Like most IROs at major US companies, Stephen Blum has some experience with webcasting. Some time ago the Dial Corporation’s vice president of IR was eager to have his company webcast its quarterly earnings conference calls, and he hoped the web would help expose Dial to new, wider audiences.
So the Arizona-based consumer products company did what most first-time webcasters do: it supplemented its teleconference event by simultaneously streaming audio over the internet.
Guess what. Almost nobody logged on. Instead, analysts and investors did what they were accustomed to doing. They listened to the presentation over the phone. ‘I did not see any appreciable difference, nor any larger numbers that chose the webcast versus the audio call,’ Blum reflects.
After trying webcasting twice again, he realized it simply wasn’t working the way he had hoped. As a result, Dial no longer webcasts its quarterly conferences live. Rather, it puts an archive-only version on its web site after the event has finished.
Let them stream cake
Blum knows you can’t just put something on the internet and expect people to find it without prompting. He is the first to admit it’s better to listen to corporate presentations over the phone than over dial-up internet connections, and he knows he would have to give his audience good reason to tune in to the web. Yet he also knows a thumbnail-sized talking head is not enough. ‘We probably aren’t using it to the fullest advantage. That’s because – and I don’t think we’re unique in this – we are fine-tuning the script almost up to the time of the call. So we don’t have time to prepare meaningful charts that could go along with that script and therefore would be value-added for the internet.’ In the end, Blum concludes the need to be flexible outweighs the need to be flashy.
Despite predictions that webcasting would expose corporations to virtually unlimited audiences – particularly to individual investors championed by Reg FD – many companies like Dial have been disappointed by the size of the audience since it has always been smaller than expected.
Some are now stepping back and asking themselves just why they are webcasting their conference calls if people aren’t tuning in. The answer differs from company to company. Some of the companies feel if they don’t webcast their presentations they’ll lose points to their competition. Others do it to be known as web-friendly and cutting edge. And others believe it is important to take advantage of every medium possible.
Scott Diehl, senior vice president of sales and business development for webcaster On24, admits much of the migration towards webcasting has been driven by the SEC and stock exchanges. ‘While companies are continuing to test and measure the results of their presentations, they feel the regulatory pressure to adhere to the tenets of Reg FD.’
Then again, companies don’t have to stream their events over the internet to satisfy disclosure regulations, though it’s recommended.
Is it worthwhile?
The question arises: how many people would have to participate in the webcast to make it cost-effective? Diehl believes the breaking point is somewhere between 100 and 150 participants. ‘Beyond that, the marginal cost of adding a streaming webcast participant is lower than the marginal cost of adding a conference call participant.’
Richard Lattimer, head of new business development for UK streaming-media company Streamway, sets his sights a little higher: ‘I would want to know that 150 people attended in total, and that at least 50 of them are good quality decision-makers.’
Still, 150 people can be a tall order for most companies during a busy earnings season. A basic audio webcast may cost a few hundred dollars, while a more complex multimedia one could cost upwards of $5,000. One IRO, disappointed by his
webcast’s poor attendance, quips, ‘It could be more economical to take those few would-be attendees and fly them out to our headquarters to meet face-to-face.’
On the other hand, there are many companies that enjoy tremendous success from their webcasts, as evidenced by the steady increase in streaming media events. SimplyWebcast, a UK-based webcasting firm, did a study with Investor Relations magazine last spring to compare the Fortune 100 and FTSE 100. At that time 62 percent of Fortune 100 companies were using streaming media on their web sites, compared to 47 of the FTSE 100. US-based online IR leader CCBN says the number of conference calls in the second quarter of 2001 grew 90 percent from the second quarter 2000. Moreover, a Niri survey from August 2001 shows that almost all of its member companies (92 percent) that are conducting conference calls are webcasting them. The other 8 percent don’t do conference calls at all.
But despite the proliferation of webcasts, many companies have been disappointed by their attendance, especially considering that they expected a huge influx of individual investors taking advantage of Reg FD’s level playing field. Indeed the SEC strongly encourages companies to use webcasting as a means of making their corporate financial information available to the public at large.
Novelty no more
However, the masses in general and individual investors in particular have not taken to IR webcasts as many believed they would. ‘Individual investor participation is way down from six months to a year ago,’ says Ron Gruner, president of Shareholder.com, another US-based webcasting leader with offices in London, Amsterdam and Frankfurt. Gruner believes when webcasts first became available investors may have seen them as a novelty, and now the novelty has worn off.
‘I would also surmise that the reason for that is the retreat of the individual investor from today’s markets,’ he adds. For example, individual investors accounted for only 3 percent of PepsiAmerica’s recent webcast audience, according to Shareholder.com’s registration information. United Technologies, Coca-Cola and Freddie Mac haven’t fared much better: individual investors accounted for just 3, 4 and 5 percent respectively of the audience for recent webcasts.
