement now seems to be: ‘Get me traffic.’ IROs need to justify expenditures and there isn’t enough hard data to really quantify potential savings.
Slome: Clearly, the age of evangelism is over. Clients come to us to help them execute their goals, not to have us tell them what to do. This allows us to work more in tandem with IROs, as a team, instead of just wowing them by showing the most advanced sites.
The problem is, while clients may know what they need in terms of a web site, nobody really wants to own the budget. If it’s a marketing-based site, IR seems to be the poor step-child. If it’s a technology site, or if it’s a web-based business, they might not even have an IR page.
Start-up costs, though not as onerous as they once were, can throw a traditional IR budget off kilter. Investor relations officers and their managers seem frustrated that it’s hard to prove any immediate cost-savings. However, they can’t just summarily dismiss the investor relations site. Some companies that you would expect to have great sites are embarrassingly thin: high-tech companies without IR web sites, for instance. So there is resistance out there.
Molthrop: How is multimedia currently being used on IR web sites?
Slome: Most of our clients are still gun-shy about multimedia. We created Wang’s 1997 annual report in Flash, which is an animation program. A totally animated report is not right for every company, but it seemed to be right for Wang.
Lyden: Internet videos, when used in conjunction with quarterly earnings calls, allow chief executive officers to tell their stories in a fresh format that is more personal. The benefits are more in terms of image: because you see the CEO as he speaks, it can send a strong psychological message. It’s a great format for a strong CEO.
Molthrop: So chief executive officers are going to have to be stars in addition to being good managers?
Lyden: We call it business entertainment. Whether it’s the CEO or an analyst, they have to be aware that this is a different way to communicate. And it’s not only the way they present themselves, but how they speak. There isn’t a blue pencil in real time.
There is some downside risk – the possibility of misstatements or misinterpretations of gestures, for instance. But if you’ve, in effect, opened up what was once a private analyst meeting to a wider audience through the web, and more people have access than ever, you’re not going to have to put out a press release if some previously undisclosed information slips out. Everyone and their mother will be online and would have heard it in real time. Of course, we’re not there yet with regard to disclosure.
Molthrop: On disclosure, will we see the day when publishing on the web meets the requirements of full disclosure?
Adler: Some people think that this wonderful world of the internet is a panacea in terms of getting information out in a way that’s compliant with SEC regulations. But I wouldn’t expect standard disclosure rules to be changed in the near future. A number of companies that thought they were complying with the SEC by just publishing their release on the web and then putting out a release that calls attention to it have found themselves sued for selective disclosure. Currently, releasing like this doesn’t provide a ‘level playing field’ through the ‘broadest possible dissemination.’
Molthrop: How is the internet influencing the design of traditional written documents like the annual report?
Slome: The design approach is changing. For us, it’s likely that we’re designing both the annual report and at least the graphics of the web site, so we have to really work closely together to make sure that there is consistency. You really have to ask, How will these graphics translate to the web?
Molthrop: Are the computers on the desks of investors and analysts ready for streaming video broadcasts?
Lyden: It’s like television. Who still owns a black and white set? I just bought a computer for my daughter, who’s going to be a freshman in college. Everything was on it. It wasn’t a question of asking for it, it just came that way. I think that issue is fading fast.
De Tata: A bigger problem is the corporate firewall, especially with audio and video. We’re finding ways to help clients put a presentation into http language, which can get though nearly any firewall. As long as you have the sound card and speakers, you should be able to hear the audio.
Molthrop: What do portfolio managers and analysts really want from the internet?
De Tata: They want as much information as they can get, in a form that’s easy to get through, as fast as they can get it. They want all the information right there in one place. They want to know when the conference call is, what number to dial, and they want to receive the release on their e-mail as soon as it crosses the wire. Eventually they’ll want to participate in a conference call through the net.
At the same time, IROs are looking for assurances that their information is secure and that their conference calls are still manageable from a participant standpoint. Few are ready to just open up the conference call to the universe yet.
The internet has the potential to satisfy the demand for information, but there is legal and cultural hesitation on the part of most companies to throw everything onto the web. There’s even more resistance to finding ways to package the information in a way that’s useful, as that means more work, more money, and the duty to update.
Molthrop: How can an IRO justify spending on the internet?
Slome: We’re finally seeing companies quantify the savings made possible by having an effective web site. The idea of not having to mail corporate material to some shareholders, and the ability to access proxy material and vote your shares online, have provided new reasons to get IR sites up to speed. There’s also the attractive advantage of lightening up the number of calls that come into the IRO’s office to ask for information that can now be accessed on the web.
Adler: When I was on the corporate side, the call I got most often was: Can you send me an annual report? The vice president might answer the phone and it would be a student who needed the report for a college project. Anything that can be done to automate routine functions is a major plus. It takes the heat off the investor relations officer and furthers disclosure.
Slome: One of the biggest problems is that companies don’t budget for internal resources when creating web sites. When we go into a project, we advise our clients to have an inside writer re-organize their content because you can’t just hand out marketing material – nobody will read it. We say they must hire somebody, like a project manager. It can’t be a high level IR person because they don’t have time.
Molthrop: Will the internet eliminate the need for printed annual reports one day?
Slome: People will always need paper. But in the next five years, the way the annual report is produced is going to change. I see a lot of companies turning toward a 10k format with some marketing material attached – a format that’s easy to transfer to the web. The printed report isn’t going away, it’s just changing.
Lyden: Some things seem to change overnight, while other changes are more gradual. There’s almost no way to predict how fast the internet will evolve, but it’s easy to see that there’s room for exponential growth, like in the infancy of television. I can’t imagine us giving up our books and magazines and newspapers overnight, just getting everything online. The internet is a very exciting format, but it’s just another tool to get and give information.
Molthrop: The first telegraph message, sent by Samuel Morse, was, What has God wrought? Does anyone know the first e-mail message?
Lyden: Probably a joke.
Slome: Or a message from human resources reminding everyone of a company picnic.
