Why are IROs ignoring 1.5 million potential investors?

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RECENTLY in a blog post here and in a discussion in the Investor Relations Executives Group on LinkedIn, I suggested that the time has come for investor relations departments to open up their earnings calls to finance bloggers.

My objective in doing the story about President Obama taking a question from the Huffington Post was to hopefully get a few people to sit up and take notice of what I believe is the early stages of a profound change in how professional investors obtain and distribute investment information.

I knew full well that there are a lot of misconceptions about blogs and social media in the investor relations profession. IR Web Report’s web stats tell me that when a lot of readers of this blog even see the word “blog” they switch off.  Posts about blogs or bloggers don’t get as much traffic as other stories.

But I had no idea about how deeply entrenched the misconceptions about blogs are. On LinkedIn, my post received comments from four IR professionals, three of whom did not want to open up calls to bloggers to ask questions.

One comment from someone at Thomson Reuters‘ corporate advisory services unit really drove home for me how unaware the IR profession seems to be about finance bloggers. Here’s what it said (emphasis added):

I agree that having the masses ask questions over the phone would be a logistical nightmare and the questions they would ask may be irrelevant and take up precious time to get answers analysts are looking for to help drive their models and investment decisions. Generally the sell-side and buy-side analysts will be asking the most relevant questions – if they are not, they’re not doing their jobs. If you only have a half-hour for Q&A, one needs to prioritize.

Another way to go about this is to allow individual investors the ability to ask questions via the webcast and the company can decide when and how to respond. This seems to me more a responsibility of shareholder services in larger companies, but could fall to the IRO for smaller ones.

Frankly, I find this comment appalling. First of all, finance bloggers are not “the masses.” They’re not stupid retail investors who are going to ask “irrelevant questions.” They’re some of the smartest, most influential people in the US capital markets. And suggesting that these people should be shoved off to “shareholder services” betrays an arrogance and lack of insight into perhaps one of the most significant trends taking place on The Street.

But let me quote you something else, this from a recent article on the website 24/7 Wall Street called The Twenty Five Most Valuable Blogs. Again, emphasis added:

8. SeekingAlpha. This aggregator of investing blogs and news has almost 900,000 unique visitors according to comScore. Compete puts that number at about 1.5 million. Since Comscore tends to underestimate audience numbers, the higher figures is more likely to be accurate. Because of the content and site navigation, SeekingAlpha should have 15 million pageviews a month. The site runs a reasonable amount of network ads that have low yields, but has some financial services ads from investing companies including discount brokers which would bring CPMs up. The yield on a thousand pages for SeekingAlpha should be about $10. Revenue is probably running about $2.2 million a year. Based on the number of editors and writers that the company has and looking at the cost of it publishing platform, SeekingAlpha probably cost about $3.5 million to run. It is a potentially valuable property for one of the large financial sites. Seeking Alpha is worth about five times revenue or $11 million.

I’ve been talking with the folks who run Seeking Alpha for several years. The site has around 2000 contributors, of which about 400 are active contributors. These contributors provide their stories to the site because it can offer them distribution to sites like Yahoo! Finance. That distribution is not included in the stats mentioned in the above quote.

Here’s a little more about who these bloggers are from Seeking Alpha (emphasis mine):

The majority are finance professionals, and many have their own blogs. All contributors bring what we believe to be a unique slant and rigor to their work.  We strongly favor contributions from finance professionals and industry experts writing about their own sectors, but we are open to any article that is carefully argued, informative and well-written. We expect money managers to hold positions in stocks they write about, and require them to agree in writing to Seeking Alpha’s compliance standards.

And now the most important question you, as an Investor Relations professional, should want to know: who is reading what these “bloggers” are saying? Again, from Seeking Alpha:

Who Reads Seeking Alpha?

• Money Managers and the Sell-Side. Seeking Alpha is an important research tool for money managers, sell-side sales professionals and research analysts. When you type a stock symbol into the search box at the top of the page, we aim to provide: (1) a range of well-argued opinions about the stock by money managers, bloggers and newsletters; (2) annotated summaries of important stories about the stock from the Wall Street Journal and Barron’s; (3) transcripts of the most recent conference calls; (4) coverage of competitors who may have filed IPOs recently; and (5) charts showing the stock’s comparative performance and valuation to others in its sector. Many money managers also subscribe to Seeking Alpha articles by email. By signing up for our free email service, you can get articles about stocks in your portfolio and on your watch list automatically sent to you. Our daily Annotated Wall Street Journal Summary is also immensely popular with money managers.
• Investment Bankers. Seeking Alpha provides deep and broad coverage of new IPO filings and has a section devoted to M&A. Many investement bankers also subscribe by email to articles about their clients’ stocks and sectors.
• Industry Executives. Because of the depth of our content and its arrangement by sector, Seeking Alpha is an important resource for managers and entrepreneurs to follow and analyze developments in their industry. Thousands of participants in the Internet industry, for example, follow our coverage of Internet stocks due to the richness of information including conference call transcripts of almost every publicly-traded Internet company, coverage of smaller companies, and comprehensiveness. Most of these readers access our industry-specific content in one of three ways: bookmarking the relevant industry section of the Seeking Alpha site, subscribing to the RSS feed for that sector, or signing up to receive sector-related articles by email.
• Individual Investors. Seeking Alpha provides opinion and analysis, not just news. Many individual investors subscribe by email to articles about stocks in their portfolio, and regularly read our coverage of sectors they are interested in, such as gold or energy. Two broader areas are also particularly popular with individual investors: our coverage of exchange-traded funds [ETFs] and our discussion of the overall market. And many individuals like to follow our commentary on the housing market, and also follow Sound Money Tips, our personal finance website that publishes one short personal finance tip every day.

And that’s just Seeking Alpha. Zack Miller at New Rules of Investing is my favorite source for information about the many other ways that the world of investing is changing. He wrote two articles for us on How new finance websites impact investor relations and the new influencers emerging on Web 2.0 investor communities.

Now, I really want to say something snarky about how stupid it is to ignore an audience like this when it’s your job to build your company’s profile with investors, but I know that will just make you mad and you’ll find some excuse to dismiss me as a crank. So instead, I’ll just shut up and leave you to think about this and reach your own conclusions.

But if you decide you’d like to learn more and want to know how you can reach Seeking Alpha’s influential contributors, and their equally influential audience, you know where to find me.

Dominic Jones

Dominic (bio & disclosures) is IR Web Report‘s founder and an online investor relations consultant. He advises leading public companies and investor relations service providers worldwide on using the web for disclosure, engagement and profile building. You can contact him via the contacts page.