Ah, for the days of blissful ignorance when the unruly masses on the web could be ignored. Those days are over. The posting of a false announcement on the internet in April about a corporate takeover sent Pairgain Technologies’ stock up 30 percent before the rumor was debunked. Gary David Hoke, a Pairgain engineer, was charged with securities fraud for posting the fake report, which he designed to look like the Bloomberg News web site. He then placed a notice on a message board at Yahoo – alerting other investors about the ‘news’ and providing a link to the web site he had created.
Cyberspace has no editors. Anybody can post any opinion or information they want on the web. If there are repercussions, as in the Pairgain case, they are likely to come weeks or months later, after the damage to a company’s stock price or reputation has been done.
How are corporations to protect themselves? Several companies now offer web-monitoring services which use automated search tools, or ‘intelligent agents’, to scour the bitstream for messages in internet chatrooms and message boards that could harm a company.
Customized reports
EWatch (www.ewatch.com), a product of WavePhore, charges companies $13,000 and up for its services. For that price, it will scan investor message boards on Yahoo, Silicon Investor, and Motley Fool; plough through thousands of chatrooms and forums including America Online, Microsoft Network, and Compuserve; and report any changes to sites requested by the customer, as well as breaking news and media transcripts. All this is condensed into a customized e-mail message that arrives every morning.
Glenn Canary, director of investor relations at Claire’s Stores and an eWatch client for three years, says it is essential for him to have a way of monitoring what is being said about the company on the internet – good or bad. ‘First I watch for postings on the internet that are clearly inaccurate, because sometimes postings are deliberately wrong, by people who are trying to manipulate the stock,’ says Canary.
Is it just gossip?
Donn Waage, senior VP of public relations at US Bancorp, puts understanding what is being said about his company on the web on a par with knowing what newspapers, magazines, radio and TV are saying. ‘Communication on the web has so much less credibility,’ he says, ‘but it’s equal in importance. It’s really important to watch it just to make sure it’s all just gossip.’
All the information eWatch compiles is already out there on the web; the problem is sifting through the mountains of garbage before you find something important.
James Alexander, co-founder of eWatch and VP of marketing business products for WavePhore, says, ‘Our clients want us to filter that out. Clients get back the meat of what appears, we weed out the garbage that wastes their time.’
Alexander breaks down dangerous postings into five types: legitimate gripes; manipulation of one organization by another – as in Greenpeace trying to get an oil company to stop drilling; market manipulation – such as the Pairgain case; revenge attempts by disgruntled employees or customers; and misinformation.
Scanning message boards and chatrooms can give indications of problems to come. Alexander cites two incidents where disgruntled investors posted messages that they were planning to disrupt annual meetings. They even described the color of clothing they would wear, which tipped off corporate security.
Shared cost
Because of the multiple applications for eWatch data, Alexander says the cost is often shared by, say, IR, PR, corporate communications and security. But perhaps eWatch’s most valuable service is peace of mind. ‘I know that every day I will be made aware of anything of significance said on the internet,’ says Canary.
For those who find the eWatch price tag too steep, Infonautics’ Companysleuth product offers similar services and additional features for free. Companysleuth’s over 145,000 customers sign up at the company’s web site (www.companysleuth.com) and punch in the ticker symbols for up to ten companies they want to monitor.
Like eWatch, Companysleuth monitors chatrooms and message boards. It also scans information available on the internet that could tip investors off about new directions a company may be heading into – sometimes before any announcement. For example, Joshua Kopelman, executive vice president and co-founder of Infonautics, says law firm Skadden Arps Slate Meagher & Flom registered a web site with the name DaimlerChrysler.com before the merger of Daimler Benz and Chrysler was announced. Companysleuth also reports new trademarks and patents, short interest, federal litigation, broker and analyst reports, earnings whispers, and job postings.
At the Financial Relations Board, partner Julie Creed uses Companysleuth primarily for monitoring chatrooms devoted to her clients. Say a company has a conference call with good results and a good explanation but opens down eight points the next day. In a case like that, ‘I might check Companysleuth to see if I am missing something, or to see what is the thread or the buzz.’
While most IROs say they just like to keep up with what is being said, sometimes the postings they come across may be good preparation for corporate events like annual meetings and conference calls. Michael Claes, executive VP at Burson-Marsteller, notes, ‘While the web is not a valid opinion survey, more often than not a single posting can be very insightful. That can be good for conference calls because most likely what’s on their mind is on other people’s minds as well.’ That’s especially true for company insiders, who often show up in chatrooms and post notes on message boards on inside operations.
Internet buzz
The phenomenon of web-monitoring has taken hold most strongly in the US. Frans Bedaux, director of investor relations at ABN-Amro and chairman of the International Investor Relations Federation, says, ‘As far as I know, it does not exist in Europe. But if something were available I’m sure we would definitely be interested in looking at it. It is an interesting exercise to try it for a while and get people’s ideas.’ London-based Romeike & Curtice, which has a product called Net.Cut, might like to get in touch with Bedaux, as should several of the other European-based media monitoring services which now run web monitoring operations.
What a company can do about misinformation on the web is another question entirely, largely dependent upon the regulatory environment in its home country. But, as Glenn Canary of Claire’s Stores notes, ‘You can’t decide what to do if you don’t know what is being said.’
Eventually, the web will probably look more like a tamed animal than the wild beast it is today. ‘We are all used to dealing with newspapers or television and the more organized and professional media where you have reporters and editors and professional standards’, says US Bancorp’s Waage. ‘The web is a free-flowing type of thing and we all have to get used to it and learn to deal with it.’
