GOOGLE INC. (NASDAQ:GOOG) will begin making announcements about its financial performance solely through its investor relations website, making it the most prominent company to take advantage of the U.S. Securities and Exchange Commission’s (SEC’s) guidance on using company websites for disclosure under Regulation FD.
Almost all North American public companies currently distribute their earnings announcements and other investor disclosures through paid PR wire services that syndicate full-text releases to hundreds of media and Internet outlets. They do so even though the SEC ruled in August 2008 that postings on company websites alone can meet its fair disclosure requirements if they abide by certain standards.
Google broke with the PR wire service distribution tradition for its April 15 earnings release when it issued a short advisory via a paid PR wire service informing investors to visit the company’s investor relations website to obtain the full earnings announcement. The advisory release approach, which we first recommended in 2007, has been adopted by at least two three other U.S. companies, BGC Partners (NASDAQ:BGCP), Reis, Inc. (Nasdaq:REIS), and Expedia, Inc. (NASDAQ:EXPE), which plans to use the process again April 29.
Google’s IR website has long been “recognized channel”
However, Google also announced in its advisory release that it “intends to make future announcements regarding its financial performance exclusively through its investor relations website.” This suggests the company will no longer issue advisory releases and instead rely solely on its recently revamped investor relations website as a disclosure channel.
In its 2008 guidance on the use of corporate websites for disclosure, the SEC made it clear that companies could only use their websites for disclosure if their websites were a “recognized channel” for investors. It also provided a list of non-exclusive factors for companies to consider when evaluating whether their websites and their investors were ready for web-based disclosure.
I have long believed that Google’s investor relations website is the recognized channel for its investors. This is because for the past several quarters online commentary about the company’s results on news websites and blogs has almost always included links to the earnings information on Google’s investor relations website rather than to news releases posted on wire service partner websites.
Links to a page are the primary measure of authority on the Internet. In fact, Google uses links to a web page in its search algorithm to determine which pages should be most prominent in its search results.
Companies that continue to use full-text PR wire releases for their investor announcements are in effect hampering their ability to claim “recognized channel” status for their own websites.
Real-time news distribution now free and open source
It is also relevant that Google enables investors to receive information direct from the company via email alerts and several RSS feeds. Importantly, one of the web feeds pushes out real-time updates to subscribers who use feed readers that support the open source Pubsubhubbub protocol developed by two Google engineers.
Unlike normal web feeds, which require subscribers to check the feed for updates at regular intervals – typically hourly – Pubsubhubbub-enabled feeds tell subscribers when new information is available and information can be distributed within seconds of it becoming available.
This typically results in information being distributed faster and more evenly than via paid PR wire services, which typically have delays of 1 to 7 minutes depending on how investors access the wire service.
Any web feed publisher can use Pubsubhubbub at no cost. IR Web Report has been using the protocol for several months and support for the protocol continues to grow across major web publishing companies and services.
Media and blogs shrug off the move
After Google issued its advisory release and made its announcement about using its website exclusively for future disclosures, I made a special effort to find any negative commentary about the move in news media and blog coverage of the results. No one commented on the change, but several did remark on the fact that Google’s CEO Eric Schmidt was no longer attending the earnings calls.
This tells me that the move to website-only disclosure is a non-issue for the media, analysts and the investing public. However, that does not mean there will not be criticism of Google from some quarters.
Meanwhile, Berkshire Hathaway-owned Business Wire has told companies that it will not distribute their advisory releases. Google was a Business Wire client, but switched to Market Wire immediately prior to issuing its April 15 advisory release.
Update April 16: As I predicted, Reuters again chimed in with an article headlined “Google’s unorthodox press release raises questions.” The article is poorly researched and contains errors such as saying that the SEC requires “notice-and-access” releases, which it does not. The article also failed to mention that Thomson Reuters owns Hugin and therefore is conflicted in its views on companies using their websites rather than paid PR wires.