MANY companies will have thought about changing how they publish their annual reports online. Their objectives may be to communicate better by moving up to a more interactive report, or to save money by going down to a less elaborate report.
In either case, they are likely to have run into a product that seems like a reasonable solution, but which on closer consideration should be avoided at any cost.
We’re talking about image-based annual reports, which you may know better by such names as “Dynamic,” “Interactive,” or “mobular” reports. These cost more than PDF reports, but a lot less than real HTML reports — typically anywhere from US$2,000 to US$7,000 depending on the vendor.
(Note: I used the term “real HTML reports” because some vendors misleadingly refer to their image-based reports as “HTML reports,” which is simply a lie.)
The easiest way to tell if a report is image-based rather than real HTML text is to try copy text from the report and paste it in a word processing program. If you can’t do it, it’s probably an image-based report. I explain in more detail why copy-and-paste functionality is so vital for investors and other researchers later in this post.
Image-based reports are worse than PDF
Image-based reports are cheaper than real HTML ones because the conversion is largely automated, taking as little as 1 hour to produce from a PDF file. In their crudest forms, vendors simply convert a PDF file of your printed report’s pages into a series of scans or images that are then linked together by a basic drop-down menu and linear page-by-page navigation scheme under a standardized masthead.
However, the image-based conversion produces an inflexible, low-quality document that is a poor alternative to proper HTML and even to PDF. As such, using one of these documents is likely to harm people’s experience on your website and potentially undermine your ability to communicate essential information to current shareholders or engage new prospects.
If you currently publish your report in PDF and want to move up to a better presentation, then remember that image-based reports are a step down, not an improvement on what you’re already doing. Here are your options for improving on a PDF-only report.
- Provide the CEO letter and the financial section, including the MD&A, in HTML but leave the narrative sections in PDF.
- Publish a full HTML report;
There are many reasons image-based annual reports fail to meet the grade for usability and communications value. Some of these are so fundamental that any one by itself is grounds for avoiding the approach.
Here are 10 reasons to avoid image-based reports:
1. No copy and paste ability
Copying and pasting information is the single-most common activity that people perform in their desktop office software. Microsoft discovered this in a large-scale voluntary electronic monitoring study of Microsoft Office users. The study found that:
Top 5 most-used commands in Microsoft Word 2003 were:
Paste accounted for more than 11% of all commands and had more than double double the usage of Save, which was the second entry on the list. Paste was also by far the most common command in Excel (15%) and PowerPoint (12%).
With this context, the fact that image-based reports make it impossible to copy text from the report should immediately disqualify them from ever being used in an investor relations or disclosure context.
Investors, analysts, journalists and researchers often use information on investor relations websites to prepare their own documents. By making it impossible for them to copy information from your online annual report into their own reports or articles, you will discourage them from using your website or even writing about your company.
And since users cannot copy the information from your report directly, they are forced to retype it manually, which like will increase errors in the information they convey to their readers.
Both HTML and PDF allow users to copy and paste text into other applications.
2. Hard to read
The standard resolution for images on the Web is 72 dots per inch. While images of higher resolutions can be used, these take longer to download.
While 72 dpi is adequate for most graphic images and photographs, it results in smaller details like text appearing blurry. This is a critical issue for online annual reports since much of the useful content is presented in the text of the MD&A, notes to financial statements and the financial statements themselves.
Furthermore, to save on the cost of paper, the text of the printed report from which the images are derived is often printed at 10 points or lower, making the image-based version even more illegible.
Neither PDF files or standard HTML text have these inherent problems. See an example to-scale blurry text taken from an image-based annual report.
3. Print poorly
For the same reasons that image-based annuals are hard to read on a screen, they produce poor quality printouts. The best print quality is usually obtained from PDF files with standard HTML text your second best choice.
4. Inaccessible to screen readers
Blind and sight-impaired users rely on special software that converts text on the screen to a voice synthesizer or to Braille. But since the text of image-based documents is embedded in an image file, the software cannot read the information.
To overcome this limitation, the standard is to provide a text description of images through one of two HTML tags specifically designed to assist blind and sight-impaired users. However, neither of these tags is meant to provide entire pages of text as is required in the case of image-based annual reports.
The issue of accessibility of information to disabled users is becoming more widely recognized. Several governments have enacted legislation compelling all government websites to be accessible to users with disabilities.
Companies have also been successfully sued by disabilities rights groups for failing to make their websites accessible.
5. Poor navigation
The navigation schemes of image-based annual reports typically don’t provide enough detail to enable users to quickly find the information they want. The main navigation assistance of image-based annual reports usually consists of a drop-down menu for section by section navigation, and arrows that allow users to move sequentially page to page in the same way that you turn the pages of a book.
Drop-down menus are a poor choice for primary navigation. They make users work harder by requiring repetitive interaction with the menu. They discourage users from exploring your report by hiding the various options available until the user clicks on the menu. It’s better for all section links to be visible at all times so that users can see at a glance where they can go in the report.
