State of Investor Relations on the Internet.
The Commerce Department issued its report on the Internet in April. Secretary of Commerce William Daley issued the report, The Emerging Digital Economy, fittingly on April 15th. Information technology represents 8.2% of the gross domestic product of the U.S. up from 4.9% in 1985. Information technology drives one-quarter of the nation’s economic growth. Technology price cuts also cut U.S. inflation by 1% last year.
From the introduction to the Digital Economy report come a few additional highlights on impact of the growth of the Internet and electronic commerce over the last 12 months:
If the trends suggested by this preliminary analysis continue, IT and electronic commerce can be expected to drive economic growth for many years to come.
Ernst & Young’s Internet Shopping Report published in Stores Magazine reported that business in the 1990s has seen globalization even for neighborhood businesses like retailing.
The Internet allows all companies to go after world markets (and for world marketers to show up anywhere or for a small manufacturer to show up on your doorstep). E-commerce currently has 50 million users worldwide. By 2000 predictions are the number of users will hit 140 million with growth returning to Asia and Europe.
U.S. retail Websites are readily available outside the US, 44% today with 24% more planning to offer sales internationally. It will not take long for that lesson to reach the investment community.
U.S. manufacturing sites have a global presence with virtually half able to take orders multinationally. Forty percent of U.S. companies with international sites are now getting orders from foreign customers.
Lands’ End believed that close-out sales were too expensive to mail to international customers. The Internet makes it easy to tell foreign customers about close-outs. Barnes & Noble expects international markets for English books via the Internet to hit 30% of its total sales.
How long before researchers, analysts, stock brokers and others tap into the potential of the Internet? The answer is not very long. And if it weren’t for the melt down in the Pacific the Internet investor revolution would be here.
A. Levin Communications in an ongoing survey report that some 80% of publicly held companies have Website, more than double what the 35% of companies that had Websites last year. Companies post their annual reports, earnings reports and stock information. But only 25% of these sites are updated daily, a quarter of the sites are updated weekly, a quarter monthly and a quarter are updated even less often
Mecklermedia which is publicly held and traded on the NASDAQ hosts the Internet Stock Index. ISDEX includes 50 publicly trade corporations that rely on 90% of the their business for the Internet. IBM, AT&T, Digital and Microsoft to name only a few are major publicly held corporations that are not included in the Isdex because of their non-Internet businesses. Like Intel, Oracle, and Novell any of these non-Isdex companies Internet operations are larger than those of many of the companies on the Internet Stock Index.
The publicly held companies of the ISDEX all try to provide some investor information at their Websites. However, the businesses that are primarily focused on actually delivering their products on the net, Amazon.com, CDRom Now, do not necessarily have investor relations information on the top of the page. They obviously do not want customers ordering books or music to loose site of buying the latest editions with images of how well the company is doing financially for the last quarter.
There is no question that the Internet represents a revolution for publicly held companies. The revolution is not here yet. And it may be more of an evolution that anything as radical as a revolution. The potential of the Internet brings the resources of the financial market to every computer user in the world.
The revolution may take longer than most of us realize. The Internet brings information to a far wider audience than ever before. Information can be delivered immediately without being dependent on fax machine, telephone dialing accuracy or postal systems. Paper no longer has to be shipped to the researcher, analyst or investor.
Calls will still come from competitors asking for information and a copy of our quarterly financials. The Investor relations deparment returns the call and reaches voice mail. to voice mail. But now the competitor or investor can be told where to find the information without faxing or waiting for the mail. Investors, researchers, customers and competitors can download the information directly at the Website where it is posted.
Many investors prefers still prefer to deal with faxes on paper and prefer to search for information. These professional investor not only do not want e-mail clogging their laptops and often don’t trust most of the information that is sent to them.
With the impact of the Internet corporate America views the Internet in the same way it viewed 800 numbers and business cards. It is not necessarily something they want to use but it is impossible to be considered a "real business" without it.
As businesses create an Internet presence the first use is to market products and services. So much so that of the 50 Isdex Internet companies more than half did not have an investor relations page on the home page.
Many of the Internet Isdex company vs. the other leading American corporations require frames, Shockwave and Java to view their information. Frames for those that are not as current requires a significant amount of memory allocated to the browser as well as Windows 95 and soon Windows 98.
There is no question that most corporations will provide and expect this level of sophistication for their business users, but individual investors and small business operations do not all have this level of technology all the time. Often research for investing and background is donw on the road or from a laptop at home which may or may not have the resources of the corporate office.
Where is the Internet is today?
