Last year, Instagram hit a staggering one billion active users and it is currently seeing growth of 5% per quarter, generating more than $5.48 billion in advertising revenue – providing one of Facebook’s biggest sources of revenue growth. But while these may be compelling figures, what exactly does a photo-sharing social media platform have to do with your investors?
We have now reached a critical juncture when it comes to financial communications and investor engagement. Once upon a time, reaching investors relied almost solely on sell-side broker and analyst relationships, issuing results and securing coverage in the ‘pink pages’ of the Financial Times – perhaps following a long lunch with a city hack.
But today, communicating to investors is a very different beast. City analysts are now using a whole host of data beyond earnings, performance targets and other financial disclosures to form their recommendations to clients. This ‘data’ is increasingly derived from unexpected sources such as social media sentiment, employee reviews on sites like Glassdoor, and Google Analytics – and even deploying nascent new technology like AI and machine learning to mine earnings call and AGM transcripts for insightful information.
And this isn’t just a sell-side trend either. A recent report by consultancy Greenwich Associates examined social media usage by institutional investors across the globe, finding that nearly 80% of institutional investors use social media platforms as part of their day-to-day work. But beyond just using social media as a handy research tool, it also often provokes action, for example:
Clearly, therefore the importance and resonance of social media goes far beyond consumer engagement metrics, such as ‘likes’ or impressions. How a brand shows up on their owned channels, and what their stakeholders say on them, can build a complete picture of the overall value and perception of any given company – and potentially impact investment decisions.
As we’ve seen time and again in recent years, with everyone from airlines to car manufacturers to Silicon Valley giants suffering the same fate, reputation is often a key driver of corporate value and shareholder return. In the UK, it is estimated that ‘reputation’ alone is responsible for over £1 trillion of market capitalisation across FTSE 350 companies – according to the 2018 UK Reputation Dividend Report. This is up 8% on the previous year.
With Brexit uncertainty showing no signs of abating, a recent Edison research note indicated that analysts have been steadily softening their UK corporate earnings forecasts since August last year as market fundamentals become ever more challenging to predict. As such, investors may well be seeking refuge in brands with solid and well-earned corporate reputations that have stood the test of time – and in leaders who stand up to protect them.
FleishmanHillard’s propriety ‘Authenticity Gap’ study revealed that just half of perceptions and beliefs about a company are shaped by expectations of its products and services. The other half is influenced by information on the company itself, its culture, how it treats its staff, its attitude to social responsibility and more.
It stands to reason, therefore, that if reputation is becoming a more important driver of shareholder value, then a holistic approach to ‘investor engagement’ is needed. This could be anything from CEO activism on social issues, to political engagement on regulatory matters, through to brand campaigns, digital engagement and campus recruitment programmes.
Ultimately, to deliver meaningful investor interactions in today’s world, corporates need to look beyond traditional channels and incorporate an investor dialogue as part of holistic reputation campaigns, with an attitude that looks not only at value and risk – but considers the potential for growth.
So, to answer my original question, what does Instagram have to do with your investors? Well a lot, as it turns out.
Just like many other social media platforms, Instagram can be used by a research analyst – or indeed an algorithm – to uncover a plethora of insights about an organisation. This could range from brand strength and influencer reach through to things monitoring the escalation of a reputational crisis, the effectiveness of an employee engagement programme or how successful it is at attracting the next generation of talent.
Collectively these can be put together to make a very informed assessment of a company or a brand – and perhaps its future – in a way that a balance sheet alone simply can’t. So next time you see your company’s Instagram account, spare a thought about what story it might tell an investor.
