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Can social media success really have an impact on share price?

Contrary to expectation, markets are very emotional places…and individual share prices are often influenced by sentiment as much as the fundamentals. Every IR and PR professional knows this and they know the power that 3rd parties like the financial press have to drive sentiment.

Many believe that social media can have a similar impact but there’s not been much hard data to support that view.

However as reported, our recent Social Media and the City study DID find some pretty interesting links between strong social media performance as measured by PRINT™ and positive share price movements.

The detail is in the study but, for the statistically challenged (like me) the scattergraph below shows the correlation between the PRINT™ Receptiveness score at the beginning of November and the monthly change in share price to 28 November. These were all statistically significant (r > 0.207, N = 100, p < 0.05). This effectively means that if one variable were to rise or fall, chances are that the other would too. The p bit means there is at least a 95% probability that this relationship is not happening by chance – a level at which studies in the social sciences are generally accepted to be true.

On the basis of these initial findings we think someone should fund a longer, more detailed study to determine whether or not this represents a real and consistent lead indicator.

We’re open to offers!

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Two thirds of FTSE100 companies failing at social media

We had a feeling all was not well in corporate use of social media…

Our new Social Media in the City report, published today in association with the PRCA, shows that the majority of the FTSE100 are failing to engage effectively with social networks. As a result they may be at a competitive disadvantage by not connecting well with corporate stakeholders. Our research also suggests a link between social media performance and share price movement.

There are some creditably strong FTSE 100 performers, including companies from surprising sectors, but it seems that most still do not regard social media and networks as important for corporate communications. This is despite the fact that social media are used by a variety of stakeholders, by commentators and by mainstream media.

Research highlights and lowlights

  • Our study has found statistically significant correlations between social media performance and subsequent daily share price movement; higher social media performance scores associated with positive changes in share price
  • Two-thirds of FTSE 100 companies perform below average on main social media networks
  • Shell, AstraZeneca and Sainsbury lead new ranking of best-performing companies
  • Best performers come from some surprising sectors, e.g. mining firm Vedanta and computer chip maker ARM Holdings both appear in the top 10
  • The highest performing FTSE sector is pharmaceuticals & biotechnology, followed by oil & gas producers and retailers
  • Only 20% of FTSE 100 companies are actively using LinkedIn company pages to engage

The research was conducted in November this year. We used our quantitative PRINT™ performance measurement system to assess the corporate social media profiles of all FTSE 100 listed companies. Performance scores were derived for each social media network and combined to create an overall Social Performance Index (SPI).

The SPI leadership group is unexpectedly diverse. While the top 20 includes four of the FTSE 100’s six retail companies, this group also includes non-consumer facing brands like mining firm Vedanta, computer chip-manufacturer ARM Holdings and BAE Systems. Only one bank, Barclays, makes the top 20 group.

There are some surprising sector laggards. The Insurance sector as a whole, for example, scores well below the FTSE 100 average and only one company, Aviva, even makes the SPI top 30.

Most FTSE 100 companies (95%) have LinkedIn company pages, attracting a combined 2.6 million followers. However, less than a quarter of the FTSE 100 list any of their products or services on company pages, which are usually not actively managed – only 20% posted a status update in the 30 days prior to the study.

Is social media performance a lead indicator for share price movement?

Previous Sociagility studies have shown similarly close correlations between PRINT™ scores and measures of brand value and growth, as well as market share.

This study shows a statistically significant correlation between the SPI score and market capitalisation. It also shows statistically significant correlations between PRINT™ Receptiveness attribute scores at the beginning of November and share price movements during the rest of the month (r>0.207, N=100, p<0.05), indicating a 95% probability that this is not happening by chance. Higher social media performance scores were associated with positive changes in share price.

Health warning: correlation is NOT the same as causation… However, we think these results are interesting and at least give in-house corporate comms teams a strong argument to get the resources they need to up their game.

Different strategies … or none?

This study suggests that under-performing companies are incurring a reputational disadvantage internationally compared with competitor companies that engage with social media successfully. Yet social media performance really matters for corporate brands: it is a competitive issue and this should be of concern to the whole C-suite, and to investors.

Specific company plans to improve social media performance must of course depend on an individual approach, taking into account a host of factors we cannot know about. We have made no attempt to investigate or understand individual company strategies. But major differences in performance do emerge purely from the data. In some cases these are clearly driven by a deliberate strategy – in others, apparently, by the absence of one.