Today the Internet sits on a threshold a being a true mass market medium. At issue is whether it is a marketable medium like radio or television or something that is so close to a commodity that it is not measurable or sellable or whether it becomes simply an additional delivery channel that provides masses of information for niche audiences, i.e., cable television delivered to the individual desktop with as many topics available as there are newsletter publishers today. The Internet will reach U.S. mass market status of 50 million households quicker than any other new medium in history. Radio, television and cable each took decades to reach that status, while the Internet is expected to accomplish it in less than 8 years.
What the Internet means to business.
From Fedex to Cisco corporate America has found that the Internet is a way to market and save money. Fedex saves over one million dollars a month in man hours b y letting users track their own shipments on the Internet. Cisco, the world largest seller of network hardware and software, sells over $3 billion a year in its products through its Web sites.
Gone are the days of developing an international communication system unique to one company or the necessity of an internal telephone system that would reach halfway found the world. Today, the Internet can provide that system for all corporations.
The Internet’s speed is impacted and slowed with more and more users. The world is subject to a meltdown or overload with a problem at AOL or AT&T or any of a dozen other major players in the industry.
But that is no different that the challenges faced with long distance overuse and problems with the mail system or the express delivery system. The difference is that we now have true mass communications available virtually worldwide at the end of a telephone line.
It is taken for granted that in most of the world the Internet is still delivered to the end user by the local telephone service. And the challenges of international business is that the rest of the world is waiting for consistent telephone service to bring about true universal communication. But it is on the horizon.
The American economy and business will define the communications network of the next century. Even countries that might seek to control information is it possible to control the power of the Internet and business communication. And with business communication comes international mass communication.
But that is a step away from the primary concern on how the Internet will impact investor relations.
What the Internet will means to IR?
Universal information for all to see. Sure. Information about the company and all its products. Okay. Marketing for all who desire to seek your information. That of course is the challenge of the Internet. It is a passive medium. The user has to visit the site. Even with an e-mail that is delivered to the electronic mailbox with critical information...when it is not so much information that the consumer stops reading all together. The user must decide that they want to take the time to dig for the information.
More information can be made available. The pyramid of information from the investor to top management virtually disappears with individual investor able to send a message or question directly to the attention of top management. How the company is doing, How it has done, What its history is...can all be made available immediately.
But too much information becomes no information. All the e-mail letters and press releases become more than anyone can digest. Information about switchers or routing of airplanes can dominate a site that for a delivery company or a networking company and the latest earnings report will be buried so that the investor doesn’t easily find it.
The presence of a new board member that might signal a long term partnership or the acquisition of a new technology from a newly merged company can easily be buried under tons of other good and necessary information that users visit a site to see. But not all site visitors are analysts, journalists, researchers or investors, employees or other stakeholders.
The best sites in the business today deliver the critical core information that is needed for the business to operate (be it providing search information, taking catalogue orders, airline reservations or book orders) but they also recognize that every visitor is not coming as a customer, some are coming as shareholders, employees, future employees and as competitors. And though everyone is concerned about beating the competition in today’s market today’s competitor can be tomorrow’s takeover target or corporate parent...and so the Website has to accommodate all concerns.
If the goal of investor relations is to increase shareholder value. There is no question that the Internet is right there with the telephone, fax, quarterly report and conference call as a means of reaching investors about the company. Used to its fullest the Internet should benefit virtually all businesses whether publicly held or not. The possibility of maintaining orders, databases, information and catalogues on the net is established. Leveraging the net as a competitive advantage in the marketplace is being established not only by high tech, leading edge technology companies but by what might be considered as old fashioned businesses.
Retailers can move merchandise easily and quickly. They can test a pricing policy and a promotion. The 41st largest travel agent in the world today is entirely net based. It did not exist as an organization two years ago. The booksellers of Amazon tell how in the old days a price promotion would be tested over six months. Today they test it on an hourly basis.
Merchandise from consumer electronics and computers can be moved quickly over the Web. It will not replace the local department store for purchasing, but it will provide an additional merchandise stream to move product. Egghead gave up its retail store operation to move completely to the Web. Disney which has an established theme store business and catalogue business as well as licensed merchandise in other retail outlets can also use its Web site to move old, out of date product which it would not want to have in its retail operations or have remaindered.
Are we likely to see stocks trade this way. Probably not. There are too many legal restrictions and protectors of the public good. But Schwab and others will find more competition as consumers are invited to execute their own trades on the Web at a growing discount rate.
To do so those consumers will want information. They will go to the corporate Web sites to look up the company, check into its ROI, look at the P&E, look for the biography of the management and see what the company’s core businesses are.