To keep drop-down menus a manageable length, there’s a limit to the number of links that you can provide in it. However, in some reports the list of options is too short and vague to be useful. For example, Gillette’s report does not have a direct links to the financial statements or to the MD&A, two of the most heavily used sections of any annual report (see picture below).
Page-by-page navigation using arrows is bad because it imposes a linear navigation scheme on the nonlinear Internet medium. Forward and back arrows also don’t provide users clues about what information they will find when they arrive on the next page.
Going page to page like a printed book is an inefficient way to navigate on the Web. It wastes users time because they often have to click through several pages to get to the page they want, especially if the drop-down menu is inadequate. In the Gillette example, you have to click through 19 pages to find the MD&A if you chose to use the arrows.
Some image-based annual reports have a complicated navigation scheme which is set up to look similar to the menu bar in a standard software program. This requires people to adjust to, and learn how to use, a new set of user controls other than those in their browsers. This can be a significant burden for many people and it’s likely that most people will never learn how to use the product properly given that they use it only occasionally.
6. Bad search function
Vendors argue that any shortcomings in their primary navigation is offset by the inbuilt document search utility. This argument does not hold up for two reasons:
- First, studies show that only about half of all people actually use search utilities to navigate the websites they visit. The other half browse websites relying on the navigational assistance you provide. By relying on a search utility as the primary means of navigation, image-based annuals are potentially unfriendly to half of your audience.
- Second, even those who do rely on the search engine will be disappointed by their experience on image-based annuals. Our tests of the search utilities for the image-based reports in our survey of 100 of the world’s biggest companies found them to be inadequate.
One search for the term MD&A on the Gillette and Dow Chemical reports returned several irrelevant results, while the same search of BP’s report netted zero results and Proctor and Gamble’s report did not have a search tool.
7. No text links
This is typically done using hypertext links within the text itself. A common, and useful application of context-sensitive links is to link line items in the financial statements to their relevant notes. However, in image-based annual reports this is difficult, time consuming and hence expensive to do. This may be why none of the image-based annuals we’ve seen use context sensitive links.
Both HTML and PDF reports allow you to provide context sensitive links easily and cheaply.
8. Take away user’s browser buttons
Some image-based annual reports can only be opened in a new browser window in which the standard browser buttons are turned off. This is done to force users to rely on the report’s built-in navigation, which, for reasons already explained, is inadequate for a document as a large and as complex as an annual report.
Users rely heavily on their browsers’ “BACK” buttons so taking it away can stymie and disorient visitors to your website. According to research at Stanford University, difficult-to-navigate sites may be perceived as less credible.
9. Print layout does not work online
Ironically, this is often touted as a benefit by the vendors who sell image-based annual reports. They make spurious claims about this being in line with SEC requirements, which is rubbish to say the least.
It’s also nonsense to claim that mirroring the layout and content of the printed report is a benefit to your IR communications objectives. That’s because anyone with even a basic understanding of online communications knows that what works on paper rarely if ever is effective online.
However, the two mediums are polar opposites. Paper is a linear medium best suited to narrative composition. The Web is nonlinear and best suited to categorical organization.
In addition, screen-based layout and design must take into account a number of technical and physiological limitations that are not present when information is designed to be read on paper. For example, many printed reports use a two-column layout. However, when the same two-column layout is viewed online, users have to scroll up and down to read each page.
The additional scrolling slows down the user and breaks their concentration as they must think about moving around the page rather than focusing their attention on the information on it.
Sometimes annual reports are printed on oversized paper. When you convert these reports to an image-based annual, you either have to reduce the size of each image – in which case the already grainy text will become even harder to read — or you have to rely on users to scroll horizontally to see everything on the page. Making people scroll sideways as well as up and down makes your report too difficult to use and people simply won’t do it.
Another often overlooked consequence of duplicating the printed document on the web without any editing is that printed documents often contain references and terminology that are out of place online. Referring people to other page numbers – common in printed reports – betrays the linear structure of the printed report.
Most printed reports include text advising readers to consult the company’s website for further information. Printed reports also typically duplicate information that already appears elsewhere on your website, such as contact information, and director and officer bios. When these information types are included in an online version, they send the message that little forethought has gone into providing a useful experience for your online users.
10. Waste time with useless pages
Printed annual reports often include full-page photographs and contents pages that have no value to online users and are obstacles to people being able to quickly get the information they want.
Fortunately, our research indicates that 90% of companies have so far resisted the marketing spin surrounding image-based annuals. Only 10 companies in our recent survey of 100 of the world’s biggest enterprises opted to provide image-based annuals. Their decisions seemed to be driven by cost cutting since all had previously published more expensive HTML annual reports.
Of course, they would have done better by reducing the amount of information in their reports that is provided in HTML. Since studies show that investors use online annual reports mostly for financial reporting information, providing only the financial report in custom HTML could save companies unnecessary expense on design and production of flashy feature content that few bother to read.
Vendors that sell image-based reports play to companies’ desires for quick solutions to posting information online. However, there are no short-cuts in good web-based disclosure and communication. It is simply a case of what you put into it, you will get out.