We understand that, for many corporate communicators in more traditional companies, the #1 priority is brand defence and that social media may seem risky but as Francis Ingham, Director-General of the PRCA says: “It is a far greater risk to let social media policy simply stagnate.”

We’ll be focussing on different aspects of our findings in the coming days. Meanwhile, if you’d like to download a copy of the full report, you can find it at http://www.sociagility.com/ftse.

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Why corporate engagement with social media is a competitive issue

We’re just starting our study of how well the UK’s largest public companies, the FTSE 100, perform on social media platforms. But does a good social media performance actually matter for corporate audiences?

We wouldn’t be in business if we didn’t think so, and it’s reassuring that a majority FTSE 100 companies apparently do too… or at least they think it matters enough to have a social media presence of some kind. But not everyone’s equally keen.

Who’s on what?

First, by ‘corporate’, I mean the overall business, rather than its constituent companies or brands – although for some ‘company brands’, this is the same brandname. Specifically, for the purposes of this study we are looking at the entity actually listed on the London Stock Exchange, the plc.

Others may have done more complete breakdowns of which companies are on which platforms but these often look at the consumer-facing brand(s), not the corporate entity. For our study, the percentage breakdown for the four common platforms that PRINT™ assesses is as follows:

  • Website: 100% of the FTSE 100 have something aimed at corporate audiences.
  • Twitter: 72% have created some kind of corporate Twitter account
  • YouTube: 65% have a corporate YouTube channel
  • Facebook: Only 56% have a corporate Facebook page, perhaps indicative of a platform perceived as being more consumer-focused

It’s hardly surprising that all the companies have a corporate website – even if some are pretty basic. But the numbers drop off after that. So which audiences are the companies that do have a corporate social media presence trying to reach and why is that relevant for the others?

Corporate & financial audiences

Of course there are a whole host of potential ‘corporate’ audiences: employees, trades unions, suppliers, local communities as well as regulators, legislators; not to mention commentators and a broad spectrum of ‘traditional’ media. All these groups include many important individuals who are active users of social media. For them, it’s just another way to have a relationship with a brand or company – or simply keep track of what they are doing.

But what about investors? Do they really care about tweets and Facebook likes… they are just interested in facts and figures, right?  And in any case, surely better for listed companies to avoid the risk of engaging via these informal forums and channels and stick with the safe formalities of the annual report, face-to-face presentations, earnings statements and the traditional mediated route of the financial press.

This view is short-sighted for a variety of reasons. For a start, shareholders and potential investors are people too – and likely to be participating in social media, especially in the UK and USA.

Second, both private investors and the ‘wholesale’ City institutions like insurance companies, banks and brokers, routinely use social media analysis to help in their buy/sell/hold decisions on individual shares. Furthermore, City commentators, not least the financial press, use social media to track news and opinion – and themselves engage in creating social media content.

Fragmented control = fragmented corporate messaging

Ever since the advent of the web 20+ years ago, the Internet in all its forms has become a public mirror (sometimes distorted) for brands and companies, showing the good and the bad, highlighting successful strategies and exposing corporate fault-lines. Yet some FTSE 100 companies still seem to be adopting an old-school, pre-Internet (let alone pre Web 2.0) approach to managing the social media aspect of their online presence. Specific audiences are assigned specific platforms leading to a dangerous potential for gaps, contradictions and confused or incoherent messaging.

A typical example is Twitter. Many companies just use Twitter corporately as a broadcast channel devoted to journalists with content consisting almost entirely of references to news releases. Why is this happening? Well, it could be a well thought out strategy but my guess it’s probably because someone in the Press Office was seen to ‘get’ Twitter, so he/she got it forever.

There’s similar issue with Facebook. The perception – aided and abetted by Facebook and digital agencies – is that it’s purely a consumer platform and the only role for companies is advertising. Yet many organisations use it successfully to reach out to local communities, job seekers and even business partners – all traditionally within the remit of the corporate communicator.

A competitive issue

Unsurprisingly, our own point of view is that social media undeniably have a large and increasing important part to play in corporate communications – including the daily struggle for investors’ confidence and money. Furthermore, how well a company engages corporately through social media is a competitive issue – both as a risk to be managed properly and an opportunity to gain advantage.

It’s therefore an important issue not just for corporate communicators and marketing directors but for company Chairmen, CEOs, Finance Directors and their Boards.

And because of that, we’re really looking forward to seeing how the FTSE 100 stack up!

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