The Web is not a replacement for a conversation with an individual investor, nor does it replace a returned phone call to a research who is being told to provide background information to think about beginning coverage.
The Web does not replace the CEO speaking at an investor conference or doing a road show.
But the Web does represent a helpful tool to all these and a way of broadening the base of information available to the investing community.
Trend leaders and methods being used...
There is a problem with being too technically on the edge. Java and shockwave, frames and other leading invocations for the Web are remarkable, they take the Web based information to a virtual real time experience. But most users do not have a cable modem and most systems do not have the capacity for video and few have the time or interest to listen to the full audio presentation of a conference call.
What are the basics that have to be delivered?
Disney, Chrysler, Lucent, Ford, Amoco, AT&T, Intel each have a prime focus for their Website to deliver information (which may be very entertaining) about their core business products. The sites provide the customer with the answers that come from 800 numbers, answer centers and thousand of pages of printed brochures (which customers print on their own paper), visual information as well. Audio and full motion video sit on the horizon as potential innovations that require expanded bandwidth and continuing expansion and improvement of infrastructure.
The major innovators in investor relations and corporate communications use their Websites to deliver marketing messages and product information, and deliver the messages related to enhancing shareholder value. However, shareholder value cannot be delivered if the Website is so sophisticated in its graphic presentation that it cannot be read on a basic laptop running a basic browser system with as few enhancements as possible and run over a basic analog telephone line. Digital communications, bandwidth, cable modems are all on the horizon but they are still on the horizon for many Internet business users, most users at home and virtually all international investors.
Hally Enterprises surveyed corporate communicators on the use of the Internet. Almost 70% of those responding to the survey expect that the Internet will deliver more than half of their communications efforts. The prime obstacle of Internet use by traditional investor relation firms is the ability to measure value. Mike Reilly, president of Hally, expects, "Second generation tools to provide more feedback. Currently e-mail with automated response or comment forms are the most popular methods. According to Hally’s survey 85% of the companies surveyed plan to upgrade content and usage methods.
Proxy votes are being tested on the Internet and it is only a matter of months as corporations and their transfer agent move the entire process to electronic Internet systems.
Who should move to Investor Relations on the Internet?
The return on the investment will be fastest for companies with large individual and employee shareholder communities. A company with under 2,000 investors will find it hard to justify being on the leading edge of Internet investor relations.
If the company is one of those listed on the Internet Index or one of the other information technology lists then it is expected to be on the leading edge of delivering information. It should also have its investor information in an easily locatable page on the Web, with no more than two page views to get to the IR pages.
The transfer agents and those involved in delivery of stocks have to be on same page as the company. The financial equation of installing an Internet delivery system has to balance with the savings on postage and printing. It may not in the first year. And for the transfer agent it may not be worth the investment for just one company, but within two years virtually all companies will be expecting this electronic Internet support.
Planning an Internet strategy is like planning a public relations or marketing strategy. It cannot be a single stand alone effort by the PR department, IT department, IR department or any single department. The strategy must be integrated throughout management.
To get long term maximum impact from the Internet the PR image has to be consistent with corporate standards otherwise according to Scott Dean, Amoco’s senior media relations executive, "you end up with a patchwork of sties for business-unit groups." Internet users demand quick access to product information and Web is an effective communications tool for everything from marketing and internal communication of benefits to crisis management.
Amoco is regarded as a prototype for a successful site. The site provides information about Amoco’s full product line. It’s $250,000 annual budget is paid via a flat fee assessment for each business unit.
Along with information about job listings, environment actions the site provides shareholder info with an area targeted for media and shareholders for breaking news. Specifically Amoco’s IR pages include:
Amoco’s visitors have grown to over one million per month since the site was launched two years ago. But the site has been revamp several times to increase the return on investment and has meant an increased emphasis on products ad services. Surfing the Web is over. The user now is looking for specific information, get it, download it and get out as quickly as possible. Time spent downloading a Website means the user will go on to the next site.
Individual investors like the working press are accessing Websites on a 24 hour basis, often from home on the laptop machines or older hardware that may not be as quick at the equipment used in the office. Clean and quick loading Web based information is critical to success on the Web.
Researchers and analysts, investors and journalists are now conditioned to using the Internet to get information that they want. Wandering through the Internet, ie, surfing the Web, is fine for teenagers but most business users know what they are looking for. They know where to look for it and they expect to be able to find it quickly and then go on to something else. Like all other trends the hours spent surfing the Web has probably ebbed and now users want to get in and out and do something else, like trying to make money from their efforts on the Web.
This appeared in the July/August 1998 issue of Electronic Commerce Advisor. (Vol. 3/No. 1)