So analysts and professional investors are the main webcast audiences, but many companies are disappointed with these figures as well. Alice Lehman, First Union Wachovia’s managing director of IR, says the number of people who dialed in to their most recent earnings call outnumbered those who logged on to the webcast by a ratio of four to one. Of the 105 individuals who registered for the webcast, she says, ‘There were about 15 institutional investors and five individual investors. The rest were employees, a lot of press, rating agencies, hedge funds and – interestingly – people who work for [competing] webcasting service providers.’
Why aren’t more investors logging on to these events? Dial’s Stephen Blum reminds us that most web presentations are merely repackaged audio calls, and don’t offer sufficient incentive. ‘Unless you have a PowerPoint presentation or something that’s available only on the web, I don’t know the reason why you’d want to tie up your machine staring at a screen with nothing going on.’
Another obstacle may be technical in nature. Streamway’s Richard Lattimer says, ‘In some cases people had tried to log on a year and a half ago, and it didn’t work. Now they don’t try anymore.’ He estimates that 35-40 percent of people who have tried to log onto webcasts have experienced technical difficulties. And few have the patience to keep trying.
Lehman agrees: ‘I think the perception was that webcasts were great when they first came out, but the minute people ran into problems they quickly switched back to conference calls.’
She says whenever she tries to log on to a streaming media event, her technical team has to specifically configure a computer to handle this task. ‘In order to log on to a webcast at a large organization, typically you have firewalls that prevent you from getting through,’ she explains. ‘So, you need to have a modem straight to the internet that doesn’t go through the company’s systems.’
And firewalls aren’t the only technical obstacles. For instance, users may not be able to download the appropriate software needed to play the presentation, or else they may not have a sound card to hear it.
Fewer problems?
Shawn Dornan, CCBN’s manager of streaming media services, says things are looking up. In the past year he has seen a steady decline in the number of webcast access problems. ‘The technology has not really changed much. Companies and their information systems departments are simply becoming more adept at making the adjustments to their firewalls and their proxy servers.’ He says most IT departments that know about an event in advance should be able to figure out a way to gain access.
In some cases this may require a standalone PC – as in Lehman’s case – but most often they can reconfigure the corporate network to allow everyone to log on.
Lehman isn’t so sure. She says that in her experience retooling the entire corporate network often results in a new series of technical problems. ‘If we set up everybody’s PCs to avoid the firewall, we would have problems getting back into our servers and into places where a lot of our data is stored. Once you set up a separate point to participate in webcasts, there shouldn’t be a problem, but until you do, there is a problem.’
Would Alice Lehman consider doing away with the webcast altogether? Absolutely not. Though her audience may not be as populous as she’d like, she still has over 100 people logging on. And that number will probably continue to grow. Besides, in the end webcasting does provide the most cost-effective means of satisfying disclosure regulations.
Saving up
The one statistic that may give encouragement to IROs whose live webcasts are poorly attended is the amount of people who listen to the archived versions. CCBN and Niri independently found the ratio of archived webcast listeners to live listeners is approximately three to one. The archived webcast audience has seen the greatest growth, says CCBN, with 25-times more listeners accessing archived webcasts in the second quarter of 2001, compared to the same time the year before. Some companies consider the archive alone to be sufficient justification for the webcast.
Niri found that 88 percent of its member companies archive their calls on their web sites for at least a week. Half of the members leave them up from two weeks to a month, while 27 percent leave them up for the entire quarter. For those companies that archive webcasts on their IR web sites, Niri encourages the use of appropriate disclaimers to accompany dated information.
Tech talk
While webcasting for IR purposes has grown steadily, the technology has had a difficult time catching on elsewhere. The news media, for instance, has come to realize that few people opt for an internet stream when they can watch television instead. Similarly, live entertainment tends to find scant audiences when streamed over the web.
However, CCBN’s manager of streaming media services, Shawn Dornan, says webcasting in the IR world also had a difficult time taking off. ‘A year and a half ago, since there wasn’t a lot of streaming media content particularly related to IR and financial services, the IT departments could argue they didn’t need to allow for this content to be delivered across their networks. They said there was no real business justification for it.’
Dornan believes investor relations has done the hard work to get webcasting accepted, and has subsequently allowed other functions to take advantage of this type of technology. ‘In many ways, IR has saved streaming media’s butt. If it wasn’t for the use of streaming media for IR conference calls and IR events, a lot of these [streaming media] companies wouldn’t be in business today.’
‘The industry is starting to realize that this is not a mass communications vehicle, it’s a narrow communications vehicle,’ Dornan adds. IROs may be satisfied communicating to very a specialized audience, provided, of course, it is the right audience.
