The internet has produced many a myth in recent years. I remember going to an investment bank presentation two years ago and hearing how Amazon.com’s then-colossal $30 bn valuation was based on a market-sizing exercise that began with a potential customer base of several hundred million people. Today that valuation method has been consigned to the dust heap.
The reality – as many an internet retailer has found – is that reaching large audiences is far harder than was originally thought and the old adage of build it and they will come has as much substance on the net as in the real world.
The term ‘glocalization’ is a well-worn mantra in the business world and investor relations is no different. It is not enough to build a site, stack it full of information and expect users from around the world to come. In Europe, for as long as a single pan-European financial regulatory environment remains a laudable hope rather than a reality, IR sites will have to be tailored to an international and local investor base in line with differing disclosure requirements.
Quick visits
Sixty-five percent of IR web site visitors spend less than a minute on the site, according to data compiled from Investis’ European clients, so sticking to generally acknowledged signposts, data and information formats for easy access is important. Market opening is the most active time for site usage, suggesting investors are using corporate sites as a primary source of information.
But some investors do stick around on IR sites – 10 percent of visitors spend more than 20 minutes on the IR web pages, indicating that some shareholders use IR sites as a source of historic data, corporate background and general information.
The display and design of an IR site is too often translated into creativity and flair when all investors want is quick, easy access. Information is useless unless it is easily accessible and heavy graphic design often only serves to create obstacles by increasing download times.
One of the most lauded IR web sites in Europe is Nokia’s, whose appearance is not dissimilar to the Yahoo front page, containing lots of text links and information all on one page.
Platform change
Cost is a key driving force behind the switch to web-based investor communications. But it is not the only consideration. As reporting requirements become more onerous, shareholder bases become larger in size and scope, increasing the dialogue between a company and its owners.
In Germany, a recent Handelsblatt/IRES study showed that while only 10 percent of IR budgets were being spent on the web, analysts and investors believe they receive 16 percent of company information from the corporate site, making it second only to the annual report in terms of usefulness. In contrast, the annual meeting swallows up about 25 percent of the annual IR budget and delivers only 12 percent of the required information, according to the poll.
However, any cost benefits are impossible to achieve unless shareholders use the corporate IR site as a primary source of information. Attracting investors requires a mixture of good navigation, easy access, timely content and interactive tools.
The share price and charting pages are the most visited areas of European corporate web sites. Having a share price on your web page is often seen as a luxury item, given that institutional investors have Reuters or Bloomberg screens, while retail investors can access a plethora of financial web sites.
This argument neglects one of the basic tenets of the web – easy accessibility. Investors like to see what the stock is doing while finding out information about the company. One-click shopping was an idea coined by Amazon but it holds true for IR sites. If you make it easy and give them what they want, investors will use your site.
The second most popular page on IR sites is, perhaps surprisingly, the corporate strategy or equity story followed by corporate press releases and annual reports.
Investor tastes prove to be remarkably homogenous across geographical boundaries. What they actually get is a different story. There is still a significant divide in how European corporates use the internet to communicate with investors. Attitudes to IR are changing, cajoled along by changing regulation and the new equity culture, the internationalization of capital flows, the unwinding of cross-holdings, increased M&A activity and growing use of stock options. Corporate IR web sites across Europe are changing along with these attitudes – but considerable variances remain [see table, page 75].
British best?
The UK’s lead in web-based IR in Europe can be attributed to a more developed IR industry, fueled by more stringent disclosure regulations, wider shareholder bases and strong US influence. Particularly popular among UK companies are interactive services such as stock price charting, along with e-mail and SMS communications. There is also a growing demand for multimedia services such as webcasting, reflecting the higher information flow at these companies.
The research also shows that continental companies are increasingly closing the gap, as Europe’s equity landscape changes and matures. German and French companies beat their UK counterparts in the timely publication of annual and interim reports, accounts and company press releases on their web sites. French companies demonstrate the greatest take-up of multimedia services in Europe, which can probably be attributed in part to large holdings by US fund managers. Meanwhile German companies have been the most diligent in posting company accounts and press releases.
A noticeable laggard is Italy, where companies consistently score lower than their European counterparts in every category, registering close to zero take-up on services such as e-mail/SMS alerts and e-mail access to IR departments.
As companies continue to assess the benefits of web-based IR communications, regulators are giving them a gentle prod. Although none of the major regulators have yet obliged companies to report via the web, Italy’s Consob, France’s COB and the UK’s FSA have all issued statements encouraging companies to use the net as a communications medium.
While gentle persuasion is clearly helpful, there is a need for a seismic shift in attitude from the top down within corporations. According to research conducted in July by Investis and Italian financial communications agency Rowland Italia, managements at European small and medium-sized companies are unwilling to devote more resources to their online IR communications, especially since IR budgets are being cut as a result of the market downturn. It may take some time before Europe’s investor relations managers fully embrace the digital revolution.
Rupert Spiegelberg is head of European business development at Investis (Investis.com)
Methodology
Investis looked at companies drawn from a variety of indices to reflect the whole market and avoid skewing the results in favor of large-cap stocks, which usually have larger IR sites.
The criteria included 26 different factors to assess whether companies are providing content-rich, up-to-date, interactive and easily navigable IR sections on their web sites.
